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April 19, 2006
Palestinian inflation possibility?
John Palmer sees the Palestinian Authority running out of money and ponders what might lie ahead.
My guess is that unless other [Arab?] nations cover the shortages left by canceled EU and Western aid, then within a year (and possibly just a few months), the PA will declare its independence from the New Israeli Sheqel and the Jordanian Dinar and start printing money to pay its debts. The effect will, of course, be to create massive and rapid inflationary pressures. These will be followed by ruthlessly enforced price controls and foreign exchange controls.
Whether it will play out this way depends on Middle Eastern politics and diplomacy. By comparison, predicting the Fed's June decision looks like a piece of cake. This bears careful watching. One hyperinflation in the world right now is one too many.
Posted by William Polley at April 19, 2006 01:04 AM
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Comments
Maybe the Palestinians could peg their new currency to the Zimbabwe currency! Something along the lines of the National Review's devotion to fixed exchange rates.
Posted by: pgl at April 19, 2006 04:16 PM