Zimbabwe inflation at 2,200,000%?

Question

http://news.bbc.co.uk/2/hi/business/7509…

Please explain to me how i the world such a thing is even possible. Just last year, the inflation rate was 10 000 % and just a few years ago it was 500 % and just a decade ago, the inflation was 10%.

How is it possible to reach such a runaway and unsustainable inflation rate? What are the "mechanisms" that are tantamount to a manageable economy?

Basically, how the devil does an entire country get an inflation rate of 2,200,000%??????????????????

Answer 1

Best Answer - Chosen by Asker

Zimbabwe's farms were highly productive and the bread basket for much of southern and eastern Africa. Mugabe confiscated the farms and gave the land to his cronies -- who knew diddly about farming and destroyed the productivity of the land. No more exports, no more income, no more foreign exchange. Therefore no money to pay his henchmen.

Mugabe started the printing presses rolling full-tilt to pay off govt employees, etc., without any income, foreign exchange, gold, or anything else to back the currency. The currency starts buying less: there's no food grown so no food in the stores, no forex so no money to pay for imports. Lots and lots of paper chasing fewer and fewer goods.

It's called hyperinflation and is notorious in economic history. Germany suffered hyperinflation in the early 1920's. Argentina is another notorious recent case.

Hyperinflation is always caused by issuing excessive amounts of "money" with nothing to back it and no way to exchange it for goods and services due to lack of supply. Hyperinflation always results in economic collapse and a change in govt. In Germany, Hitler took over, you know the impact of that on world history.

Mugabe is a goner. It is only a matter of time and the manner in which he is deposed. A new govt will have to rebuild the economy from scratch. If Zimbabweans do it right, they will end up in a couple of years with a more responsive and responsible govt and a sounder economy, and they will rebuild a stronger country. If they do it wrong, they suffer the consequences -- hunger, violence, totalitarianism -- until they straighten themselves out and get it right on some future try.

Zimbabwe will run out of paper to print their currency in about 2 weeks. That will be the end of the printing presses churning out more worthless paper. Watch the news bulletins during the month of August.

Asker's Rating:

Asker's Comment:

Wow. I feel like my IQ has gone up by 30%! Thank you very much for enlightening me on this economic quandary. You explained this very clearly.

Answer 2

dunno

Answer 3

I was wondering the SAME thing!

Answer 4

The government starts printing money as fast as they can, but it's almost worthless because there's no gold to back it up.

Answer 5

happened during the great depression in lots of countries. Money was worthless. It was better as fuel for fire than value. Basically the economy has to completely fall apart.

Answer 6

it is a third world country in africa. what can you expect. there are many third world countries in africa, and there are those in africa who dont have any money at all. it is possible to reach such a runaway and unsustainable inflation because of bad government and bad laws. also, poor living conditions in general, so higher taxes are made so that they can use the money to better living conditions. many ppl cant afford the tax on everything, so they buy less and less which makes the economy go down. the 'mechanisms' that are tantamount to a manageable economy are reasonable laws, fair taxes, proper liviing conditions, good salaries for the citizens, available healthcare, and availablitly of all basic needs, like clean water, homes, food, clothes, utilities, multiple forms of communication.

Answer 7

Inflation is growing at the rate the Government is printing money. Inflation is a result of monetary policy. It is too much money chasing too few goods. In the case of Zimbabwe, they have too many dollars in circulation. The reason it is that way is because Zimbabwe, rather than earn money through tax receipts and such to pay its bills, the Govt just prints money. They keep adding to the money supply and thus make their currency worthless. They can't stop, else the house of cards the Govt has created will collapse. All those police who backup the Govt Machine must get paid, else they'll walk. Etc, etc...

So the Zimbabwe Dollar is worth about as much as leaves on a tree. The cure to this problem is to cut the money supply and burn the printing press. That is the only way Zimbabwe can recover. Either that or Govt Collapse.