Hyperinflation in Zimbabwe

[forsmant]

HARARE, Zimbabwe (AP) -- The official rate of annual inflation in Zimbabwe tripled in the space of one month to 66,212 percent in December, by far the highest in the world but less than half the rate calculated by independent analysts.

The state Herald newspaper published the figures from the central bank Friday, showing a dramatic escalation from November's already dizzying rate of 24,470 percent.

In early October, the state central statistical office gave official inflation at just below 8,000 percent. It then suspended its monthly updates on inflation because there was not enough in the shortage-stricken shops to calculate a regular basket of goods.

The National Incomes and Prices Commission, the government's price control body, this week allowed sharp increases in the prices of the corn meal staple, sugar, bread and other basics in a bid to restore viable operations by producers and return the goods to empty shelves.

But the new prices were still roughly half the price demanded on the black market and were unlikely to guarantee regular supplies to food stores.

Even the Herald predicted that "in most cases, the products will be available only immediately after the price increases" and would disappear again as production costs rise.

Independent analysts estimate the real annual rate of inflation is closer to 150,000 percent. They cite supermarket receipts showing the price of chicken rose more than 236,000 percent to 15 million Zimbabwe dollars, or about $2.15 for 2.2 pounds between January 2007 and January 2008.

Zimbabwe, a former regional breadbasket, is facing acute shortages of food, hard currency, gasoline and most basic goods in an economic meltdown blamed on disruptions in the agriculture-based economy after the often-violent seizures of thousands of white-owned commercial farms began in 2000.

http://hosted.ap.org/dynamic/stories/Z/ZIMBABWE_INFLATION?SITE=WILAC&SECTION=HOME&TEMPLATE=DEFAULT

 

[Cleaner44]

Poor basturds, sure glad I live here... wait a minute!

 

[WilliamC]

This is something that has never happened in the USA, at least not since colonial times.

Even during the Depression the problem wasn't hyperinflation, just the opposite.

We'll just have to see what tomorrow brings....

 

[SeanEdwards]

I'm not sure why they are even bothering to quantify the inflation rate. I mean, somebody went to the trouble of calculating a 66,212% rate of inflation?

Wouldn't it be logical at that point to say "fuckit! This money is crap! I'm not compiling these statistics, because by the time I finish, whatever you offered to pay me for these calculations won't be worth my time!"

 

[AceNZ]

It sounds like the socialists are reaping what they sowed. Unfortunately, it sounds like they haven't learned yet that laissez-faire capitalism and a commodity-backed currency are the solutions, not price controls and private property seizures.

 

[RonRules]

Hyperinflation happened in Germany and the causes were similar to what is starting to happen here. Printing money to pay debt triggers these things.

Back around 1998, I went to Russia when they defaulted on their bonds and their currency collapsed. Everything was extremely cheap (for me). I was actually able to buy a pack of Russian state cigarettes for $0.04. I don't smoke, but it was a hell of a deal, which I kept as a souvenir. A tour guide (with car!) for a whole day was $4.00. I gave him a $1.00 tip and got a great smile back.

 

[Dr.3D]

I remember when it happened in Mexico and they had to issue new money.

 

[RonRules]

Afganistan, right at the height of the Taliban trying to control the economy.

 

[kyleAF]

I can't quite decide the following:

1. Which is better? Deflation or Inflation (given the choice only between these two)
2. Which is more likely to happen in an actual crisis? (Bernanke has hinted that inflation is preferred)

So, I'm holding cash and yellow metal... as a financial hedge against either scenario.

 

[Dr.3D]

I can't quite decide the following:

1. Which is better? Deflation or Inflation (given the choice only between these two)
2. Which is more likely to happen in an actual crisis? (Bernanke has hinted that inflation is preferred)

So, I'm holding cash and yellow metal... as a financial hedge against either scenario.

I believe I would prefer deflation. At least what I had in the bank would still be worth what it is supposed to be worth or perhaps more.

In this case though, I believe we will see severe inflation shortly.
Precious metals seems the only way to preserve any kind of wealth.
Of course good long term storage food is also great to have.
My grandparents went though the last depression and they always kept a large supply of food around even after the depression was over.

 

[Tom228]

I can't quite decide the following:

1. Which is better? Deflation or Inflation (given the choice only between these two)
2. Which is more likely to happen in an actual crisis? (Bernanke has hinted that inflation is preferred)

So, I'm holding cash and yellow metal... as a financial hedge against either scenario.

a little inflation won't hurt that much, unless it's hyper inflation. With deflation, you get something like the Great Depression.

 

[weatherbill]

come on hyperinflation! Let's get it over with!

My yellow metal will buy me some real estate.....aint got enough right now to go on...... so bring it on ben burnthebanke

 

[forsmant]

Doesn't hyperinflation end with deflation? In terms of the hyper inflated currency being replaced or revalued lower?

 

[rollingpig]

watch out for Ameros!

 

[AceNZ]

a little inflation won't hurt that much, unless it's hyper inflation. With deflation, you get something like the Great Depression.

Those are two myths that the government wants you to believe. The truth is:

Even a little inflation is harmful. 3% over 24 years means half of your savings have been stolen from you. Your tax bracket will increase. Your real wages won't keep up.

Deflation is much preferable. Prices decrease over time. Your savings are worth more. No one is stealing from you.

Deflation wasn't the cause of the Great Depression. It's possible to have a depression even in the presence of inflation (or hyperinflation). The root of the problem back then was that the government actually inflated the money supply in the years before the Depression (even though prices were going down), and set interest rates artificially low. As a result, wealth in the US moved overseas and the stock market boomed and then crashed (Sound familiar to what's happening today?) Since so much wealth had been moved out of the US, the economy was unable to support the same number of jobs, and the Depression started. Then the government stepped in and tried to "help", rather than just letting the market run its course, and the Depression became the Great Depression.

 

[kyleAF]

Those are two myths that the government wants you to believe. The truth is:

Even a little inflation is harmful. 3% over 24 years means half of your savings have been stolen from you. Your tax bracket will increase. Your real wages won't keep up.

Deflation is much preferable. Prices decrease over time. Your savings are worth more. No one is stealing from you.

Deflation wasn't the cause of the Great Depression. It's possible to have a depression even in the presence of inflation (or hyperinflation). The root of the problem back then was that the government actually inflated the money supply in the years before the Depression (even though prices were going down), and set interest rates artificially low. As a result, wealth in the US moved overseas and the stock market boomed and then crashed (Sound familiar to what's happening today?) Since so much wealth had been moved out of the US, the economy was unable to support the same number of jobs, and the Depression started. Then the government stepped in and tried to "help", rather than just letting the market run its course, and the Depression became the Great Depression.

I understand the immediate impact on savings and real wealth for the average person between the two scenarios. Inflation eliminates savings, while deflation can help it in terms of the fiat currency's value...

So am I right to be hedging against both? I believe that a pronounced deflation will make dollars worth more and gold worth considerably less (when indexed in dollars, of course), while inflation will make the gold worth quite a lot (of dollars).

The trick with thinking of money units is that it's relative to a given good. I can think of dollars versus gold, sure. Ultimately though, Dr. 3D is right: you can't eat dollars or gold. Non-perishable food and overall preparedness is probably the best investment!

Question: What exactly IS the mechanism for deflation (the real definition: contraction of money supply)?? How would the Fed (or govt.) absorb the excess dollars out of the economy?? Would it be enough to simply make the "digital money" in the system dry up? I know that accounts for the vast majority of money, rather than tangible paper dollars.

 

[danberkeley]

Who cares! At least everyone is a millionaire in Zimbabwe so it doesn't matter if a banana costs a million. I mean... d'oh! Sooner or later the government will simply remove 6 zeros from the end of the currency and that will solve the problem just like in Mexico. I mean... d'oh! Well, at least OUR government isn't creating inflation by increasing the money supply. I mean... d'oh!

 

[american.swan]

I'm not sure why they are even bothering to quantify the inflation rate. I mean, somebody went to the trouble of calculating a 66,212% rate of inflation?

Wouldn't it be logical at that point to say "fuckit! This money is crap! I'm not compiling these statistics, because by the time I finish, whatever you offered to pay me for these calculations won't be worth my time!"

LOL

 

[LibertiORDeth]

Those are two myths that the government wants you to believe. The truth is:

Even a little inflation is harmful. 3% over 24 years means half of your savings have been stolen from you. Your tax bracket will increase. Your real wages won't keep up.

Deflation is much preferable. Prices decrease over time. Your savings are worth more. No one is stealing from you.

Deflation wasn't the cause of the Great Depression. It's possible to have a depression even in the presence of inflation (or hyperinflation). The root of the problem back then was that the government actually inflated the money supply in the years before the Depression (even though prices were going down), and set interest rates artificially low. As a result, wealth in the US moved overseas and the stock market boomed and then crashed (Sound familiar to what's happening today?) Since so much wealth had been moved out of the US, the economy was unable to support the same number of jobs, and the Depression started. Then the government stepped in and tried to "help", rather than just letting the market run its course, and the Depression became the Great Depression.

Aren't we going through a depression in the midst of inflation?

 

[forsmant]

Aren't we going through a depression in the midst of inflation?

That is what happened during the 1970's in the USA.