Looks like my strategy will be a winner!
This American debt is on a dizzying scale; debt on a scale that absolutely cannot and will not ever be repaid, except in near-worthless, inflated dollars.
Consider the Zimbabwe dollar, which was worth substantially more than the US dollar in 1980 (“At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47” per this Wikipedia article). The Zim $ is now worth essentially nothing, and that’s despite the original Zim Dollar having been replaced with a new version (“the second dollar”) and then a still-newer version this past July at 10 billion to one! At the time the original “old” dollar was replaced in August 2006, its exchange rate was over half a million Zimbabwe dollars to one U.S. dollar. Clearly, things are deteriorating at an accelerating rate in what had been, not so long ago, one of Africa ‘s wealthiest nations. Also clearly, a single Zimbabwe dollar (a theoretical construct, really) is worth almost exactly nothing. A loaf of bread in Zimbabwe costs more than 100 billion dollars – which is also the maximum allowable cash withdrawal from a Zimbabwe bank, by law.
The CIA Factbook site has this to say about Zimbabwe ‘s monetary woes:
The Reserve Bank of Zimbabwe routinely prints money to fund the budget deficit, causing the official annual inflation rate to rise from 32% in 1998, to 133% in 2004, 585% in 2005, passed 1000% in 2006, and 26,000% in November 2007. Private sector estimates of inflation in 2007 are well above 100,000%.
Well above one hundred thousand percent? In fact, Steve H. Hanke pegs the current (late September 2008) annual rate of inflation in Zimbabwe at – this is not a misprint — 531,000,000,000%. Yes, five hundred thirty one billion percent. For readers who still believe hyperinflation is a rarity, Hanke provides a list of 29 recent examples in Hyperinflation: Mugabe versus Milosevic. (Note: the chart figures in linked article are for monthly inflation rates).
Clearly, if we make the United States dollar worthless enough, then we can repay all those trillion-dollar debts! Just as clearly – so clearly that the world is starting to notice and to modify its behavior accordingly – this is the actual plan in Washington .
If this occurs those with massive (good) debts will win the game! Here’s some great news – do the math on your own mortgages even based on much lower inflation rates like 10-15% annually. Let monetary inflation pay off your loans even in the face of asset deflation, you can protect and/or create wealth!
Flickr / nicolasnova
