Hyper Inflation

Anyone wishing to see the effects of Hyper-Inflation need look no further the Zimbabwe. Through years of chronic fiscal mismanagement Zimbabwe has for a number of years held the ignominious title of World Inflation Record holder.

The "official" inflation rates is 2.2 million percent, reliable estimates by independent analysts put the real inflation rate at 15 million percent. To try an get an understanding to what that sort of inflation would feel like if you lived their, imagine you go to the store and buy a loaf of bread. It costs you $1. You go to the same store to buy a loaf of bread a month later and it costs $3.80.

In that kind of environment the only sensible thing to do is spend your pay as soon as you get it. Unfortunately for consumers in Zimbabwe, getting your money all at once is impossible because of a currency shortage. Even if you could there is nothing in the shops to buy.

The local population has been reduced to a barter economy. I'll trade you a few eggs for a bag of corn meal.

For business's trying to operate in this environment, it has become difficult if not impossible. The government has enacted price controls that make trying to operate in this environment and obey the rules a guaranteed quick route to bankruptcy. If you are caught raising prices or taking in hard currency not only could you lose your business but you will most likely end up in jail. Which will necessitate a hard currency bribe to get out of.

The government last week introduced a 100 Billion Zimbabwe Dollar bank note. By the end of the week it was insufficient to purchase a loaf of bread. The head of the central bank Gideon Gono has plans to reduce the number of zero's on the Zimbabwe bank notes as it is impossible to find calculators or cash registers that can handle that many zeros. They tried this before in 2006 but at 15 Million Percent Inflation it does not take long to get right back where you started.