Zimbabwe Closes in on Record|
March 16, 2009
Readers will be aware that hyperinflation has long been alive, well and thriving in Zimbabwe. Back in February 2007 the country became the first to hyperinflate in the 21st century when the monthly inflation rate achieved 50 percent. This is taken as the minimum rate to allow a country to qualify as a fully paid-up member of the hyperinflation club. It equates to 12,875 percent per year.
Promotion through the ranks has been rapid for Zimbabwe. Last October it achieved second place in the all-time hyperinflators' stakes when it nudged aside Yugoslavia's January 1994 monthly rate of a miserly 313,000,000 percent.
Sometime this year the country could become the new world champion. To take the number one spot, Zimbabwe must eclipse Hungary's stupendous achievement of July 1946. Then the monthly rate peaked at 13,000,000,000,000,000 percent with prices doubling every 15.6 hours.
On Friday, Jan. 16 The Reserve Bank of Zimbabwe (RBZ) marked the country's new international status by announcing plans to issue Z$10 trillion, Z$20 trillion and Z$50 trillion notes along with one for Z$100 trillion. At the time Z$100 trillion equated to about US$60.
As in the past the announced official intent was to introduce the new denominations gradually starting with the Z$10 trillion. However, such is the exponential growth of the country's inflation that the $100 trillion proved to be needed sooner rather than later.
The BBC noted wryly that a Z$50 billion note had been issued three days prior to the announcement on Tuesday, Jan. 13 and that was less than a month after release of a Z$500 million bill.
Somewhere in the intervening days the RBZ had abandoned the daily bank cash withdrawal limit. It had become irrelevant. Not only was it barely sufficient for a few loaves of bread but most banks had long lacked sufficient cash float to meet the demand.
Then, on Feb. 3, the RBZ revalued the Z$100 trillion issue to ZN$100 by chopping 12 zeros from the Zimbabwe dollar. This added to the 10 zeros slashed back in August 2008. As on that earlier occasion, record keeping was having problems keeping abreast of the size of the numbers involved. The bank's governor, Gideon Gono, assured one and all that the move was meant to bring convenience to the public, and introduced six brand new currency denominations of one, five, 10, 20 50, 100 and 500 dollars with immediate effect. The three-week-old trillion dollar notes will cease to be legal tender on June 30.
The country has also adopted a multiple currency trading system - officially. Both the U.S. dollar and the South African rand now circulate alongside the ever-inflating Zimbabwean dollar with government blessing. For many months the two alternative currencies have been preferred for all cash transactions on the black market. But now essential civil servants are paid in both rather than the Zimbabwe dollar.
An excellent account of Zimbabwe's hyperinflation, including comparisons with other infamous currency crashes, is given by Steve H. Hanke, professor of Applied Economics at John Hopkins University. It is recommended to all those addicted to collecting hyperinflation monies. Try: www.cato.org/zimbabwe.
Back on June 25 last year Hanke observed: "Zimbabwe is in the late stages of a classic hyperinflation - Inflation is galloping ahead as the supply of Zimbabwe dollars surges and the demand for them shrinks. Eventually, the currency will totally collapse as people simply refuse to accept it." In effect this has happened with the widespread use of the U.S. dollar and rand.
And in November, when the monthly rate raced past 80,000,000,000 percent, Hanke observed that all non-cash Zimbabwe dollar transactions had ceased and the Zimbabwe Stock Exchange had stopped trading. He hence declared the non-cash Zimbabwe dollar to be dead, i.e. no checks, no plastic money.
As a consequence, and with few goods in the shops to measure inflation on at a practical level, Hanke sees no point in trying to estimate, let alone calculate any inflation figure beyond this point. In an article in Forbes Asia of Dec. 22, he noted the annual rate, based on the 80 billion percent November monthly rate, would be 6.5 quindecillion novemdecillion, that's 65 followed by 107 zeros percent - or 98 percent a day if you prefer.
Nonetheless a lot of folks in Media Land continue to make estimates and display their skills with the names of really big numbers, prompting some derisive comments and observations.
When Gary Els, vice chairman of the Astronomical Society of Southern Africa, read a report in The Times of Feb. 4 that the annual inflation rate had passed, a conservative, five sextillion, or 5,000,000,000,000,000,000,000 percent, he realized that in size the rate will soon approximate the number of stars in the known universe.
In a blog, he calculates that if a Zimbabwe dollar is 0.1mm thick, such that a stack of 10,000 notes is 1 m high, then a pile in which one dollar corresponds with every percentage point of Zimbabwe's February five sextillion percent inflation, would reach from earth to the edge of our solar system. In fact Voyager 1, launched by NASA in 1977 and currently trundling along beyond the orbit of Pluto at 17 km/s, will not arrive at the top of that pile until 2025, by which stage it will have grown considerably higher. Goodness knows what it would stack up to using Hanke's estimation.
Whatever the real rate, Zimbabwe may soon become the new world champion. It could happen any day soon.
Add to: del.icio.us digg
With this article: Email to friend Print
On March 18, 2009 Petros James
Something to add? Notice an error? Comment on this article.