Sunday, October 5, 2014
Is the US making the same mistakes as the Zimbabweans?
I have started reading a new book about the collapse of the Zimbabwean dollar--When Money Destroys Nations, by Philip Haslam and Russell Lamberti. One of the main causes of the hyperinflation was the decision of the Zimbabwean government to give army veterans of its recent wars a big bonus. The promise was too much for the Zimbabwean economy to manage, so the government printed money...and lots of it. Why is this relevant? Well, look at America. We have been fighting wars around the world for twenty-five years and recently promised universal healthcare to all citizens. The baby boom generation is retiring and will draw unfunded Social Security and Medicare benefits in ever larger amounts. There is no way that these promises can be funded by the American economy. We will print money, too, just like the Zimbabweans. The Zimbabwean economy went into hyperinflation, because the Zim dollar was not held as a reserve anywhere in the world. The US hyperinflation may be delayed, because our money printing is being sopped up by foolish central banks worldwide in order to reward their export industries. In a non-manipulated currency market, the US would have to fund its budget with honest debt and repay it with honest money. But the chickens eventually will come home to roost for the US, just as they did for the poor Zimbabweans.