$15M Hamburgers

It's been a while since we checked in on the economic blueprint for the United States, Zimbabwe. Today, the AP reports a situation that will turn Helicopter Ben green with envy:

Zimbabweans will be soon lining their pockets with 10-million-dollar bills.

At the current black market exchange rate of $2.5 million (ZD) to $1(USD) the new notes will be worth a whopping $4 (USD), about two-thirds of the price of a hamburger. The new notes will supplement last month's new notes where $750,000 was the highest denomination issued.

As always, soldiers, police, and other uniformed services will have special pay-lines, "because it is not desirable to see them queuing for cash."

Echoing his American colleague Ben Bernanke's remarks on the current "liquidity crunch" faced by US and European banks, Reserve Bank Governor Gideon Gono said, "businesses might be tempted to again raise prices of scarce goods. 'If this happens, the whole objective of solving the cash shortages ... will be defeated,' he said."

Two Fed Chiefs with the same prescription for the same perceived problem. The good news for both of them is that former Senator/bad actor/sleepy candidate Fred Thompson trusts 'em!

Fiat Money and the Business Cycle

2008 Presidential candidate Congressman Ron Paul has, as one of his campaign issues, returning sound money from its current outlaw status. It's an easy process, actually, of reversing the steps by which fiat currency gained its hegemony. It is as simple as removing capital gains taxes on the items people may choose to use as money and calling off the dogs at the Treasury Department that are currently spreading personal opinions as legal fact in regard to alternative currencies.

Congressman Paul is promoting sound money with a populist message: the Federal Reserve is exacting an "inflation tax" by debasing the very dollars in your wallet. It's a simple message (simplified further by his supporters to "abolish the Fed") as far as it goes, and non-controversial from the standpoint that no one other than Ron Paul supporters has even bothered to notice it.

What I've noticed, though, is that Paul seems to be studiously avoiding the subject of fiat money and the business cycle. I have to wonder if he isn't missing an opportunity right now to talk about this far more lecherous effect of the federal reserve system. This will be a controversial topic - what better time to broach something controversial than when everybody seems to be ignoring you?

Respected economists and high finance types are going to start throwing bolts of lightning if an "abolish the Fed" campaign gains the least bit attraction. The axes that unions and corporations will throw at a non-corporatist candidate will pale in comparison.

Big investors, lenders, and borrowers are far too addicted to easy credit to give up without a big fight.