When $1.5M is not enough to buy a week's worth of groceries

We are talking about Zimbabwe. Several newspaper have this story about hyperinflation in Zimbabwe today. Prices double daily. Barter has replaced cash.Government regulations only permit the withdrawals from banks of Z$1.5m a day, which is not enough to buy a week's worth of groceries. It is fascinating to read.

Zimbabwe's inflation will rocket to 1.5m% before the end of the year, the US ambassador to Harare predicted yesterday, forecasting massive disruption and instability that will drive President Robert Mugabe from office.

In a telephone interview with the Guardian, Christopher Dell said prices were going up twice a day, sapping popular confidence in a government which is now "committing regime change on itself".

"I believe inflation will hit 1.5m% by the end of 2007, if not before," Mr Dell said. "I know that sounds stratospheric but, looking at the way things are going, I believe it is a modest forecast."

Zimbabwe's official inflation is 4,500% but independent economists and retailers say it is really above 11,000% and picking up speed. The black market rate for the Zimbabwean dollar has slumped, from Z$160,000 to the pound last week to more than Z$400,000. It collapsed further yesterday, tumbling to more than Z$300,000 to the dollar. The official rate is fixed at just Z$250. Mr Mugabe insists that the Zimbabwe currency must not be devalued.

"Prices are going up twice a day, in some cases doubling several times a week," said Mr Dell, who is approaching the end of his posting to Zimbabwe. "It destabilises everything. People have completely lost faith in the currency and that means they have lost faith in the government that issues it.

While perma bears have been trying to paint this kind of scenario in USA, these kind of things are less likely to happen in democratic country and in capitalistic economy. The leader selection process in such countries acts as a check on policy makers. The pendulum swings when next President comes in. If a issue becomes more pressing, alternative leadership emerges, by cashing in on peoples dissatisfaction. Anyone for Mike Bloomberg as President. If he gets elected ( which is unlikely, as per Scott Adams theory Americans usually elect the tall guy with the best hair regardless of his experience or policies)many of the structural imbalances will get remedied. The very hint of his running will send all the President aspirants to copy his economic agenda anyway. So chances of hyperinflation in America are remote.