Hyper inflation in Zimbabwe - Essay Example

If there are a lot of price controls the value of the money is not discounted relative to gold or other currencies—this too causes huge problem. There is nothing left to value money against: its value becomes effectively meaningless. If the central bank starts printing a lot of money and the economy has many other problems—as Zimbabwe does, for example, no property rights—hyperinflation usually speeds up. When this happens, the central bank usually can’t print money fast enough to keep up with the rapid depreciation of the currency.

They have to keep adding zeroes to the numbers on their various bills. None of this has been helped by the serious political turmoil that has hurt Zimbabwe so badly over the last few years. Robert Mugabe decided to seize white-owned farms and then give each of the farms and other land to his many cronies and to people in the security forces. The result was that some of the most productive land in the country fell into the disuse. Nothing was grown on it and no money came from it. Because Zimbabwe used to be one of the biggest agricultural countries in the world this has hurt the economy very badly.

Also many of the most talented people in the country fled because of this oppression. Foreign direct investment dried up as property and contract rights were simply not secure. When the security forces beat the opposition leader to within an inch of his life a few years ago, Zimbabwe’s slide began to pick up pace. Last year, Mugabe basically stole back an election that the opposition won. A few months ago a power-sharing arrangment was made, but there are still suspicions of plots against the now prime minister, Morgan Tsvangirai.

As the Economist wrote recently, “So far Mr Tsvangirai has kept his head down. Despite the many attempts of Mr Mugabe’s old guard to humiliate and undermine him, he has made no public complaint. That, he believes, would alienate those in ZANU-PF whom