Globonomics!

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Zimbabwe hyperinflation – 66212%!

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This is yet another hot contender for the “Globonomics award for the most freakish innovation – 2008”! -‘Hyperinflation in Zimbabwe’! Its predicted to hit 1 million% shortly!

Yes, its true. I am not playing with large numbers here. Their economy is destroyed and a loaf of bread is worth about $3 million (Zimbabwean, of course!)

Prices change every few days and in worse situations, every few hours! People pay for their drinks before they set off on a golf course because by the time they come back the price of that drink would’ve in all likelihood – doubled!

Bank savings have been turned worthless, millions have been left homeless and destitute.  People trade in bartering (exchange of goods, as they have lost faith in their own currency). Goods have value, not the currency.

The Government has just let their currency printing presses work overtime printing more notes and more higher denomination currency.

Remember, in the 1920’s, Germany was battling hyperinflation and they had a currency note of a denomination of 100 trillion Reichsmark!

http://en.wikipedia.org/wiki/Hyperinflation

Recent crises in other countries battling hyperinflation were those at Russia under Boris Yeltsin and Argentina that saw almost 4 presidents in a span of less than 1 year in 2001-2002!

http://gregmankiw.blogspot.com/2007/02/hyperinflation-in-zimbabwe.html

I strongly believe that instead of holding wealth in currency savings in banks etc., the best way is to hold it in tangibles that remain stable during such situations – the real asset classes such as Gold, Real Estate, Silver, Platinum, commodities etc.

During periods of hyperinflation, currencies are simply worthless. In fact, in Germany, the fuel produced by burning currency notes of large denominations was more effective that the fuel that could be purchased by that same currency – this shows the devastating effect currency has on the present day world during periods of economic uncertainty! In recent memory (2001-2002), Argentina also had 25% unemployement rate and people used to queue up outside banks to withdraw savings which was simply either not allowed or was not worth much. Finally, the Argentina central bank was forced to devalue the local currency Peso that was pegged against the US Dollar. 

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Written by Naveen Athresh

February 21, 2008 at 12:43 pm

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