by Bill Bonner
(snip)"Zimbabwe also continues to provide real world, real time lessons on how markets really work. A Reuters report tells us that the Zimbabwean greenback was pegged to the U.S. model back in April at the rate of 15,000 to one. But now it is June and a single U.S. dollar bill will bring you a stack of 200,000 Zimbabwean dollars.
Do you see how it works, dear reader? The more the central bank of Zimbabwe puts out dollars, the more people don't want them. This is the way everything works. Quality and quantity vary inversely. In the currency world, an increase in the quantity of money, leading inevitably to a decline in its quality - its purchasing power - is called inflation.
But oh - if only it were simpler! We now have a phenomenon that not even Mises foresaw. The U.S. dollar increases in quantity - depending on how you measure it - at a speed variously clocked at three to ten times faster than GDP growth. U.S. dollar-denominated derivative contracts now have a nominal value equal to 12 times the total output of the entire world. And so far, people are not exactly eager to get rid of U.S. dollars. At the top end, inflation in art, antiques, collectibles, Shanghai shares, luxury houses and so forth is proceeding at a rapid - though, still not Zimbabwean - pace. At the bottom, inflation in consumer prices is mixed...and middlin'.
It is surely a Crack-Up Boom we are living through. But things are so cracked and so booming, it is hard to know what will happen next - but we have our suspicions. (snip)



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