Wednesday, January 7, 2009

Zimbabwe's Inflation Remains Untamed

By Richard Giedroyc, World Coin NewsJanuary 06, 2009

Zimbabwe is back in the numismatic news. Despite having removed a whopping 10 zeros from each currency denomination on August 1 inflation has continued almost uninterrupted.The Zimbabwe government of President Robert Mugabe has officially put inflation at 230 million percent for July, the month prior to this so-called currency reform. The Cato Institute in Washington says the southern African nation's inflation is actually at a staggering 10.2 quadrillion percent. Regardless, it is the worst inflation in the world, likely being the worst inflation anywhere in history.zimbabwe re-introduced coins alongside new bank note denominations in August. According to a Nov. 3 Reuters news report, Mugabe's government has announced it plans to "ease the effects" of hyperinflation by introducing new higher denomination bank notes in values up to $1 million Zimbabwe.No one in Zimbabwe is stepping forward with a new plan to tame inflation, just to "ease its effects". The government plans to ease its effects by issuing bank notes in denominations of Z$100,000, Z$500,000 and Z$1 million. THere has been no mention of coins, which shouldn't come as a surprise since a loaf of bread at the time this was being written was priced at more than Z$50,000. At that price a coin wouldn't even purchase a single slice! Perhaps Zimbabwe's citizens should take a page from India and Bangladesh, melting metal coins for their intrinsic value. As of Oct. 15 the highest denomination bank note in circulation was the Z$50,000. Banks were reported by Voice of America to be limiting daily cash withdrawls to this amount. Banks in the city of Mutare were reported to be issuing bank notes in denominations of Z$20,000 despite the availability of the higher denomination by the Central Bank of Zimbabwe. Power outages in Bulawayo and Mutare were said to be limiting the capabilities of automated teller machines. At the root of the problem is Mugabe's economic policies, which have been worsened by a failure to agree with opposition rival Morgan Tsvangirai over power sharing. Until this crisis is resolved coins will not circulate and bank notes will continue to be worth less than the paper on which they are printed.

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