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Unlike Zimbabwe, the U.S. can easily get the currency it needs without being beholden to anyone. But wouldn't that dilute the value of the currency? No.
A month ago, the bond vigilantes were screaming that the Fed's QE2 would be the first step on the road to Zimbabwe-style hundred trillion dollar notes. Zimbabwe (the former Rhodesia) is th e poster example of what can go wrong when a government pays its bills by printing money. Zimbabwe's economy collapsed in 2008, when its currency hyperinflated to the point that it was trading with the U.S. dollar at an exchange rate of 10 trillion to 1. On November 29, Cullen Roche wrote in the Pragmatic Capitalist:
Back in October the economic buzzwords had become "money printing" and "debt monetization". . . . [T]he Fed was initiating their policy of QE2 and you'd have been hard pressed to find someone in this country (and around the world for that matter) who wasn't entirely convinced that the USA was about to send the dollar into some sort of death spiral. QE2 was about to set off a round of inflation that would make Zimbabwe look like a cakewalk. And then something odd happened -" the dollar rallied as QE2 set sail and hasn't looked back since.
What really happened in Zimbabwe? And why does QE2 seem to be making the dollar stronger rather than weaker, as the inflationistas predicted?
Anatomy of a Hyperinflation
Professor Michael Hudson has studied hyperinflation extensively. He maintains that "every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts."
It is in the foreign exchange markets that a national currency becomes vulnerable to manipulation by speculators.
The Zimbabwe economic crisis dated back to 2001, when the government defaulted on its loans and the IMF refused to make the usual accommodations, including refinancing and loan forgiveness. Zimbabwe's credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign exchange market. These dollars were then used to pay the IMF and regain the country's credit rating. According to a statement by the Zimbabwe central bank, the hyperinflation was caused by speculators who charged exorbitant rates for U.S. dollars, causing a drastic devaluation of the Zimbabwe currency.
But something darker seems also to have been going on. Timothy Kalyegira, a columnist with the Daily Monitor of Uganda, wrote in a 2007 article:
Most observers and the general public believe Zimbabwe's economic crisis was brought about by Mugabe's decision to seize white-owned commercial farms in 2000. That might well be true. But how about another, much more sinister element . . . sabotage?
Kalyegira asked how a government " with the same tyrant called Mugabe as president, the same corruption, and same mismanagement, kept inflation down to single digit figures [before 2000], but after 2000, the same leader, government, and fiscal policies suddenly become so hopelessly incompetent that inflation is at the latest reported to be over 500,000 percent?"
Canadian commentator Stephen Gowans calls it "warfare by other means." Devaluing the enemy's currency has been used as a war tactic historically. It was used by Napoleon against the Russians and by the British against the American colonists.
In 1992, financier George Soros showed how it was done, when his hedge fund virtually single-handedly brought down the British pound. His fund sold short more than $10 billion worth of pounds, forcing the Bank of England to devalue the currency, earning Soros an estimated $1.1 billion and the title "the man who broke the Bank of England." In 1997, the UK Treasury estimated the cost at 3.4 billion pounds.
One wonders, then, if it is just coincidence that the Open Society Initiative for Southern Africa is a Soros-affiliated organization. A ccording to Wikipedia, its director for Zimbabwe also directs the Zimbabwe Congress of Trade Unions, the main force behind the founding of the Movement for Democratic Change, the principal indigenous organization promoting regime change in Zimbabwe.
War by Other Means
The push for regime change in Zimbabwe was detailed by Stephen Gowans in a March 2007 article posted on Global Research. He wrote:
