We know how it should work. What we have to do is watch it for for signs of failure, and determine why it is so.

WOW!
Maybe I’ll want to move to Zimbabwe in a couple years.

Tracy

The ultimate result of monetary collapse or “default” is necessary before an economy can recover once a government has gone down the path of hyper-inflation. Trying to put off the “default” would only increase the suffering and delay recovery.

The only savings that are lost are those held in the currency that is debased by the actions of the government. It is not some action of default on the part of individuals that causes this, it is the action of the government issueing the currency. Banks will fail or survive in direct relationship to how much they participated in the debasement of the currency. The suffering (or “worse economic conditions” as you put it) is created by the debasement of the currency, the ultimate defaulting is a result of actions that have already caused the suffering.

If all debts are wiped, doesn’t that create worse economic conditions? Wouldn’t all the banks and other lending institutions collapse and all savings are lost?

although china’s “temporary” mercantilism has lasted decades, the end-game must surely have started.

i erred in classing zimbabwe as an export-based economy, but export-based economies can and do exist as you have described. see china versus the us. mercantilism, in other words.

There is no such thing as an “export-based economy”. And if there was, that would be the stupidest kind of economy. That means you are shipping out more goods and services than you are taking in, and getting worthless paper in return. Eventually that paper must be sent back, otherwise you have permanently lost the value of those goods and services. Anybody can print worthless paper.

the interesting thing about this article is that the banks seem to have done it fairly tough. this is what happens when the inflation is literally through printing money, as opposed to originating it through the banking system.

http://juandemariana.org/video/4194/jeffrey/tucker/technology/economic/education/

In the heart of southern Africa there is new flow of blood since the clot has moved on. Before the complete and total destruction of the Zimbabwe unit of fiat currency the tissues were dying from the lack of nutrients and oxygen. It is good news to see a localized reinvigoration but what has happened to the clot?

Inviolable property rights is the cure but where in Africa does that exist?

Nevertheless a return to relative health does bring some relief.

What? Now they use the US dollar and other fiat currencies. So they are still dependent on central banking.

The key here is that Zimbabwe doesn’t have a functioning central bank of its own, so Zimbabwean politicians can’t just create inflation. Also important is that there is competition between the USD, the EUR, and the ZAR. All three of these currencies are considered strong currencies (at least for the time being).

they haven’t. the article says the usd has become the de facto currency, with others accepted. that is, the government has got out the money production game, but not formalized any alternative monetary regime. i wonder how much time will pass before this happens. it’s hard to imagine politicians standing idly by as laissez-faire does its work.

Just asking:
Is it a useful refinement to your statement about transaction costs to say this: In accounting for non-like-kind, non-Fed-note exchanges for tax purposes, one must convert the value of the good given or service rendered into USD and deduct it, then convert the value of good or service received and count it as income. Under this, the tax burden is theoretically a wash, but the accounting is a more-than-crushing burden. Also, the IRS is free to quibble at will without any meaningful restraint with the dollar valuations of the bartered goods.

What I’m after is this: Is there a tax imposed on the exchange, or is it just prohibitive to effectively and legally avoid the tax?