Posted by: Reilly | April 1, 2008

Hyperzimbabflation

Since April 2007, the Zimbabwean Dollar has had the dubious epithet of “Least valuable currency unit in the World”, which it secured by outpacing the venerable Vietnamese Dong. Rampant hyperinflation (now estimated to exceed 100,000%) has decreased the value of the currency to $70 Million ZWD to $1 US Dollar.

While it’s reassuring to note that at least one country on Earth has outpaced the decline of the US Dollar in recent months, Zimbabweans are not amused at having to shell out a few billion for black market Winger albums. It’s rare to see inflation this bad; examples that come to mind are 1923 Germany (when inflation was 3,250,000% per month) and 1946 Hungary (when inflation on the Pengő was 4.19 × 1016 percent per month, and prices doubled every 15 hours).

In addition to throwing the basic macroeconomic policy out the window, (Former?) President Mugabe’s administration has sealed its own fate by causing this catastrophe. In today’s Telegraph, David Blair spells out how the seizure of white-owned farms, the decline in tourism, and the nationalization of the mining industry have effectively reduced the country’s tax base. As a result, the Zimbabwe Government is able to generate virtually no revenue, and has resorted to ‘printing money’ to merely remain operational. While it’s nice to print out a few hundred million dollars so President Mugabe can run downstairs and grab a coke out of the vending machine, the net effect is astronomical inflation (and the expensive costs of converting the new machine to accept billion-dollar notes).

Indeed, it must have cost the government even more than a Michigan primary do-over to run the recent election. As Mugabe steps down, the new administration must first perform a few economically critical acts: namely, printing of currency must cease, and government operations must be funded by an outside source (enter: a good use for the IMF). Significant reversals in recent economic policy must occur to restore faith in both the currency and the economy, which (by the way) also suffers from an 80% unemployment rate.

The top occupations of the other 20%?

  1. Miscellaneous Mugabe Henchman
  2. Peddler of AIDS Orphans
  3. Refugee
  4. President Mugabe (himself)*
  5. Peddler of Refugees

*Currently Unemployed

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