That ole' Vietnam Shuffle: Stagflation is back

One way that LBJ and Nixon paid for their wars in Vietnam was basically by running the country deep into debt (in 1967, the military took up 15% of the national income, a large percentage of which was paid for via debt), then printing money to devaluate the debt. The result was "stagflation" -- increases in prices as the money became less valuable due to an increase in the money without any corresponding increases in economic output. Indeed, since inflation also tends to devalue the money that would have gone into investment, it tends to cause a stagnation of economic output.

The Busheviks have had the printing presses turned on for some time now to handle the fact that they're running the country outrageously into debt with their borrow-and-spend invade-everybody-and-let-our-children-pay policies, but nobody's noticed because during the same period, the dollar was the de-facto currency for most of the world and the world's total economic output was also growing. But it appears that this little bit of good news is over: stagflation is back.

I swear, Iraq is just like Vietnam, except without the cool hippy clothes...

-- Badtux the "History repeats itself" Penguin