They are "enjoying" an inflation rate in excess of one million percent! That's correct. One million percent! Some of the descriptions of hyperinflation make for great reading.
Quoting from the article:
"Robert Mugabe has kept his embattled regime in Zimbabwe afloat on a sea of paper money...
![[Robert Mugabe]](http://s.wsj.net/public/resources/images/HC-GM291_Mugabe_20080701153703.gif)
Mr. Mugabe's regime relies on a steady supply of the paper -- fortified with watermarks and other antiforgery features -- to print the bank notes that allow it to pay the soldiers and other loyalists who enable him to stay in power. With an annual inflation rate estimated at well over 1 million percent, new notes with ever more zeros need to be printed every few weeks because the older ones lose their worth so quickly...
Zimbabwe's central bank stopped posting inflation figures in January, when it stood at a relatively modest 100,580%. A loaf of bread costs 30 billion Zimbabwean dollars...
Vending machines, which take coins, fell out of service in Zimbabwe years ago. A single soda would require the deposit of billions of coins. Imported from South Africa and in very short supply, a Coke sells on the black market for around 15 billion Zimbabwean dollars."
The lesson is simple. When your government cranks up the money supply, buy wheelbarrows!
3 comments:
Here are a couple quick comments on inflation.
First, in my profession (investment management), I have worked with more than one Argentinian, who, could always understand and explain inflation better than anyone else. It is often the extreme that allows one to understand the "norm". In that sense, Argentinians have "benefited" from abnormal inflation patterns.
Second, the Argentine, or Zimbabwe, example can be used as an exaggerated example of how one can inflate away debt. In the extreme it causes other problems, but nonetheless provides a useful illustration. Imagine if you owe $1000 a month on your mortgage, and then there is inflation of 1000%. Now, assuming that your salary has also gone up with inflation, your mortgage payments are equivalent to $10! This is a simple illustration only, but the point is that one should consider partially inflating away debt in deciding whether or not to pay off a mortgage early.
Inflation is clearly beneficial if you are a debtor. However, the reverse is true. Don't be a lender or a saver. You'll be wiped out.
To survive, you must convert your paper money into hard assets as soon as you receive it.
Here is the upside of inflation:
the "benefit" of not being able to afford Coke is really very simple, no cavities.
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