I was reading about the new $100 BILLION bank notes they are issuing in Zim. Suprisingly you can’t even buy a single loaf of bread for $100 BILLION dollars over there. WTF happened to move a country into the bad of a situation?
Robert Mugabe happened to it?
The government started printing money in order to pay for things. This is a very common cause of hyperinflation.
Right.
In this particular case the cycle worked like this, I believe:
Robert Mugabe could not stay in power without the support of the army and the police.
He couldn’t get their support unless he paid them.
The only way he could pay them, since the economy had collapsed, was to print money.
Printing money made the money worth even less.
Repeat.
Ed
I’m under the impression that when Mugabe confiscated white farmer’s land and gave it to his incompetent cronies, the economy of Zimbabwe collapsed. It used to be a net exporter of food but now produces a tiny fraction of what it used to and cannot even feed its own people. Farming and tourism were the two major industries and now that things are so sketchy, tourism has collapsed also, which is a damn shame. When I was in Zimbabwe in 2002 it was $400Zim to the US Dollar, and that was considered horrific (It was $600Zim by the next week). The Zim dollar used to be worth close to one US Dollar. I’ve said it here before, but I think I’ve got a Zim penny lying around here somewhere (and several $10Zim notes).
Yes, the confiscation of land from productive white-owned farms was a major cause. The land was taken from families that had been farming it for decades in many cases and given to “war veterans” - in other words, any thug that would vote Zanu-PF in return for a few acres and the chance to beat up a few whites. Needless to say, these guys didn’t make the best farmers, and food production plummeted.
Darryl, I visited Zimbabwe in 2001 when it was about $50 to the pound officially, or closer to $100 on the black market. It’s such a beautiful country, and I met some wonderful people there, and I shudder to think what state the places and homes I remember are in now.
Ok, here’s the short version.
Mugabe wasn’t particularly good for anything at any point, but when he started confiscating farms, that’s when things went to hell in a handbasket. Beforehand, it was just the usual third-world kleptocracy, but with a functioning economy.
The problem was that the farmers were whits of Dutch extraction. They knew the farming cold - how and when, what mahcines to use, how to keep things running, how to read the economy, how to deal with the market. And they were not only very productive, they were extremely lucrative. Mugabe stripped their farms from them in the guise of “undoing the effects of racist imperialism” and handed the land off to cronies eager to grab the wealth for themselves.
Problem: said cronies have no idea how to farm and probably don’t want to work that hard at it. They saw white people getting rich, but didn’t understand how it was done. So the farm goods started drying up. Zimbabwe was once a well-fed exporter of food, and now it produces virtually nothing. At the same time, Mugabe started buying off his supporters with cold, hard Zimbabwean Dollars. At the time these were fairly high in value on the world market.
But, as he printed more off, the value went down (as always happens). Moreover, as the supply of money increased, so did the scarcity of goods. Any economist can tell you that too much cash chasing too little goods is a recipe for inflation. Plus, mugabe started destroying his opponents’ (of which he was making more every day) livelihoods. The more houses and businesses Mugabe destroys, the poorer Zimbabwe becomes. The poorer it gets, the more people are desperate for the neccessities, the more desperate, the more they are willing to pay for anything they can get ahold of.
And it gets worse. Although there’s ample demand to import food, Zimbabwean currency is always getting less valuable (because Mugabe keeps printing it off!), so importers know that any money they make will soon be worthless, which means they can’t pay for any future shipments.
And it gets even worse than that, because Mugabe’s thugs are roaming around beating or killing anyone who won’t vote “correctly”, no one will want to invest or start new businesses. Why would you, when the thugs will probably just steal your stuff or kill you? Let me put it to you this way: Zmbabwe had problems before but was almost a first-world nation. Maybe it was a first-world nation. it is now among the poorest in the world, period.
Why do people act like this is an improvement over Rhodesia? They just replaced a racially-biased country that happened to have an excellent economy with a racially-biased country that has a horrible economy and massive atrocities, people being massacred, etc.
Because protesting British colonialism in Britain is a lot healthier than protesting Mugabe in Zimbabwe.
Who is acting like this? I don’t recall this view being espoused anywhere since Mugabe started comprehensively ruining the country.
BTW, from the “You couldn’t make it up” department: I read somewhere, it might have been on this board, that a couple of years ago the Zimbabwean central bank was forced to delay printing the next batch of hyperinflated banknotes because they couldn’t afford the paper and ink.
So, does this mean that the cronies that were paid off years ago when the money was good, are now holding holding worthless money? The value of the farms they were given is virtually nil since they no longer make any product to sell?
How does he manage to keep anyone happy with money when they can’y buy anything with it anyway? If it is just a matter of the thugs taking whatever they want, what is there left to take and why would they remain loyal to Mugabe?
Here’s an interesting article on the effects of this hyperinflation on the people in Zimbabwe.
So get a new job, as an election-enforcer thug…there’s always work to do for Mugabe and the military who operate most of his strings.
They can buy today’s food with the money you give them today, but tomorrow they’ll need to earn more, or go away to nothing. For keeping a vast bunch of killers under control, I can’t think of a better situation, short of physical addiction.
No disagreements on that point here, but the OP asked what has caused the hyperinflation, and AFAIK reckless printing of money is the cause of that.
Hyperinflation has pretty much always involved two distinct events which play into each other: too much money and also too few goods. The printing aspect 9too much money) is of course a huge part, but it rarely happens in a healthy economy. Even in Zimbabwe the printing presses weren’t running off like that while the economy was healthy. It was only when Mugabe found he’d destroyed his wealth that he started running the presses like that.
If they had any sense, and a lot of them did/do, they hold their money in other currencies.
What do you think is going to happen to the ‘cronies’ if Mugabe loses power? Bob is pretty irrelevant nowadays - the mad, old, syphilitic nazi is just a front for the vested interests behind him. There are 2 choices at the moment:
-
A transfer of nominal power that sees the ‘vested interests’ protected / given immunity.
-
Civil war / unrest / revolution / popular uprising.
A point needs to be made here, Mugabes enforcers, who are his power base are described as ‘war veterans’.
This is from the ‘war of independance’ from white colonial rule.
However, its now almost 30 years since that war was over and the reality is that those ‘war veterans’ for the most part were not even born then and have never known white rule.
Neighbouring nations have problems with illegals, or refugees from Mugabes misrule, so you might imagine that the leaders of those nations would bring some pressure to bear.
Not so, M’becki has been singularly dissappointing in his lack of condemnation of Mugabi, especially since South Africa is by far the largest trading partner and could have immense influence.
You could say the same about other leaders in the region, and the African Union is still so stuffed with despots and tyrants that there is hardly any chance of discord from that quarter as these upleasnat individuals sit uneasily upon their own thrones of power.
You only need look at Botswana which has mineral wealth but far fewer other resources and compare to see just how wealthy Zimabwe could be if manged with any sense at all.
I think it will need the death of Mugabe, one way or another, and a clear out of his generation to demolish that particular form of post colonial thinking.
So, assuming he was sincerely motivated and still had the trust and support of the population, how could Mugabe end the cycle of hyperinflation? Generally, without reference to any specific country, how does one get an economy back to something approaching a ‘normal’ rate of inflation (say, < 10% pa) when current rates are in the hundreds of thousands percent, or higher?
Introduce a new currency, and make sure you don’t print too much of it.
Don’t forget the fostering of independent wealth creation. Even a stable currency needs a system that allows the local economy to expand.