I started tracking articles on Zimbabwe's currency crisis starting in August 2006 when their old banknotes ceased to be legal tender, inflation reached the million percent, a 100 billion note bought a loaf of bread, and cholera became epidemic. As Zimbabwe money became completely useless in this hyper-inflation mode, an underground economy emerged using commodities, notably blood diamonds, and other national currencies, especially the USA dollar. In March 2009, Zimbabwe agreed to peg its currency to the U.S. dollar which brought the hyper-inflation under control.
During this hyper-inflation debacle, Western powers demonized Mugabe as the inflationary culprit, and Mugabe accused Western powers of currency sabotage. As a result, Zimbabwe has now allied itself with a new shrewd master – China.
This is not the first time a country has experienced hyper-inflation. There’s the French Revolution and the more recent experience of hyper-inflation in 1930s Germany. Whether through incompetence or deliberate interference, the outcome of hyper-inflation is the same - severe societal disruption. And now, in America, trillion is the new billion. Buyers beware of billion dollar bailouts and stimulants.
America's trillion dollar question
28 Feb 2009
In the world of American government, the trillion is the new billion. There was a time when only astral-physicists and accountants practicing in Zimbabwe had any use for a word which means a million millions. The speed of that verbal inflation is staggering. Most of us still use the word millionaire to describe someone of enormous wealth, but it has actually been around since the mid-19th century in its current form and once conjured an image of someone with limitless spending power.
James Dines once called hyperinflation a "disease of money"...how true. You would think that the lessons of history would have been enough for governments to go a different route, but not so. The U.S. isn't far from being on the monetary chopping block itself. Storm clouds are definitely gathering. Good post, by the way. :)
ReplyDelete-- Jim