Happy Confirmation Day, Ben Bernanke?
Happy almost-totally-guaranteed-to-be-a-good-day to Ben Bernanke. Now come sit on my lap and let me tell you a story.
On 16 February 2006, the governor of the Reserve Bank of Zimbabwe, Gideon Gono, announced that the government had printed ZW$20.5 trillion in order to buy foreign currency to pay off IMF arrears. In early May 2006, Zimbabwe's government announced that they would produce another ZW$60 trillion. The additional currency was required to finance the recent 300% salary increase for soldiers and policemen and 200% increase for other civil servants. The money was not budgeted for the current fiscal year, and the government did not say where it would come from. On 29 May, Reserve Bank officials told IRIN that plans to print about ZW$60 trillion (about US$592.9 million at official rates) were briefly delayed after the government failed to secure foreign currency to buy ink and special paper for printing money.
On 27 June 2007, it was announced that central bank governor Gideon Gono had been ordered by President Robert Mugabe to print an additional ZWD$1 trillion to cater for civil servants' and soldiers' salaries that were hiked by 600% and 900% respectively.
Clearly Mugabe was responsible for the hyperinflation. The causes were those always present in these events. A weak economy, large government budget deficits, inability to borrow funds combined with the political decision not to cut Government spending. Governments are reluctant to lay off government employees, especially those related to the armed forces. The latter might invite a military coup. The only source of funding left is the creation of new money.
The entire article is recommended reading as we throw around "Zimbabwe" a little too loosely when referring to Federal Reserve Chairman (soon to be repeat, let's keep it real) Ben Bernanke. He's got a long way to go to reach Gono status but he could easily find himself there.
He owes Washington one hell of a favor, you think they aren't going to try to cash that in?
Early congratulations, ZB. FOUR MORE YEARS! Wooo hope and change YAY!!
(really, though, Zimbabwe is on the mend. It's possible. As Skeptical CPA might say, Kill the Fed!)