Inflation is cool again.
It’s in part because we’re drowning in so much damn debt that the only path out of the mess which mainstream economists can see is to inflate it away.
And it’s also because mainstream economists equate a healthy economy with vigorous consumer spending. And there’s no better way to incite spending than to convince consumers that their dollars will be worth a lot less if they hold into them.
So folks have been proposing more and more radical ideas for spurring inflation through monetary policy.
This weekend in the NYT, Greg Mankiw made a tongue in cheek proposal for how the fed could spur spending by announcing that in a year from now, all bills whose serial number ended in some arbtirarily chosen random number would be made null in void. Alas, if you didn’t want to see 10% of your wealth simply vanish, you’d have to spend it (… or buy gold).
We’re pretty sure he threw it out there purely as a mental excercise, but he got quite a blowback! Michael Shedlock (Mish) called on Mankiw to resign. Karl Denninger said that rather than prompting commerce, such a move would cause people to: “…immediately go to the closet and retrieve their shotgun, load it, and proceed to use it on the party or parties that declared their intent to randomly destroy their money.
Now Felix Salmon reports that in Zimbabwe they’re doing something nearly as bizarre as Mankiw’s idea: they’re issuing legal tender with an expiration. It has to be spent in a short period of time, otherwise it just expires worthless. It’s creative. Cash as a gift certificate with an expiration date.
But that’s actually not all they’re doing in Zimbabwe. To really drive home the point the fact that a pro-inflation government is a thieving government, it’s been discovered that the government there is literally stealing dollars from private corporations. Like, literally. In order to overcome a cash shortage, the government just went into the accounts of certain firms and took some cash. (Not surprisingly, the banks didn’t seem to show much resistance to this looting).
The government has stopped doing this, but really, the net affect isn’t much different than standard inflation-based theft… except that inflation usually helps the elites, and for once this type of plundering seemed more affected at large firms. So maybe that’s even better.