Stop the press: Mugabe out of Monopoly money (article from Sydney Herald)

[Harkoliar]

I cant imagine bringing this money to the grocery.

HARARE: It has come to this - Zimbabwe is about to run out of the paper to print money on. Fidelity Printers & Refiners, the state-owned company that tirelessly churns out bank notes for the Mugabe regime, was thrown into a crisis early this month after a German company stopped supplying bank note paper because of concerns over Zimbabwe's recent violent presidential election, widely seen as fraudulent by international observers. The printing operation slowed drastically. Two-thirds of the 1000-strong workforce was ordered to take leave, and two of the three money-printing shifts were cancelled. The result on the streets was an immediate cash crunch. "If you think this currency shortage is bad, wait two weeks. By then it will be a disaster," said a senior Fidelity staffer, who spoke on condition of anonymity. The paper will run out in two weeks, he said. Fidelity Printers is Robert Mugabe's lifeline. It prints the money to pay police, soldiers and intelligence agents that keep the regime in power. If they cannot be paid, the country faces economic paralysis - and potential collapse. Zimbabwe's economic meltdown harks back to the collapse of its main export industry, farming. That left the nation starved of foreign exchange, but government spending went on. How did it do that? It printed money. But printing more money without an increase in productivity fuelled inflation. As hyperinflation took hold last year, Fidelity printed $1 million notes, then $5 million, $10 million, $25 million, $50 million. This year, it has been forced to print $100 million, $250 million and $500 million notes in rapid succession, all now practically worthless. The highest denomination is now $50 billion (worth $US1 on the street). Despite the recent currency shortage, the Zimbabwe dollar has continued to slide against the US dollar and shopkeepers are increasing prices steeply. Before the crunch, a beer at a pub in Harare cost $15 billion. At 5pm on July 4, it cost $100 billion ($US4 at the time) in the same bar. An hour later, the price had gone up to $150 billion ($US6). Los Angeles Times

[Unglaublich Verwustung]

The Zimbabwean government will be well aware that their currency is effectively worthless, and also that it is pointless printing bigger and bigger numbers, it simply makes the value of their currency worth even less in a real market, not more. For them to stay in power though, there is no other option open to them apart from printing ever more ludicrous denominations; without doing this they fall, with it they fall; there is no way out at this stage.

If we look at the inflationary rate, and whether it is 5000% or 7000%, this is a moot point. From a medium-term perspective the process of hyperinflation feeds on itself, pushing up the rate of price increases ever faster until this forces dramatic changes to come about in the socio-political as well as economic environment

The standard way to deal with hyperinflation is redenomination; unfortunately they already did that in 2006 whereby the currency was revalued at $1 new dollar = $1000 old dollars. The rate of hyperinflation now present in Zimbabwe means that even this would no longer work. Unfortunately, the only solution to end hyperinflation is massive fiscal cutbacks by the government and drastic tightening of monetary policy, both of which will lead to a disruptive implosion of economic activity in the country before recovery sets in.

And this will eventually result in the fall of the present government; there has been no incidence of hyperinflation in global history, i.e. inflation in the thousands of percent, which has ever dissipated without a fundamental change in leadership of a country or in its political regime. They will fight this, there will be further bloodshed and they will lose out in the end, but so will the people. There are no winners short -term, there may be no winners in the mid-term, and there is only a hope, not a certainty, for the long-term.

[wellard]

Robert Mugabe's incompetent regime is based on a policy of racist terror and should be brought to an end as soon as possible. The recent presidential election was a farce. I wish China and South Africa would stop propping up this evil man.