Hyperinflation in

Zimbabwe

Grade X

2000-2007 hyperinflationinflation rates as great as

25,000 %• 2008 1 egg = ZW$50 billion (US32 ¢)

Lottery would pay ZW$1.2 quadrillion (1.2 x 1015)

Reserve bank of zimbabwe

•Can you become a rich person ?

Every Zimbabwean is billionaire……..

4 redenominations / price controls

2000-2007• Agricultural production falls 51%• Industrial Production 47%• GDP falls 40%• Money Supply increases by more than

500B % (2008 estimate)• 94% unemployment• Election Fraud• Human Rights abuses• Redistribution of farmland

Now

• Legalized foreign currency transactions 2008/9– Zimbabwe has no currency; uses

dollars, rands, other currencies.

• Government of Unity (new power-sharing coalition)

Bellringer 4/20/20091. How would you describe the

economy of Uruguay from 1998-2004?

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5

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15

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Uruguay GDP(in Billions)

2005 Comparison

Uruguay's GDP: $30.66 billion

Spain’s GDP: $1.83 trillion

United States GDP: $12.36 trillion

Factors: population, resources, education, crime

Zimbabwe

Population:13 million

GDP: 4.72 billionGDP/Capita:$402Unemployment:

66%

the President of Zimbabwe on how to improve the economy of his country.

Situation: Many blacks can not afford goods and food in the markets. Business owners are

allowed to charge whatever price they want and since food is hard to find, its very expensive.

Local Zimbabwe businesses have a difficult time competing with imports from the USA, South

Africa and England. When Zimbabwe businesses fail, people lose their jobs causing more

unemployment.

98% of the farm land is owned by white farmers, which was taken in the 1800’s from native

Africans. 90% of this country is black and has no access to this farm land. The white farmers pay low wages and often do not hire native blacks.

Zimbabwe 1990’s

Fixed prices

Banned imports

Redistributed land

Printed up more money

Gov’tsolution EFFECT

President Robert Mugabe

Shortages

More shortages

Still more shortages

inflation

Technically “hyperinflation”

ProblemHigh food

pricesCompetition from

USA & SA

Blacks have no land

Not enough money

What if I told you?

• Million dollars?• 25 Billion dollars?• 100 Billion dollars

• Fiat currency = value only because we think it does

Inflation• Rise in

prices over time

• “cost of living”

• “The real value of currency”

Why can’t we just print more money?

• Quantity theory of inflation

Piles of currency in Zimbabwe

What else causes inflation?

• Cost push theory- when producer costs increase, producers raise their prices. For example, increase the cost of gasoline causes and increase in the price of food.

• Demand pull theory – When consumers demand

increases producers will generally increase prices. For example: fads or hot xmas toys

Third World• Draw 3 comics showing each of the theories

behind inflation