26 June 2008
Hyperinflation-not just for the little countries?
Posted by Roy Bischoff under: Emergency Preparation; World Economy .
Here is an article about extreme inflation in Zimbabwe. Inflation this bad is a difficult concept to grasp. I think unsound political and economic policies can cause this type of inflation in any country in the world. This type of thing is kept at bay by first world countries often acting in concert with other countries. But what if there were no help? Germany went through a period of hyperinflation after WWI, which helped Hitler gain power. Someday our country’s unwise policies and the unsound financial practices of its citizens combined with world wide, either apathy or hatred toward the US will cause this type of inflation to occur here in the US.
I remember reading about a guy in Germany paying off the mortgage on his large estate with the money from a wheel barrow full of potatoes. The ability to grow your own food and maybe some to sell would solve a lot of problems. In times of great upheaval, food has great intrinsic value.
Zimbabwe has shortage of food, abundance of zeros
By ANGUS SHAW, Associated Press Writer Wed Jun 25, 4:14 PM ET
HARARE, Zimbabwe - For many Zimbabweans, the chief worry is not political violence or President Robert Mugabe’s iron hold on power. It’s out-of-control inflation that puts anything more than a single daily meal beyond reach. Underlying the current political crisis is an economic meltdown that has caused a shortage of food and all basic goods, while leaving the people an abundance of zeros.
The official inflation rate was put at 165,000 percent by the government in February, but independent estimates put the real figure closer to 4 million percent.
Zimbabwe is believed to be the only country in the world that now carries out routine financial transactions in dizzying set of quadrillions — one quadrillion is a 1 with 15 zeros behind it, or 1,000,000,000,000,000.
“It’s gone completely crazy. Our computers and calculators can’t deal with all the zeros even on the cheapest products,” said Harare economic analyst David Moyo.
Brokers said this week that the Zimbabwe dollar broke the barrier of 10 billion to a single U.S. dollar in direct bank buying, while in electronic transfers, it exceeded 20 billion Zimbabwe dollars to $1 U.S.
Bread has disappeared from stores. Previously, a loaf in a supermarket cost 2 billion Zimbabwe dollars (20 U.S. cents at the official exchange rate), or 15 billion Zimbabwe dollars ($1.50 U.S.) on the black market, where prices of scarce items can vary up to 10 times higher.
9 Comments so far...
4 The Cause » Blog Archive » Hyperinflation-not just for the little countries? Says:
26 June 2008 at 8:08 am.
[…] Hyperinflation-not just for the little countries? I think unsound political and economic policies can cause this type of … By ANGUS SHAW, Associated Press Writer Wed Jun 25, 4:14 PM ET […]
Cameron Says:
26 June 2008 at 8:46 am.
I’m a terrible gardener but I guess I had better do some reading and try and improve.
Zimbabwe is such a mess and needs intervention but the US and UN are stretched so thin it would be hard to do anything about it.
Angela Rogin Says:
26 June 2008 at 9:29 am.
15 billion of their dollars on the black market gets a loaf of bread? If someone wrote a fictional story with figures like that it wouldn’t be published because it wouldn’t be believable. I hope this doesn’t spread to the rest of Africa.
T. Fan Says:
26 June 2008 at 11:11 am.
Real life usually beats fiction, Angela.
SGS Says:
26 June 2008 at 4:01 pm.
As I recall from my macro/micro economy course (I’m not an economist, so please correct me if I am mistaken), there actually are two kind of inflation — what I would term good and bad. The “good” inflation is when the cost of the products get passed to the customers. For example, let’s suppose a company decided to give its workforce a raise. The cost of raises would get passed down to the customers. It used to be that a mark of a smart businessman if he or she could figure how to reduce the producing cost, and “pass on” the savings to his/her customers, workforce and stakeholders. A good example of this is with Ford’s T-Model assembly line in 1930s, and the mass agriculture movement of 1980s
There also are some bad effects behind the “good” inflation, like increased tax against the corporations, or how the demand of materials may surge ahead of supply, like fuel today. The cost gets passed down to the customers. This “good” inflation is the sum cost of the products manufactured in USA and elsewhere.
Now, there is a “bad” inflation. It is the worth of a dollar. The government used to be in position to decide how much coins and papers are minted. The worth of a dollar was tied to heavy metals, like gold, silver or plutonium. You could just divide your dollars against how much heavy metal you store. But this tie has been severed in 1930s, making it so easy for the inflation to go out of control. This was made even worse by turning over the control of the worth of a dollar to a private corporation. Yes, the Federal Reserves, aka FED, is a private corporation, under the control of 9 or so non-elected men that are not power-checked and -balanced. The legislative have no influence, other than to have a law, allowing them to take back the control of dollar. They do not have any impact on how the FED manage, determine the value, and so on. The inflation we have been seeing since then was not typical of early days of America. They also have not experience any recession for first 150 years or so. This is what has happened to Zimbabwe. So far, we have not seen the same disaster with our dollar, only because there was the power of the faith of the whole world in America’s dollar. Unfortunately, this faith is decreased rapidly.
Hawk Says:
26 June 2008 at 5:08 pm.
I’m not real sharp with economic details so that is very helpful to me. It makes me nervous that OPEC has so much power to save or destroy the dollar…China also.
Nalvy Says:
26 June 2008 at 8:57 pm.
Well I guess i am going to start on that experimental inside garden i have always dreamed of… maybe i should grow wheat make my own bread from now on too.
Cavetrollhead Says:
27 June 2008 at 1:46 am.
This is why I am focused on a years supply of food, and getting off the grid for energy and buying a handgun and rifle and keeping them secure (and learning how to use them and how to not use them.) People think that being wealthy is security. It is NOT. Your life’s savings can disappear in no time with out- of- control- inflation.
And , of course gardening is important, but when your neighbors are starving, good luck with that. They will just eat your guard dog and then your garden.
Cavetrollhead Says:
27 June 2008 at 1:48 am.
Do they sell generators that run off of alcohol? That would be real independence. Having a still, and generator, a years supply of food, your house paid for, a garden, and some guns.
(and buy it all with cash)
Boy I sound like a nut.
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