March 30, 2013

NEWS YOU CAN USE: “For years, I have been advising my cash-poor friends: the secret to an ultracheap international holiday is a Google News search for the words runaway inflation,” Graeme Wood writes in the Atlantic:

The place listed in the dateline of any recent articles including that phrase should be your destination. En route to your home airport, visit the bank and withdraw U.S. dollars in crisp hundreds and fifties. At your beleaguered landing place, the local currency’s value will be melting away like a snowman in July. Your greenbacks will remain pleasantly solid. Everyone at your destination—hoteliers, restaurant staff, tour guides—will covet them and cut you deals. For you, luxuries will suddenly become affordable. Until your return flight (assuming you make it back safely, and are not robbed by an increasingly desperate local mob), you will experience the dismal science at its most cheery.

And note this:

Inflation happens for many reasons, but hyperinflation scenarios are nearly always the same: a government fails to harvest enough revenue to pay its bills—usually because a war has drained its treasury, or its poor fiscal policies have tanked the economy—so it prints money to make up the difference. “The central bank is just producing a lot more money than people want to hold,” Hanke says. “They’re spending much more money than they’re raising in taxes, and they can’t get credit from the private sector. At that point, you’re off to the races.” Monetary supply outstrips demand, and the wild irresponsibility of the government scares everyone away from saving cash. Instead, people buy whatever they can get, immediately, and prices rise accordingly. Anyone caught with cash loses everything.

And anyone who has hard currency—the kind that doesn’t evanesce expensively, like smoke from a Cohiba—is sitting pretty.

Don’t worry, I’m sure it can’t happen here.

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