By Bob Davis
You know things are really awful when a nation’s rate of hyperinflation gets into the territory of Weimar Germany. Between August 1922 and November 1923, German inflation rose about 10 billion percent, according to a textbook by Columbia University’s R. Glenn Hubbard.
A Zimbabwe 50 billion dollar bill. (Getty Images)
Zimbabwe topped that record for economic mismanagement last year. The country’s annual rate peaked at 489 billion percent in September 2008, the International Monetary Fund reported, and for the full year averaged 56 billion percent. The Zimbabwe dollar became literally worthless, the IMF said, and by November 2008 it “virtually disappeared from circulation.”
Fed up, locals started using U.S. dollars, which put a sharp lid on inflation. This year, the IMF estimates that inflation will descend from hyper-stratosphere and average 6.9%, when measured in dollar terms.
The IMF is somewhat optimistic about a Zimbabwe turnaround now that the nation has a unity government, formed by rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai. When inflation was out of control, Zimbabwe’s gross domestic product fell 14% in 2008, on top of a 40% decline from 2000 to 2007, the IMF reported. In 2009, the IMF estimated, the economy will expand 2.8%.
So was Zimbabwe’s bout of hyper-inflation the worst since the 1920s? An IMF spokesman didn’t know.
Yugoslavia or Hungary may hold the record. According to a Web site maintained by Thayer Watkins, a San Jose State University economist, between October 1993 and January 1995, Yugoslavia, which then consisted of Serbia and Montenegro, suffered through a hyperinflation of five quadrillion percent. (That’s 5 followed by 15 zeroes.) Hungary’s inflation in 1945 and 1946 may have hit four quintillion percent some months. (Four followed by 18 zeroes.)
An IMF report from 2000 pegged Yugoslavia’s 1992 inflation at 6,147 pecent but didn’t have an estimate for 1993 through 1995. As for Hungary, the IMF didn’t open its doors for business until 1947, after the Hungarian hyperinflation subsided.