Zimbabwe is the latest example in history of what happens when a government and its leaders print money unchecked.  For years President Robert Mugabe printed money to pay off debts and government employees, to the extent that the inflation rate at one point was over one million percent annually. But recently it looks as though Zimbabwe is in recovery even as their currency was declared dead as recently as April of 2009.

Zimbabwe was deep in debt and was unable to afford its interest payments.  When any country reaches this point it can either go bankrupt or devalue the currency through inflation.  Zimbabwe chose the later.  As a result the currency collapsed and the country is now debt free.  That is right, debt free.  However not without consequence, hyperinflation wiped out the savings of all of its citizens, putting 80% of the people of Zimbabwe in abject poverty.

Forced to start over the people needed something to trade with.  They chose gold and US dollars.  Gold is trusted because it can not be manipulated by government and for now the US dollar is still the world’s reserve currency.  So with this quasi gold standard the shelves are stocked again and government controls have gone by the way side and the country is rebuilding.  Check out some of the BBC videos on youtube.com covering the panning and digging for grains gold by the Zimbabwe people to buy food.

Unfortunately the United States is on a similar path.  We are also printing money to cover deficits at a faster pace than this country has ever seen.  There are common denominators in all hyperinflation scenarios.  There will come a point when these deficits cannot be paid through any combination of taxes, growth or government borrowing.  Ultimately the government will need to make a choice, 1) cut government expenditures to the point that the budget is balanced, or the easier choice that is currently being used 2) fund the deficit by printing US dollars.  Most politicians will ultimately choose this route as it is the path of least resistance.  Unfortunately this leads to inflation and the erosion of savings.

If left unchecked inflation can lead to hyperinflation and in that case you will want to own gold.  Owning tangible assets are the only items that can put you in the 20% of the people that are thriving.  Now is the time to buy gold coins!