Dollar Uber Alles

What happened in Zimbabwe?

Zimbabwe had the 30th hyperinflation episode in world history. The first happened during the French Revolution, when inflation topped 50% per month. In late 2008 Zimbabwe’s monthly inflation rate topped out at 79 billion percent.

The government had literally printed money to pay its debts. After Mugabe destroyed his economy through confiscation, they didn’t have the tax receipts to pay the army and other workers, and they couldn’t borrow. So they just printed what they needed. Prices inevitably rose. The currency fell apart when the government issued a 100 trillion Zimbabwe Dollar.

What happened next is unique. The economy spontaneously dollarized. People couldn’t be bothered to read all those zeros—there were 15 on that 100 trillion note—and they started to use dollars instead. Now prices are stable, in dollar terms. The economy is limping along.

What we learn is the economies are incredibly adaptive. And that just having more money doesn’t make you more wealthy.

Douglas R. Tengdin, CFA
Chief Investment Officer
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