The $750,000 Note That Won't Buy a Loaf of Bread
In a live TV broadcast, Dr Gono said he was introducing a Z$250,000 note, a Z$500,000 note and a Z$750,000 note. None of them is enough to buy a single loaf of bread.
Zimbabwe's currency is fast losing value as annual inflation hovers above 14,000 per cent. Officially, Z$750,000 is worth £12.50. But at this week's widely-used parallel exchange rates, it is worth about 8p.
The new notes come less than five months after Dr Gono launched the Z$200,000 bill, now only enough to buy one hard-boiled sweet. The note will become obsolete on 31 December, the central bank chief said, announcing a raft of measures to clamp down on cash hoarders.
Many shops have stopped accepting cheques because the Zimbabwean dollar loses so much value in the five days it takes to clear a cheque.
"We need a Z$1 million note then we will not have to carry our money in big bags," complained a shopper in a Spar supermarket.
Comments (14)
Deflation should be around the corner soon. Don't they understand that globalization will keep inflation in check. Wage arbitrage should do its magic in no time.
Published: December 22, 2007 8:07 PM
i've always believed that a stabilization plan would only be implemented on mugabe's death or overthrow. i don't see him voluntarily handing over the tool by which he and his buddies have enriched themselves at the expense of an entire nation.
Published: December 22, 2007 8:32 PM
I find it odd that most Americans understand that excessive printing of money in countries like Zimbabwe and Mexico (circa 1980's) is the reason for massive inflation, and yet they don't seem to understand that the same thing is happening here, just on a smaller scale.
Published: December 22, 2007 9:54 PM
The massive inflation of Zimbabwe and Mexico is happening here in the US: the process is well underway. It just hasn't progressed quite as far.
Yet.
Published: December 23, 2007 12:17 AM
The Zimbabwe government seems to have read
von Mises work and done the exact opposite
of what should be done to develop a prosperous economy.
I'd like to see articles on economic actions by the governments of Bolivia and Venezuela.
I think Bolivia will crumble first.
Venezuela does have an advantage in avoiding
economic reality by sitting on huge oil reserves.
Published: December 23, 2007 4:05 AM
according to wikipedia 'Dr' Gideo Gono (chief central banker) awarded himself the honorary title Doctor. nice.
Published: December 23, 2007 4:33 AM
"...Americans...don't seem to understand that the same thing is happening here, just on a smaller scale."
I would have said, larger scale, but at a slower rate. Ultimately the dollar has a value of zero units of any commodity.
Published: December 23, 2007 9:29 AM
Jodie, let's hope it starts soon.
Meanwhile, no globalization can save your from runwaway printing presses while you are being paid with the resulting worthless paper.
When printing presses go wild, usually what you get is a monetary reform. Today's 1 million bill will become tomorrow's cent, and then maybe they'll stop it, maybe they'll start again.
Just look at what happened with the currencies in Argentina and Brazil from the 70's to the 90's.
Here in Uruguay, we had two monetary reforms creating a new currency. The new unit was worth 1000 of the old one. Thus, one 1970 peso was worth 1/1000000 of a 1990 peso.
It took great hardship and time to stop inflation before investment returned and wage arbitrage started "doing its magic".
Given Zimbabwe's friendliness to potential investors and property rights, I wouldn't be surprised if it takes even longer for them.
Published: December 23, 2007 11:43 AM
Some smart guy with the initials LvM wrote almost a century ago:
"Inflation can be pursued only so long as the public still does not believe it will continue. Once the people generally realize that the inflation will be continued on and on and that the value of the monetary unit will decline more and more, then the fate of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value of the notes."
A light analogy would be from a classic Peanuts Gang scenario. This is where Charlie Brown still believes that Lucy is going to let him kick the football. He is sent flying onto his arse when she takes it away at the last second. Poor ole' Charlie Brown keeps coming back to try again anyway.
Q: Where is the money value?
A: It's all Gono!
(Or is that "Dr." Gono?)
Published: December 24, 2007 3:11 AM
"The (Z$200,000) note will become obsolete on 31 December, the central bank chief said, announcing a raft of measures to clamp down on cash hoarders."
This comment makes no sense to me. Why would anyone hoard a rapidly depreciating asset? Am I missing something or is Mr. Gono just bonkers?
Published: December 24, 2007 8:41 AM
You doubt the good Doctor's wisdom? How dare you!
Mind you, this kind of idiocy is unfortunately common in African governments. Mbeki's health minister (SA), IIRC, thought that beets were the cure to the problem of AIDs...
Published: December 24, 2007 9:00 AM
American prices aren't rising as fast as M3 is being inflated because much of the trillions of dollars created over the past decade are contained in massive "reservoirs" like IRA's, Foreign Central Bank Reserves, etc. When the people controlling these hoards decide to exchange their depreciating greenbacks for "real" stuff (a.k.a. "Dumping the dollar"), the flood will begin. All of these dollars will flow quickly to the place the law requires people to accept them as legal tender- the USA! The value of the dollar will drop, prices will go nuts, and you'll see $100 bread at Wal Mart. This is why it is crucial to monitor not only the Federal Reserve's actions, but also the foreign central banks. www.GATA.org
Published: December 25, 2007 9:50 AM
Such high inflation would be unsustainable without "legal tender" laws, because people would simply stop using the inflated currency and use a more stable currency instead. Probably, there's a lot of informal trading going on with "illegal" currencies trading under the table, as well as bartering.
This is why the U.S. government has to crack down on anything that even smacks of alternative currencies, so that Americans don't get it into their head to stop using the U.S. dollar.
Published: December 25, 2007 12:18 PM
That is Ben R of the Steelers by the way. Big Fed Ben is a clown. If he would drop the money from helicopters it might be better as some of it would get lost and the cost of a helicopter is greater than the cost of data entry.
The best part is that he has gotten other Central Banks to follow his suit and reduce the value of their currencies to keep pace so as not to disrupt the mercantilists who exported tons of stuff to the US from continuing to do so.
I like the comment that the SCALE of the currency devaluation isn the US is MUCH larger than that attempted in Brazil, Argentia, or Zimbabwae only the rate is slower.
Published: December 27, 2007 3:24 PM