Bernanke's Zimbabwe Plan for the US Economy

Fed Raids Your Paycheck and Bank Account To Bailout Banks, Wall Steet, and Mortgage Delinquents

Note: A lower dollar is not necessarily bad per se but the current dollar dive is a symptom of bad policy (such as structural savings, budget, trade, and current-accounts deficits) and the Fed's September 18 rate cut looks misguided for many reasons: 10 Reasons against a Federal Reserve Rate Cut.

The United States Federal Reserve yesterday chose an inflationary plan by lowering the Fed funds benchmark interest rate 50 Basis Points (bps) to 4.75%. The US dollar immediately reacted to the news by falling against major world currencies and commodities:

• The dollar fell to a record low against the Euro.
• The dollar fell to less than half the value of the British Pound Sterling.
• The dollar fell to a record low against a barrel of oil (i.e., oil hit a record high over $82 per barrel).

Debasing your currency and reducing your buying power as an alleged road to prosperity is an old trick to attempt to hide financial problems and to attempt to avoid paying debts (e.g. paying you back in devalued money worth less than what was borrowed--so the government can pay you your Social Security with "Monopoly money").

"Social Security is a cash program and the government can always print more cash" (Alan Greenspan, 9/20 interview).

Sometimes, the policy is "successful" insofar as it fleeces the average consumer without the consumer being aware of the pickpocketing "inflation tax." Other times, the policy runs so far out of control that the scam becomes obvious even to the most inattentive. The German Weimer Republic tried it and the social unrest led to Hitler. Zimbabwe tried it recently and its economy collapsed:

• The International Money Fund (IMF) warns that Zimbabwe inflation might reach a 100,000% annual rate.
• The Zimbabwe government "solution" includes printing a Z$200,000 bill to make it easier to carry baskets of cash to buy everyday items.
• 2006 Zimbabwe prices included Z$50,000 for 2 eggs and Z$110,000 for a loaf of bread.

By the way, the destruction of Zimbabwe's economy began with the Robert Mugabe government's real estate policies for "fair" widespread ownership (initially subsidized by the United States).

Does trying to socially engineer widespread real estate ownership sound familiar?

Thank the Fed for reducing your purchasing power.

Bernanke's double-cut of 50bps has planted both feet firmly on the Zimbabwe side of the fence.

Welcome to Zimbabwe?