The Return of Monetary Mischief to Zimbabwe?

Bloomberg is reporting that Zimbabwe might be up to some monetary mischief again. The government has started printing currency and, as first noted by JP Koning, the way they are doing it seems dubious. So, as a reminder to the government of Zimbabwe, it might be wise to revisit how bad the monetary mischief got back in 2008. You do not want to repeat that experience.

Steve Hanke found the monthly inflation rate hit 79.6 billion percent in November 2008 (89.7 sextillion percent on a year-on-year basis). That is how bad it got. This bout of hyperinflation began in early 2007 and ended in late 2008. At that point the government shut down the printing presses and allowed its citizens to freely use foreign currency. The country quickly dollarized and the country once again had a stable medium of exchange.

One way to visualize this hyperinflation is to look at the progression of currency printed by the government. Below are some slides I put together that shows this development. It is interesting to observe that in early 2007 Zimbabwe had similarly sized dollar notes to those in the United States. That quickly changed as prices began exploding.



So take note Zimbabwe. Let's not repeat the painful experience of 2007-2008.

P.S. What would happen to places like Zimbabwe if Ken Rogoff's proposal to eliminate U.S. gained traction?