Inflation is Now Illegal

Poor Zimbabwe. "The big problem about Zimbabwe," said a political analyst who asked not to be identified for fear of reprisals, "is that the one thing you can't rig is the economy. When it fails, it fails. And you can have unpredictable effects."

What could happen in Harare is a revolution or a military coup. People are getting sick of inflation rates over 1,000%. Last month, inflation hit a new high, at over 1,200%. People complain that bus fares take up their entire salaries. Food is becoming scarce (farmers get fuel at a preferentially low price... then sell it on the black market for 10 times as much). Teachers, and even doctors and nurses are on strike. And the police are threatening to riot.

But leave it to the politicians and economists to come up with a solution. The Central Bank of Zimbabwe announced this week that henceforth inflation would be illegal. Anyone who raises prices will be arrested.

Just who do they think they are, the Nixon Administration? Nixon's bunch also tried to make inflation illegal. But our Harare source is right. "You can't rig the economy." Nixon gave up... inflation rose. It only stopped rising when big Paul Volcker stepped into the Fed and hammered it down... not without pain. The U.S. economy went into its worst slump since the Great Depression... and stocks - adjusted for inflation - went down 80% below their 1960s highs.

Which makes us wonder about the future of the U.S. economy. Consumer price inflation has yet to strike the 50 states, but there is plenty of inflation in the money supply and in the prices of capital assets.

We notice also that bond yields have begun to rise... since December, in fact. Could the bond market be getting a little skittish - looking at all that inflation of the dollar? Maybe...

Of course, it is impossible to understand world politics without reference to empire. The Bush budget includes $750 billion for defense - an outrageous amount of money for a country that has no real military rivals worthy of the name. That amount is not for defense at all. An empire is in the business of maintaining order all over the world. It does this by sending its garrisons to far-flung frontiers... Vietnam, Bosnia, Grenada, Sudan, Iraq, Afghanistan. Then it meddles in them. And gets into one scrape after another.

But that's the path empires follow - the path of all public spectacles: humbug... then farce... and finally, disaster. The humbug is always the same - that the imperial power has a culture or a system so superior it must be imposed on others. The farce begins when absurd things are done to justify the humbug - such as announcing 'mission accomplished,' when all that was accomplished was that billions more dollars and more than a hundred thousand troops were now pinned down by a few fanatics with towels on their heads.

It is always difficult and dangerous to speculate about the future. Rome dragged on for 300 years after it reached its peak under Trajan. But America's enemies are almost comically weak and it is possible that the empire could find the resources to drag on too, for many decades to come. On the other hand, you can't rig an economy... in Harare or DC. After the current credit boom deflates, where will the resources come from?

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