Zimbabwe Vision

Well, we barely made the airport for last plane out
As we taxied down the runway we could hear the people shout
They said, "Don't come back here Yankee!"
But if I ever do, I'll bring more money
'Cause all she wants to do is dance
--Don Henley

Patrick Barron suggests that the US is heading toward a Zimbabwe moment. We're printing dollars to cover obligations that cannot be covered out of income. The effect of this money printing is delayed because the USD is the world's reserve currency, and central banks worldwide have been purchasing money of these dollars in the name of beggar thy neighbor mercantilist policy.

I would also add that the transmission mechanisms for much of this inflation, QE money laundering and the credit creation ponzis, have largely confined the new money to the financial system where it has thus far inflated only financial security prices.

This Cantillon effect cannot last forever. When dollars make their way into everyday markets for goods and services, it is likely that price increases for goods and services will be quick and steep.