Tuesday, 14 October 2008

Dollar, Euro, Sterling May Be Destroyed Zimbabwe-Style

Private investment advisor Martin Hennecke warned this morning that the endless printing of money to bail out collapsing banks would lead to hyperinflation and the Zimbabwe-style destruction of the dollar, euro and sterling.

Asked by CNBC how the three currencies could be destroyed, Hennecke, senior manager of private clients at Tyche, highlighted the collapse of Iceland’s banks.

“They have a lot of external debt in other currencies so they wouldn’t be able to print up more of their own currency - meaning hyperinflation to get out of their debt - but the UK, the U.S. and the rest of Europe could do it….this is the first step down the road to hyperinflation,” said Hennecke.

Pumping money into investments that are making losses is like throwing money down a hole. The extra money is lost, and the loss is now reflected on the governments involved on the bailouts. When so much money is printed and wasted in the effort to prop up insolvent businesses then the currency itself cannot be worth very much- hence the monetary devaluation and inflation. On a fundamental level, a country full of failed businesses cannot have a currency that is worth very much in comparison to more robust systems or commodities.

[Posted at the SpookyWeather blog, October 14th, 2008.]

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