R.I.P. ZIMBABWE DOLLAR
Steve H. Hanke*
Professor of Applied Economics
The Johns Hopkins University
The Cato Institute
As I wrote on 25 June 2008, "Zimbabwe is in the late stages of a classic hyperinflation. … Inflation is galloping ahead as the supply of Zimbabwe dollars surges and the demand for them shrinks. Eventually, the currency will totally collapse as people simply refuse to accept it." In recent months, facts on the ground have validated this prognostication. The Zimbabwe dollar is dead.
Last year, I developed a hyperinflation index for Zimbabwe. The index began on 5 January 2007, a month before Zimbabwe entered the hyperinflation zone. Due to a lack of reliable data, I stopped reporting the index on 14 November 2008. This index was based on non-cash Zimbabwe dollar transactions. These had accounted for the bulk of transactions in Zimbabwe. By the end of November, however, there were virtually no non-cash Zimbabwe transactions taking place and the Zimbabwe Stock Exchange had stopped trading. The non-cash Zimbabwe dollar is, therefore, dead.
Ashes are all that is left of the Zimbabwe dollar — a remnant of paper money. During Zimbabwe's hyperinflation, foreign currencies replaced the Zimbabwe dollar in a rapid and spontaneous manner. This "dollarization" process was legalized in late January 2009. Even though the Zimbabwe paper money remnant circulates alongside foreign currencies, its real value is tiny, its use is limited, and its value against the U.S. dollar is cut in half every two days.
Zimbabwe failed to break Hungary's 1946 world record for hyperinflation. That said, Zimbabwe did race past Yugoslavia in October 2008. In consequence, Zimbabwe can now lay claim to second place in the world hyperinflation record books.
Highest Monthly Inflation Rates in History
CountryMonth with highest inflation rateHighest monthly inflation rateEquivalent daily inflation rateTime required for prices to double HungaryJuly 19461.30 x 1016%195%15.6 hours
ZimbabweMid-November 2008 (latest measurable)79,600,000,000%98.0%24.7 hours YugoslaviaJanuary 1994313,000,000%64.6%1.4 days
GermanyOctober 192329,500%20.9%3.7 days
GreeceNovember 194411,300%17.1%4.5 days
ChinaMay 19494,210%13.4%5.6 days
Source: Prof. Steve H. Hanke, February 5, 2009.
NEW HYPERINFLATION INDEX (HHIZ) PUTS ZIMBABWE INFLATION AT 89.7 SEXTILLION PERCENT Zimbabwe is the first country in the 21st century to hyperinflate. In February 2007, Zimbabwe’s inflation rate topped 50% per month, the minimum rate required to qualify as a hyperinflation (50% per month is equal to a 12,875% per year). Since then, inflation has soared.
The last official inflation data were released for July and are hopelessly outdated. The Reserve Bank of Zimbabwe has been even less forthcoming with money supply data: the most recent money supply figures are ancient history—January 2008. Absent current official money supply and inflation data, it is difficult to quantify the depth and breadth of the still-growing crisis in Zimbabwe. To overcome this problem, Cato Senior Fellow Steve Hanke has developed the Hanke Hyperinflation Index for Zimbabwe (HHIZ). This new metric is derived from market-based price data and is presented in the accompanying table for the January 2007 to present period. As of 14 November 2008, Zimbabwe’s annual inflation rate was 89.7 Sextillion (1021) percent. Since mid-November 2008, the weekly update of the HHIZ has been put on hold. The market-based price data from Zimbabwe have deteriorated and, at present, cannot be used to update the HHIZ. HHIZ updates will be resumed as soon as the quality of the data reaches a satisfactory level. Hanke Hyperinflation Index for Zimbabwe (HHIZ)
DateIndexMonthly Inflation RateAnnual Inflation Rate