largest denomination of currency ever issued.1 The Zimbabwean
government issued the Z$100 trillion bill in early 2009, among the
last in a series of ever higher denominations distributed as
inflation eroded purchasing power. When Zimbabwe attained
independence in 1980, Z$2, Z$5, Z$10 and Z$20 denominations
circulated, replaced three decades later by bills in the thousands
and ultimately in the millions and trillions as the government
sought to prop up a weakening economy amid spiralling
inflation.
Shortly after the Z$100 trillion note began circulating, the
Zimbabwean dollar was officially abandoned in favor of foreign
currencies. From 2007 to 2008, the local legal tender lost more
than 99.9 percent of its value (Hanke 2008). This marked a reversal
of fortune from independence, when the value of one Zimbabwe dollar
equalled US$1.54.
Zimbabwe’s extreme and uncontrollable inflation made it the
first—and so far only—country in the 21st century to experience a
hyperinflationary episode. Hyperinflation devastates people and
countries. Zimbabwe, once considered the breadbasket of Africa, was
reduced to the continent’s beggar within a few years; its citizens
were pushed into poverty and often forced to emigrate. The
country’s experience shows how a relatively self-sustaining nation
at independence fell victim to out-of-control inflation and the
severe erosion of wealth. The causes of Zimbabwe’s hyperinflation,
its effects and how it was stopped are particularly
instructive.
The chart below shows the consumer price inflation in Zimbabwe. In
July 2008, the monthly inflation rate in Zimbabwe was 2600.2
percent.
Source: Federal Reserve Bank of Dallas (2011)
- One Hundred Trillion Dollars That S 100 000 000 000 000 Is The Largest Denomination Of Currency Ever Issued 1 The Zimbab 1 (19.06 KiB) Viewed 21 times
of inflation?
b) Why exactly is high inflation a problem?
c) What measures were undertaken by the
government of Zimbabwe to deal with hyperinflation?
Percent, month/month 500 July 2008 inflation at 2,600 2 percent 450 400 350 Consumer Prices Stabilize in 2009 Percent, month/month 2 1 0 -1 300 - Wha 250 -2 -3 TYT 200 2009 2010 150 2011 March 2007 inflation exceeds 50 percent 100 50 0 w was -50 '80 '83 86 92 95 98 01 04 07 '10 SOURCES: International Monetary Fund's International Financial Statistics database; Reserve Bank of Zimbabwe's Monthly Economic Reviews