Many economic/political observers ridicule the suggestion that the massive printing of Federal Reserve Notes (a.k.a. US dollars) could result in hyperinflation. They have long viewed the hyperinflation that ravaged Germany 1919 – 1923 to have been an anomaly. They become outraged at the suggestion that hyperinflation could happen in the United States.
Those Germans were just stupid, they reason. We’re smarter than that, they posit. They ignore the hyperinflation that has ravaged many South American countries, again attributing it to “less sophisticated” peoples.
Hyperinflation remains a threat to financial well-being of all peoples as long as central banks exist, which is basically everywhere there are governments. Zimbabwe is the latest example, where the central bank has just unveiled a 100 trillion dollar banknote. The new banknote was worth about $300 US dollars when introduced; it falls daily in value.
Sophomoric analysts attribute the chaos in Zimbabwe – and the need to print a $100 trillion dollar banknote – to the political fighting between Robert Mugabe, who was elected president in one of Africa’s more famous “one man, one vote, one election” circuses in 1980 and opposition chief Morgan Tsvangirai. Mugabe, through hook and crook, has managed to be “reelected” every since, which is common in sub-Saharan Africa. Tsvangirai claims to have unseated Mugabe in the last election.
But, the actual causes of the destruction of Zimbabwe were Mugabe’s socialistic programs, complete with confiscation of private property to placate Mugabe’s supporters. Now, hyperinflation has a grip on Zimbabwe as its central bank issues paper money to pay for government programs.
Will the massive printing of US dollars by our central bank, the Federal Reserve System, for the ongoing bailouts result in hyperinflation? At this point, there is no way of knowing. But, it is certainly reasonable to invest in anticipation of at least some inflation.