Inflation of Zimbabwe

Group Members

Maria Iqbal #35

Iqra Shahzadi #12
So, what IS money?

-- a medium of exchange
-- a unit of account
-- a storehouse of value
 Money?

We trade dollars for goods, not goods

for goods…(exchange)
We keep records in dollars, not just
heads of lettuce…(account)
We save money because it keeps its
value for later. The lettuce would rot
before we could trade it…(value)
Inflation, or ‘funny money’
 Inflation, or ‘funny money’
Bananas were somewhat costly:
Inflation, or ‘funny money’
    But, if there’s wild inflation, money loses its usefulness.
No one wants it, because no one knows what it’s worth
– or might be worth tomorrow, when you cashed
a check.
Inflation, or ‘funny money’
 Inflation, or ‘funny money’

This is
Zimbabwe,
in Africa,
with about
12 million
people – rich
agriculture,
and plenty
of copper
 Inflation, or ‘funny money’
It’s a modern African country: here’s the capital,
Harare, formerly Salisbury (Rhodesia).
 Inflation, or ‘funny money’

But in Zimbabwe,
inflation got the better of
them. It skyrocketed… so
much so that the currency
became worthless,
Inflation, or ‘funny money’
In October 2005, the Reserve Bank
announced a revaluation

1000 old Zim dollars got you $1 new

 Inflation, or ‘funny money’

Carrying
all that cash
around
became
a problem
Inflation, or ‘funny money’
In April 2007, along came checks
for $25 million and $50 million.
On May 5, they added $100
million and $250 million – and
10 days later, with inflation
raging-- there was a $500 million
check.
Inflation, or ‘funny money’
No stopping it now:
Sept, 29 – $10,000 and $20,000
Oct. 13 -- $50,000
Nov. 3 -- $100,000, $500,000 and $1
million
Dec. 4 -- $10 million, $50 million and $100
million. More More !!!
Inflation, or ‘funny money’
Dec, 8, 2008 -- $200 million
Dec. 12 -- $500 million
Dec. 19 -- $1 billion, $5 billion, $10 billion
Jan 12, 2009 -- $25 billion, $50 billion
Jan. 16 -- $10 trillion, $20 trillion, $50
trillion, $100 trillion.
Oops! Start over again.
 Inflation, or ‘funny money’
Zimbabwe's Annual Inflation Rate is now 516
Quintillion Per Cent Dec. 2, 2008
Hyperinflation has Zimbabwe in the throes of a
financial crisis The monthly inflation rate is
currently running at 13.2 billion per cent …

The latest figures put the annual inflation rate

at 516 quintillion per cent. That's 516 followed
by 18 zeros.
 Inflation, or ‘funny money’

Feb. 2, 2009
Lop off one trillion – 12 zeros.
Start over with new notes
$1, $5, $10, $20 $ 50 $100 and $500.
Inflation, or ‘funny money’
Inflation, or ‘funny money’

In the end, it was about the

same inflation as Hungary
after World War II – devalued
first by clipping off 000; then
by 10 zeroes, then by 12
zeroes.
 Inflation, or ‘funny money’

You could not buy anything with the money.

ATMs could not keep up; cash registers could not

keep up; bank accounts could not keep up.

For a time, it cost more to have Zim dollars printed

in Germany than they were worth at home.
 Inflation, or ‘funny money’

The post office sold non-

denominated stamps for letters
within Zimbabwe; to Africa;
the U.K. and elsewhere. The
price changed daily.
Inflation, or ‘funny money’
The government, reacting to
complaints from government
workers, raised salaries every few
days, then every few hours. But by
the time you could spend the money,
you needed ever more. Eggs cost
billions of Zim dollars.

 
Inflation, or ‘funny money
Inflation, or ‘funny money’

The Zim dollars could not be used as a

medium of exchange – nobody wanted
them.
They couldn’t be used as a unit of
account – there were too many.
They were not a storehouse of value.
They were worthless.
 Inflation, or ‘funny money’

The Zimbabwean economy collapsed.

Barter returned.

Zim dollars were totally useless, except

to kindle the stove
Inflation, or ‘funny money’
People began using South African
rand notes, British pounds, and
U.S. dollars.
There was political chaos.
Finally, in early 2009, another new
Zim dollar came along.
 Inflation, or ‘funny money’

It seems to have lasted; there are

about four of those Zim dollars
to a U S dollar in this new
currency.
Inflation, or ‘funny money’
But looked what happened:
1 dollar = 1,000 (they dropped 000)
When that new $1 got too high, they
knocked off 10 zeroes.
10,000,000,00 (that’s 10 billion)
became yet another new $1.
 Inflation, or ‘funny money

That third new dollar skyrocketed

in only a few months to almost
one quadrillion: they knocked off
12 zeroes.
1,000,000,000,000= 1 new Zim
dollar. So-called Third Dollar
 Inflation, or ‘funny money
Let’s put all the zeroes back:
1 2009 new Zim dollar equals
(000, plus 0,000,000,000, plus
000,000,000,000) or
1,000,000,000,000,000,000,000,000+
of the dollars we started with in 2005
Wow!