Liberty Phoenix

Then consider this headline:

Zimbabwe stock exchange resumes trading, in US dollars

I call it the McDonalds laugh. Good for a moment, until you feel that pit in your stomach when you realize what the Zimbabweans are in for. Their timing could not have been worse. Or course, we will all be in this together, soon enough.

When we buy goods from China, their Central Bank keeps those dollars as foreign reserves and prints new yuan to pay their exporters. This naturally has an inflationary effect on their economy. As Americans shift more towards buying cheaper goods here at home, this inflationary effect should accelerate in China. Will this trend, combined with other Chinese regulatory trends designed to combat deflation, ultimately lead to a hyperinflationary scenario? Will the Chinese sacrifice the dollar in order to fight inflation on their shores? And what will the effect be on the prices of all those cheap Walmart products that Americans have come to depend on? One author has an interesting take on it:

http://www.marketskeptics.com/2009/01/hyperinflation-will-begin-in-china...

Whether inflation is exported along with Chinese goods or it comes out of our need to monetize the debt, when they inevitably stop buying it, the next few years will no doubt be very challenging here in the U.S. and in China.

No, it's not bionic, it's Zimbabwe. They've just started printing $200 notes as a consequence of hyperinflation.

http://www.cnn.com/2008/WORLD/africa/12/06/zimbabwe.currency/index.html

Let's all hope the dollar doesn't end up trading 1:1 someday soon.