This article is related to inflation in JC2 Macro Economics.

What are the effects of inflation? How does that affect you? How can the government control inflation? Is it bad to have inflation?

 

Hyperinflation in Zimbabwe began shortly after destruction of productive capacity in Zimbabwe’s civil war and confiscation of private farms. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe’s hyperinflation because the government of Zimbabwe stopped filing official inflation statistics.However, Zimbabwe’s peak month of inflation is estimated at 6.5 sextillion percent in mid-November 2008.

In 2009, Zimbabwe abandoned its currency. As of 2012, Zimbabwe still has no national currency; currencies from other countries are used.

A monetarist view is that a general increase in the prices of things is less a commentary on the worth of those things than on the worth of the money. This has objective and subjective components:

  • Objectively, that the money has no firm basis to give it a value.
  • Subjectively, that the people holding the money lack confidence in its ability to retain its value.

Crucial to both components is discipline over the creation of additional money. However, the Mugabe government was printing money to finance involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials. Zimbabwe was under-reporting its war spending to the International Monetary Fund by perhaps $22 million a month.

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