Inflation, at 1,200% annually, is destroying the Zimbabwean currency.

“Ten minutes later, a car pulled up in the driveway. My friend took my $100, went to meet his man and, seconds later, returned with a knapsack bulging with thick bricks of Zimbabwean dollars — in notes of 20,000 — held together with rubber bands. It totaled 30 million Zimbabwean dollars.

“Here,” he said, handing me the heavy bag. “The Zimbabwean wallet.”

In the 1980s, when I lived in Zimbabwe, Z$30 million would have made me one of the richest men in the country. Today, it barely buys a family a week’s groceries.”

This inflation, like most if not all severe inflations, is caused by two factors. Firstly, a scarcity of goods. The Zimbabwean government has embarked on a program of “reforms” which has crippled the agricultural production which was the main basis of the economy. Secondly, uncontrolled government deficit spending. In this case, to support the military. The government simply prints money to pay the troops, even though it has negligible income. As a result, more and more money chases a shrinking supply of goods.

The US has the same problem. However, the dollar’s status as the world’s reserve currency allows a privilege not extended to Zimbabwe, that of making up the deficit of goods produced by imports. Unlike Zimbabwe, the US’s credit is still good. But for how long?

The US has committed payments through Social Security and Medicare far in excess of the economy’s ability to pay. According to the GAO: “The federal government’s fiscal exposures totaled more than $46 trillion at the end of 2005, up from about $20 trillion in 2000. This translates into a burden of about $156,000 per American, or approximately $375,000 per full-time worker - more than double what it was in 2000. These amounts are growing every second of every minute of every day due to continuing deficits, known demographic trends and compounding interest costs.”

US leadership in manufacturing and technology has largely been ceded to other countries with lower labor costs. This economic gap has been papered over, for the time being, with a boom in construction. But this bubble is already popping. What next?