Wednesday, July 2, 2008

Mugabe's Currency Paper Supply Is Cut Off

Zimbabwe's official inflation rate was put at 165,000 percent by the government in February, but independent estimates put the real figure closer to 4 million percent.

Zimbabwe is believed to be the only country in the world that now carries out routine financial transactions in quadrillions — one quadrillion is a 1 with 15 zeroes behind it, or 1,000,000,000,000,000.

The exchange rate between the US dollar and the Zimbabwe dollar is now US$1.00 to ten billion Zimbabwe dollars.

The government continues to print Zimbabwe dollars to support purchases by President Robert Mugabe and his government. Almost all governments print money to support their regimes. Mugabe is just doing it more aggressively. In the United States, the Federal Reserve is growing the money supply at around 8%.

Now, the German government is getting into the act to try and stop the Zimbabwe inflation.

WSJ reports:

The Munich-based company that has supplied Zimbabwe with the special blank sheets to print its increasingly worthless dollar caved in to pressure on Tuesday from the German government for it to stop doing business with the African ruler.

Mr. Mugabe's regime relies on a steady supply of the paper -- fortified with watermarks and other antiforgery features -- to print the bank notes that allow it to pay the soldiers and other loyalists ...

Tyler Cowen points out that the paper supplier, Giesecke & Devrient, is the same firm that printed up the bills for the famous Weimar hyperinflation of the 1920s.

Prediction: Mugabe will continue printing money, even if he has to use toilet paper. (This, of course, would actually add some value to his currency).

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