The inflationary horror of creating excess money and credit is well known, and
is superbly illustrated by Zimbabwe, that most modern example of abject morons
printing money as they desperately try to spend their way out of the
inflationary mess caused by their previous excessive governmental spending,
which was (as you have probably guessed by now!) paid for, and caused by,
always printing more and more money! Hahahaha!
And, to be sure, the sheer range of corruption and stupidities of Zimbabwe's
government go far, far beyond mere monetary ones, making a bad situation much,
much worse.
I bring this up because Zimbabwe is in the news again so that
people around the world, like you and me, can watch what always happens when a
government creates too much money and credit, which is that the currency is
destroyed, the economy is destroyed, the country is destroyed, the people are
destroyed, and there is civil unrest as the people cry out with the Mocking
Laughter Of The Mogambo (MLOTM) ringing ceaselessly in their ears as I point at
them and laugh the aforementioned MLOTM and make insulting derogatory
statements about them for doing such a monetary insanity.
The actual news from CNN.com was that the Zimbabwe dollar is now so worthless
that "Zimbabwe's central bank will introduce a $50 billion note", which is, as
you probably surmised, a new record.
Now, according to my lesson plan, it is time to play a little group guessing
game with which to while away a few happy, happy minutes, at the end of which I
get official credit for having "provided an opportunity for 'quality time' in a
bonding experience designed to enhance both learning and life modalities."
The question is, "What can you buy in Zimbabwe with a banknote for 50 billion
Zimbabwe dollars?"
Immediately, a sea of hands are raised, and my heart soars at their happy,
expectant faces, eager to participate and learn, and I am so proud of them that
they had all read the same article I had, but since I have already provided the
damned "quality time" thing, I instantly lose interest, and simply declare,
"It's enough to buy just two loaves of bread! The biggest banknote in Zimbabwe
is worth only enough to buy two lousy, stinking loaves of bread! Fifty billion
Zimbabwe dollars for two loaves of bread!"
Of course, the Zimbabwe government and central bank say that this creation of
new money is "a way of fighting cash shortages amid spiraling inflation", which
makes you look up into the sky, as if expecting a flying saucer from outer
space to suddenly appear and rescue you from this planet of mental midgets,
because this is stupidity that is so tragic, so bizarre, and so completely
unbelievable that it is actually surreal!
Even more weirdly, the article went on to say, "As of Friday, one US dollar was
trading at around ZW$25 billion", which means that one US dollar should also
buy one loaf of bread in America, but does not, because bread in America is
running at least $2 per loaf, which means something, but I instantly forget
what in the hell I was thinking about because the next sentence is the essence
of hyperinflation: "When the government issued a $10 billion note just three
weeks ago, it bought 20 loaves of bread. That note now can purchase less than
half of one loaf." Yikes!
And speaking of dollars, this brings up America, where the news here at home
just keeps getting worse and worse, as the Alan Greenspan/Federal Reserve
monetary inflation since 1987 and his insane monetary excesses starting in 1997
and the associated long inflationary booms in stocks, bonds, houses and size of
governments now turns to the inevitable "bust" phase, just like all the other
monetary booms in all of history.
And speaking of things literally here at home, the atmosphere at home is tense
since nobody has any money to go out anymore, and we are all stuck here at
home, watching TV and watching each other - them against me - everyone nursing
old grudges and hatching plans to "get even" with me, even though they deny it
when you accuse them of it, which makes you angry because it means that they
think you are too stupid not to see the treachery in their eyes and the sneaky
way they say, so sweetly, "Would you like me to bring you a cup of coffee,
daddy?" like I'm going to fall for that old trick! Ha!
They are just being nice to me because they know that things are going to get a
lot worse and they will need me more and more just as I need them less and
less, which is apparent at goldseek.com, where they had two essays juxtaposed -
which, together, tell it all.
First they had, "Growth of World Money Supply" by Mike Hewitt of
DollarDaze.org, who has done a lot of work investigating money supplies around
the world, and writes that "As of Oct 2008, there was the equivalent of US$58.9
trillion in broad monetary aggregates" and while that number is so huge that it
makes no sense to me at all, the money supply is still growing, and so
inflation in prices is still growing, as "while the value of the money in the
latter half of 2008 may have declined, the volume of virtually every currency
increased" which means that money supplies are increasing, which means that
more inflation in prices is still coming! Oops!
Then, right next to it was the essay "Death of the Dollar" by Howard Katz of
thegoldbug.net, where he writes, "This is the moment of truth for the
establishment. They are about to be destroyed, and they do not have a clue."
"Maybe not," I cleverly reply, "but if they had watched me buying gold, silver
and oil with such a look of panic on my face, they would have at least been
suspicious! Hahaha!"
At least they will be educated about economics when gold, silver and oil soar,
thanks to the stupidity of abusing a fiat currency to create booms in stocks,
bonds, houses and government size. Whee! This investing stuff is easy!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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