Back to Quack Off
inflation hits 1,000,000% per year…
Government central bank issues new $50 Billion denomination notes as
paper currency becomes worthless
(July 3, 2008)
A Coke in Zimbabwe will cost you $15 billion Zimbabwe dollars. Vending
machines are non-existent since one Coke would require billions of coins.
A loaf of bread costs $30 billion Zimbabwe dollars.
A $10 million Zimbabwe dollar bill is worth 0.0008 U.S. cents.
A $500,000 Zimbabwe dollar bill is already out of circulation and is worth
0.00004 U.S. cents.
Zimbabwe citizens are allowed to withdraw only $25 billion Zimbabwe dollars
per day, less than enough to buy a loaf of bread.
After imposing price controls last year, supplies of goods dried up, so the
Zimbabwe government was forced to end price controls.
Under pressure from the German government, the Munich company, Giesecke &
Devrient, that supplies Zimbabwe with tons of airlifted blank paper so it
can print its multi-billion dollar hyper-inflated notes, has stopped sending
its special paper to Zimbabwe. That’s OK, says Mr. Gono, Zimbabwe’s
Treasurer, we “got a Plan B.”
Zimbabwe – Ya-yesss, girl friends, the Treasurer of Zimbabwe’s 1,000,000%
per year hyper-inflated central bank note, Mr. Gideon Gono, has “a Plan B” to
solve its loss of blank bank note paper cut off from German paper company
Giesecke & Devrient. Zimbabwe will now issue Invisible Money printed on
Invisible Paper purchased from an Invisible Paper Mill which manufactures
Invisible Pulp from an Invisible Forest in Zimbabwe. Well shut my mouth and
pour me another hot cup of Rocket Java, girl friends. The Wizard of Oz is
President Robert Mugabe, alive and kicking as the Dictator of Zimbabwe. We
always wondered where he up and ran off to. Yahoo.
turns out, G & D paper manufacturers based in Munich, Germany are the same
secret family that provided tons and tons of worthless cash printed up by
Germany’s Weimar Republic in the 1920s during Germany’s Great Inflation.
That inflation lasted about 9 years, wiped out the entire middle class, and
finally ended only after Germany couldn’t keep up with the printing of
Trillion Dollar Reich Mark notes. German housewives ran down to collect
their husband’s trillion Mark paychecks on a daily, then hourly, basis, with
wheel barrows full of paper money which they then rushed to market to
quickly exchange for coffee, sugar, and any commodities available in order
to beat the daily devaluation of the German Reich Mark. At one point, a
loaf of bread cost $23 billion Marks. Citizens burned logs of rolled paper
Marks for heating fuel because they were cheaper than real wood.
economist Dr. Henry Hazlitt writes about the Great German Inflation:
1914, Germany’s Fed Reserve, the Reichsbank, suspended conversion of its
paper money into gold. By November 1923, after continual “injections of
liquidity,” Reich Marks in circulation soared past 92.8 quintillion Marks
and skyrocketed past 496 quintillion Marks through July of 1924. On Oct 25,
1923, the Reichsbank apologized that it had been able to only print 120
quadrillion Marks that day, but the demand was for one quintillion Marks.
Finally, after nobody would accept the Mark, the Reichsbank devalued to a
new Rentenmark convertible at 1 trillion to one. By Nov 1923, circulation
had increased 245 billion times and prices 1,380 billion times. Inflation
finally stopped in one day when 4.2 Rentenmarks (4.2 trillion old Marks)
exchanged for 1 Dollar, which was convertible into gold. Germany, via the
Dollar, finally went back to the gold standard, after destroying its entire
economy in 9 years through hyperinflation of its non-backed paper money.
H. Hazlitt, Economist
So what is
it that Americans can learn from these two recent examples of
hyper-inflation of paper money by a government central bank? Are today’s
economic problems in the U.S., i.e. a crashing housing bubble, impending
stock market crash, a general rise in the prices of ALL commodities and
services, AND the printing up of trillions and trillions of non-backed
non-redeemable U.S. Dollars by our central bank, the Federal Reserve,
telling us that we are heading down the same hyper-inflation paths as the
governments of Zimbabwe and Germany’s Weimar Republic? Are the Austrian
Free Market Economists correct in asserting that the current Effect of
America’s economic stagflation and Recession is directly due to the Cause of
central bank mismanagement – i.e., hyper-inflation -- of our U.S. Dollar?
worthwhile to note the current similar path of the U.S. monetary system,
similar to the Weimar Republic and Zimbabwe:
Today in the U.S. in 2008, after FDR dumped the gold standard in 1933 and
Nixon cut all dollar ties to gold in 1971, our derivative markets currently
exceed a half a quadrillion dollars – $500,000,000,000,000 – of
non-collateralized paper fueled by America’s central bank, the Federal
Reserve. And what is it that everybody is screaming for more of? The
injection of billions and billions of more non-collateralized paper money as
“liquidity” or fake “capital” to “spur” the “growth” of the economy.
Street Journal editors, Federal Reserve Chief Ben Bernanke, and U.S.
Treasury Secretary Hank Paulson err when they state that the Federal Reserve
and/or member banks are issuing “capital” to bolster the U.S. economy.
Banks do not print “capital” unless they are issuing redeemable
certificates such as gold or silver certificates. Today, banks only print
non-redeemable non-backed paper currency or debt money out of thin air.
“Capital” is the monetary equivalent of redeemable, tangible “capital goods”
backing commercial paper, such as gold or silver certificates, or contracts,
titles, and legal receipts or invoices for stored “capital goods” such as
buildings, companies, real estate, precious metals, etc. No currently
issued American paper money is backed by, or redeemable in, gold, silver, or
any other “capital goods” and, thus, neither the Federal Reserve Note (the
U.S. Dollar) or Treasury Notes qualify as true “capital.” What the Federal
Reserve and its member banks are really doing is simply printing worthless
debt coupons, fiat currency, non-backed, non-redeemable paper currency out
of thin air. (Banks that are currently raising “capital” ha-ha by creating
more fake “paper” stock to presumably bail themselves out of subprime and
other bad SIV loans are actually diluting their stockholders’ shares and
thus are robbing their stockholders by inflating, or debasing, the value of
their paper, their stocks. No different than the Fed Reserve printing up
fake money out of thin air.)
what the U.S.’s Federal central bank is doing is philosophically,
theoretically, and empirically no different than what the central bank of
Zimbabwe, Germany’s 1920s Weimar Republic, today’s European Central Bank (ECB),
and all the central banks of China, Russia, Canada, France, Italy, Japan,
Britain, Mexico, and every nation on the globe is busy doing. It’s called
currency inflation, which is the
Cause; and the
Effect is always
price inflation with eventual serious economic
misallocations, unintended consequences, stagflation, Recession, and – given
an interventionist government – an extended Depression with a concomitant
loss of individual rights and freedoms to “save” everybody from the
“mysterious” ills of the economy. Like it just flew in from Mars last week
more paper money by the government’s central bank is not the solution to our
economic ills but that is exactly what central banks always do for various
orchestrated reasons: (1) to pretend to the people that they know what they
are doing and are helping citizens out by giving them more and more paper
money, (2) paying off national debts incurred by the central banks and the
politicians by printing up more and more debased, worthless paper money, and
(3) creating bogus national security reasons to suspend individual rights
such as habeas corpus, freedom of trade, travel, speech, and association
while politicians consolidate more and more political power under the guise
of “saving” the population, who, by the way, the politicians in conjunction
with the central bankers – since that’s the name of the game -- will whip
into nationalistic economic frenzies that allow the Executive, Legislative,
and Judicial branches of government to perform activities previously illegal
under the U.S. Constitution and Bill of Rights.
gets down to (a) $10 for a gallon of gas or (b) bomb your neighbors, U.S.
consumers will eagerly grant their government the power to nuke Iran or
anybody else to “save” them from a Great Depression. Just wait, you will
see how all stripes of Americans will eagerly turn into National Socialists
who will do virtually anything to “save” themselves, including blaming
everybody except themselves for allowing the U.S. Federal Reserve, the U.S.
Treasury, politicians on both sides of the aisle AND the President of the
U.S. – whether it’s Democratic socialist Barack Obama or GOP socialist John
McCain – to drag us into World War III after a Keynesian Economic Mess
created by the concepts embodied in the premise of ridiculous “targeted
inflation.” That is, in fact, why monetary inflation and price inflation
will not stop: today’s basic economic assumptions and premises of
Quantitative Econometrics are absolutely wrong but nobody, practically
nobody, will admit it. And so, like the mistaken physicians of the 1700s,
we continue to bleed ourselves to death in the mistaken belief that
bloodletting is the cure for what ails us. But monetary inflation is not
the cure for price inflation. It is the cause. (Note: By the way,
“speculators” do not cause price inflation. They merely interpret supply
and demand but are not infallible or we’d all get rich quick. They are
necessary in a free market to try and direct “capital” according to their
interpretation of supply and demand. The consumer, through subjective
future anticipation, creates prices, not the producer – except in “natural”
or government-created special monopolies such as OPEC, but that will last
only temporarily as monopolies always invite competition from within and
without. Speculators, as all futures traders know, can just as easily lose
their shirts as make profits. Otherwise, we could all get filthy rich by
simply playing the futures market. Think it’s easy? Go ahead and try,
sucker. Do it on margin, too. Just for fun since you think it’s so easy.
the scene of the crime.
attention, Americans. What happened in Germany’s Great Inflation and in
Zimbabwe today is very instructional from both a philosophical and empirical
point of view because it is exactly what is happening at a quantitatively
lesser, but increasingly greater, level in America today. It is not a
matter of “if” but “when” we will approach the economic absurdity of today’s
1,000,000% inflation in Zimbabwe. Think about it. You have already
accepted with a straight face the economic premise that President Bush can actually “stimulate”
the U.S. economy by passing out $168 billion in $600 cash increments to
every man, woman, and child in America. What an
absurdity. And yet, virtually nobody questions the obvious fact that the
President is stupidly standing there naked as a Jay Bird, passing out “free”
Monopoly Money that has no basis for value. What’s next: Wooden Nickels?
Plastic see-through coins? Invisible Paper money from Invisible Forests?
Get real, people, or you’ll soon find out it’s not nice to try and fool
Mother Nature, or Father Cause and Effect. – FM Duck
back to top...