Sunday, July 20, 2008

A 25 Billion-Dollar Orange

This weekend, all CNBC TV18s, NDTV Profits, Business Standards, and moneycontrol.coms have been talking about inflation hitting a 13-year peak of 11.89%. If Indians were extremely distressed a month ago with inflation reaching double digits, Zimbabweans are apprehensive about it reaching nine digits. Yes, there is no typo there, the inflation in Zimbabwe is at 9 million percent, and economists predict it would reach 100,000,000% by the end of Q3.

Zimbabwean government has been introducing new currency notes every few weeks, and the current denominations they are available are 100 million, 500 million, 25 billion, and 50 billion. This Monday, a new 100-billion-dollar-note would be in circulation, with an expiry date of 31st December 2008. This new note, however, would not buy you a loaf of bread in Zimbabwe, which costs at least 120 billion. You can pay for four oranges instead.

An article on reports:

Another friend recounts a weekly shop costing $514 billion, which she paid for by debit card. The shop till could only ring up $9 billion, so the card had to be swiped 57 times. By the time 57 swipes were made, ZWD soared higher and it had to be swiped 8 more times; at the end of 8 one more to finally make it even.

Okay I made the last part up. But the rate at which the currency is falling, the numbers are almost meaningless. Friday's exchange rate was 24,782,853,660 ZWD = 1 USD (Source: That means four oranges still cost four American dollars. But I wonder how do they figure out such figures down to the tenth significant figure.

Sample this restaurant bill dated earlier this year. Today, bills are of similar
numbers, but restaurants ask you to add six zeroes to the end before making the payment in mollars-millions of dollars. They might have to up the amount by a few million dollars if they use a larger sheet of paper and some extra toner to print all the digits. Cheques are refused at many places as their value would plummet by the time they are presented to the bank. Those who accept cheques ask for double the amount than that would have been paid by cash. There is a placeholder for gratuity too on this Jungle Junction bill. How many millions would you tip?

Who wants to be a millionaire? in Zimbabwe would be renamed as Who wants to be a quadrillionaire? next week, and Who wants to be a sextillionaire? three weeks hence. Billionaire lists would contain almost everyone on the census. Organizations have weekly appraisals and salary reviews in order for them to make sense.

Jokes apart, this indeed is a matter of concern. I am astonished at how is Zimbabwe still struggling in the face of economic collapse. Equally surprised I am at the Weimar Republic of Germany having faced hyperinflation in 1923, when people used currency notes in stoves because they would burn longer and provided more heat than the amount of firewood that that money could buy, and today Germany is one of the world's most advanced market economies.

Some more assorted statistics of interest:
  • At Independece in 1980, the Zimbabwean dollar stood equal to 1.25 USD, inflation at 7%.
  • In August 2006 the Reserve Bank of Zimbabwe revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar.
  • Burma stands a far second on the list of countries with hyperinflation at 39.5%.
  • Inflation in Zimbabwe touched triple digits in 2001, four digits in 2006, five in 2007.
  • Year-on-year inflation for 2007 in the USA was 2.7%, Germany 2%, France 1.5%, Japan 0%, and Naurau -3.6%. The complete list is here. (Source:


Amiya Shrivastava said...

You know what?? You wrote it before I's a good case study for economists world wide..

Amiya Shrivastava said...

I am analyzing this since last happened around May this year..and I can explain why..

Say we are 3 of us .. willing to buy one pen and we have no more than one pen in between us, just that pen ..and we have 10 bucks the current cost of pen is 5 bucks .. we all can buy and therefore to resolve raises the cost of pen by 6 bucks thereby making it 11 whoever can earn that extra buck can take away the pen..but nobody they ask govt to do something..govt. prints more notes and gives these to them..and now they have 100 bucks each..they again lay claim on this pen and again market forces raises the cost of pen to 101 bucks ..govt, foolishly prints more notes to subsidize this.. (instead of getting 2 more pens) and this recursively brings the cost of the pen to lets say 1 billion this pen is present in huge amount in the outside world and therefore its cost is 5 bucks see this virtually makes 5 outside bucks = 1 billion inside bucks..quite self govt should print no more notes (or only to a certain limit..provided you have enough foreign exchange ..the indicator is CRR or Cash Reserve Ratio) and should concentrate on getting more pens..

Amiya Shrivastava said...

This is not for the first has happened with Hungary before

ashes said...


I was thinking of writing this since almost two weeks, but couldn't write it at one go. And whenever next I started to write, I found the ZWD had further dipped, and I had to recalculate all the numbers again. :P

ashes said...


Thanks for sharing that detailed info for the benefit of my readers. And I liked it when you said (on IM) that tujhse pehle main is par blog likhta, to ab kyonki toone likha isliye main apne matter yahin daal raha hoon. :) Thanks.

Yes, Hungary had a worse situation. The inflation rate there was 41.9 quadrillion (10 to the power 15) in July 1946, and they had a 100-million-billion pengo note issued. Greece also had a mind-boggling number of zeroes in their currency notes in 1953.

There are a few more examples, and that calls for another post. :)

Amiya Shrivastava said...

and once the US was also down..and affected by Hyper Inflation!!

Ashutosh said...

I hope by just looking at the huge number... (billions, trillions) you aren't targeting for getting listed in the zimbabian's top richest... :)

I pray to god that he does give courage to zimbabian's to fight with this huge inflation.

Violet said...

Nice post, and informative too. Though I read an article on this some days back, I guess you sent me that one. But this is so maddening! Particularly for some one not so good at, and interested in numbers.

ashes said...


Not at all. Even the top richest in Zimbabwe would be finding it difficult in these tough times.

ashes said...


Thanks. Right, this is quite maddening. And no doubt you'd have read this somewhere else. It is, quoting you, just next to the aarushi murder case.. it is like ‘not again!’...

Anadi Misra said...

Very informative article...Tujhe MBA ki tayyari karni chahiye, ya IAS ki, kaafi current affairs ka track rakhta hai...

I seem to vaguely remember from my childhood days that a country which faced a similar situation re-valued (I guess made 10,000 = 1 or something) their currency....didn't help their economy immediately but made it easier to keep track of.

You might be able to find something on that or maybe its just my mind, playing tricks on me :P...but I feel this haunting deja vu on this one

ashes said...


Thanks dude, but my current affairs is limited only to whatever I post on my blog. :) In other words, had my GK been as good as I wanted, I'd be posting a blog every half an hour.

I am amazed about your GK in childhood! Your mind does play some very interesting tricks. You'd be talking about Argentina, who replaced 1 by 10,000 pesos in 1983, and 1 austral by 1,000 pesos in 1985, and 1 new peso by 10,000 australs in 1992, which you'd have heard. For me, this was the first time I heard of currency revaluation. So ultimately, 1 peso got revalued to 10 to the power 11 in 9 years. Much more interesting is Hungary's data, whose currency had to be revalued 10 power 21 times from Jan 1, 1946 to July, 1946.

Anadi Misra said...

Oh, cool...So it is not all senile decay! But I do get my memories confused...

Yeah, it must have been Argentina....Infact when I was thinking of this earlier, Menem's (Carlos) name kept flashing in my mind...Did the article say if re-evaluating helped them?

Infact you could write a small post about impacts of re-evaluation, or how countries got out of it...That might be a more positive article :)...Could turn into a giant case study too...but Its should be fun!

I have some free time,s o I am commenting on your posts, from bottom, going up....where-ever I have something to say!

ashes said...


The reevaluation definitely helped them, although I don't remember if the articles I read mentioned that explicitly....see, my ephemeral GK is gone, will have to google again for it. Yes, it would make an interesting, huge case-study.

A WAY OF LIFE said...

You too can be a SEXTILLIONAIRE.



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