What would you think if someone tells you that there is a 100 Trillion Dollar note in Zimbabwe?. There be a country whose government try to pay all its debts which were not possible to collect from the taxes and revenues from the people so the government printed more and more currency to compensate for the problem.
Then one-day inflation went up and up and up… They needed to draw the currency which was worth 100 trillion dollars but the worst part was, people were not able to buy a loaf of bread even in that much amount of money.
You must know that one trillion has 12 zeroes and the currency forms after putting extra two zeroes of a hundred!!!
You may sound the above story fable! But believe me, it is a real story happened with the country called Zimbabwe.
In November 2008, Zimbabwe’s inflation level reached a record high. Hyperinflation occurred in Zimbabwe.
For those who are new to the term hyperinflation, it indicates the situation in which the inflation rate climbs up to 50%. Inflation is also an important aspect of the economy and that is why many developed countries preferred to keep it around 2% but in December 2008 inflation rate in Zimbabwe was ”7.96 billion%” per month. Woah! Huge. Wasn’t it?
On 16 Jan 2009, Zimbabwe Reserve bank issued the largest denomination ever-100 trillion dollar note!!! What could we buy with it? Not even a single chocolate bar! As every person of Zimbabwe was a trillionaire but that money did not have enough value to pay the fare for a single bus ride.
Your salary of one billion had no value if the loaf of bread is of two billion. People in Zimbabwe were poverty billionaires.
What exactly happened there so they were forced in this situation?
Zimbabwe’s inflation didn’t happen in a single day it was planted due to some really foolish decisions made by the Zimbabwe government. There was a series of events happened as a reaction to the government’s wrong decisions.
Zimbabwe got Independence from Britain in the late 1980s then Robert Mugabe became the President of the country.
Let us assume a person who has a bare knowledge of economy and now he is president of country. He saw a Ferrari but he doesn’t have enough money to buy it. Then he prints more currency to buy it. Zimbabwe government did the same act, they printed more currency to buy things so inflation rate goes high as everyone has money to buy the same. So as prices goes up government prints more money and they continued this feedback loop. As result of this situation, prices of products goes high and even double in a single day.
Now people has lost their faith in their currency. So as part of the solution, people in Zimbabwe are now using different countries’ currencies like South African rand, Indian rupee, American dollar, Japanese yen, Chinese yuan and British pound.
As now Zimbabweans have to live with this situation for a long time as inflation will not get reduced in a short period of time as last year’s inflation rate was about 348%. Printing currency does nothing to increase any beneficial kind. It is a basic economic paradox that you can’t get richer by printing more money. But, it puts people in desperate situations trying.
Also Read: What if the whole world has same currency?