Tuesday, March 9, 2010

BOE, Deflation and Ebay Bids

I just purchased the $100B Dollar Zimbabwe Note.

http://cgi.ebay.com/2008-Zimbabwe-One-Hundred-Billion-Dollar-Note_W0QQitemZ270490630121QQcmdZViewItemQQptZPaper_Money?hash=item3efa7f77e9

The way I look at it, for the price of about $15 Bucks I can be a very rich man in Zimbabwe. I might even put up a $100 USD Bill for $90 bucks on Ebay as a joke. I wonder if anyone would bid? In all seriousness, Zimbabwe is a joke country because they foolishly thought they can just print up money to soak up all of their debts. The world was on to their game and quickly murdered their currency. This of course is the same thing we are doing in the US with ZIRP and QE. We just did it by wearing better suits, but unlike Zimbabwe we have a real economy and the general trust of our creditors. Well for the time being anyway, as soon as this changes we will also see USD on Ebay at drastic discounts. Inflation is not a big worry at the moment as housing is still too expensive and their is no credit expansion anywhere. Deflation is still the big worry and that will be the next big move for prices in general.

On the subject of deflation the Times Online has this very interesting piece.

http://www.timesonline.co.uk/tol/money/article7052019.ece

When people are worried about inflation they demand larger and larger bills to compensate lost purchasing power. When citizens start to demand smaller denominations its an indication of deflationary forces at work.

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