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Zimbabwe and Inflation: A Cautionary Tale

African country to print its own money for the first time in ten years – could the U.S. face the same problem one day?

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Ten years ago, Zimbabwe was home to the world’s poorest billionaires. The African country stopped printing its own currency because the money lost its value. The situation was so bad that people carried wheelbarrows of Zimbabwe dollars to buy a loaf of bread. Now, for the first time since 2009, Zimbabwe is printing its own money again.

Inflation is a normal process seen in all countries – this is when prices rise over time. For example, a candy bar or comic book is more expensive today than it was 50 years ago. Because inflation happens over such a long period of time, people can cope with its effects. However, Zimbabwe was suffering from hyperinflation, a faster, out-of-control version of inflation. People saw the value of the money in their wallets destroyed, leading to prices doubling or even tripling in a single day.

The Rebirth of the Zimbabwe Dollar

The Zimbabwe economy is facing an economic downturn, high inflation rates, and a cash shortage. To improve the economy, the government is creating new $2 and $5 banknotes and coins.

Consumers have been lining up outside of banks to get the new money. But experts are warning that the introduction of cash will reduce the value of these new dollars and raise prices. The country’s currency inflation is estimated at about 300%, the cost of a loaf of bread is seven times higher today than it was in January, and a meal is more expensive now than in 2009.

John Mangudya, the central bank chief, dismissed concerns. He said in a statement:

“There is a misconception that once you introduce a currency, then inflation is going to increase. We are simply giving people a chance to choose between electronic balances and cash.”

A Currency Crisis

Over the last ten years, residents in Zimbabwe have used foreign currencies, including U.S. dollars and South African rands, and digital currency known as the RTGS dollar, which could be traded through cell phones. This past summer, the central bank announced that it would be illegal to use money from other countries.

In Harare We Trust?

A lot of conservatives and libertarians are concerned that the U.S. will experience hyperinflation one day. With the U.S. Federal Reserve printing money at rates higher than normal, critics worry that there will be a massive decline in the value of the U.S. dollar, leading to a meteoric jump in consumer prices. The story of Zimbabwe is a cautionary tale because it is a country in a recession and a currency crisis, created from failed central bank policy. Is this the future for today’s youth?

Andrew Moran

Economics Correspondent at LibertyNation.com and LNGenZ.com. Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at EarnForex.com. He is the author of “The War on Cash.” You can learn more at AndrewMoran.net.

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