The power of III

Summum ius summa iniuria--More law, less justice

26 May 2011

New example of hyperinflation: Belarus

Socialism. Keynesian central planning.  Borrowing, borrowing, borrowing to pay for the government programs, until you can't pay it back, and no one will lend you more.

If you are a mundane, you go to jail, or you get your legs broken by a loan shark, or maybe both, or worse.

If you are a government, you bargain with other governments and creditors, then you devalue, and then you default.

What is happening in Belarus today is the result of sudden currency devaluation last week.  

The quantitative easing of the Federal Reserve in the United States is identical in theory and practice, but may be more incremental given the relative size and power of the United States.  

Economies are dynamic, however, and central economic planning is falling on it's face all over the world.  So what happens on a sudden abroad can also happen here: abrupt transition into a hyperinflationary environment (at least 20% generalized increase in prices per year, directly related to the money supply--the more dollars out there, the less each one is worth). 

 A Euro or Yen meltdown, or a large dumping of treasuries (such as the large US debt held by China) may trigger the dollar's collapse in value.

But here is what happens when the SHTF: 

The devaluation lifted the local price of automobile fuels as much as 24 percent, according to Belneftekhim, an industry group for the country’s oil sector. Last night, about 50 people protested the price increase in the car park of a Minsk hypermarket.

“I can’t describe how I feel without using obscenities, this is all our government’s fault,” said Sergey, a 32-year old attending the protest who works for a computer importer. “The whole world tells them, guys, you have economic problems, you should do something, and all they did was live off getting more and more loans.”

The price of children’s diapers has “gone completely insane” in Minsk, said Natalia, a 24-year-old mother also queuing outside the refrigerator store. “I used to buy a pack for 69,000 rubles, now they cost 140,000,” or almost half the 343,260-ruble monthly child benefit paid by the government, she said.

“We have become paupers,” said Tatiana, a 70-year-old woman in the line who also declined to give her last name. “We have been squeezed into a corner by this devaluation.”

"Unless Belarus heeds Russia’s call for mass privatization of state assets, it is headed for “hyperinflation, massive un- and under-employment, and a shutdown of production" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order.

(emphasis added)


Link to zerohedge guest post:
Welcome to hyperinflation hell: After currency devaluation, the Belarus economy implodes, sets blueprint for developed world future.

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