Repricing – Financial Markets – Week 7

Zimbabwe:

A small country by the name of Zimbabwe recently came to my attention. It has been reported that Zimbabwe followed the classic socialistic method of government ownership of assets and Quantitative Easing to an extreme. The central bank has created as much money as the government wanted. The result is predictable… absolute economic turmoil.

The most fascinating bit of information is that the rate of daily inflation in Zimbabwe is 98%. People there try to get paid daily so they can rush out and buy something with the money before it devalues again. I don’t envision anything like that happening here in the United States, but is is an illustration of the importance of having adults running the government and financial system.

One final note about Zimbabwe. The economy of Zimbabwe will ultimately collapse. It could be the straw that breaks the back of the global economy. Venezuela is a great candidate for that distinction, but Zimbabwe is even closer. China would set off a tsunami economic chain reaction. In every case the re-pricing of assets will occur.