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ZIMBABWE BANK NOTES
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The latest figures put the country's annual rate at 516 quintillion per cent – 516 followed by 18 zeros – overtaking Yugoslavia in 1994 and putting it behind only Hungary in 1946.
With goods unavailable and official statistics widely distrusted, the Cato Institute in Washington calculated the figures based on exchange rate movements and market data.
In post Second World War Hungary monthly inflation reached 12,950,000,000,000,000 per cent, with prices doubling every 15.6 hours – Zimbabwean prices are currently doubling every 1.3 days.
The most famous hyperinflation, Weimar Germany in 1923, is in a distant fourth place, at 29,525 per cent a month with prices doubling every 3.7 days.
Prof Steve Hanke said: "They still have a way to go to catch Hungary, but they are getting there. This is conjecture, but if they keep going at this pace, they have a shot at it within a month or maybe a month-and-a-half at the outside."
For ordinary Zimbabweans, the consequences are appalling and they must spend money as soon as they get it before it loses its value.
But the dysfunctional economy means that goods are in desperately short supply, and they must spend hours foraging to find things to buy.
There comes a point, though, where the inflation rate makes little practical difference.
"The economy just stops functioning or slows down very much," said Prof Hanke. "A lot of barter takes place. Money is not used as much or if it is, it's all foreign exchange." Supermarkets in Harare are accepting only US dollars and South African rands, leaving those Zimbabweans without access to foreign currency in dire straits.
The latest official figure for inflation in Zimbabwe – dating back to July – is 231 million per cent a year. Robert Mugabe's government blames foreign sanctions for the economic turmoil.
Prof Hanke said the only way to stop the rise was to abolish the Reserve Bank of Zimbabwe – which is a key tool of the regime.
"At the end of the day, people will just refuse to use the money. It will be just worthless and the Reserve Bank will be useless too. The only way you can change expectations about inflation in hyper-inflating countries is completely get rid of the old system."
Announcing a range of measures this week, that only tinker with symptoms of the problem, Gideon Gono, the governor of the reserve bank, blamed a “breed of selfish and unrelenting money launderers and speculators” for the crisis.
“The nation has to appreciate the magnitude of the 'sanctions’ and the mightiness of the enemies who are at play in order to understand that we are at war,” he said.
For years, analysts and opposition politicians have predicted that the economy would prove to be Mr Mugabe's downfall, but Prof Hanke, who is professor of applied economics at Johns Hopkins University, said that Slobodan Milosevic survived for almost eight years in Yugoslavia after hyperinflation peaked.
"The idea hyperinflation is going to blow Mugabe out of there isn't based on historical experience.
"Milosevic and Mugabe are similar in more ways than one: the restrictions on liberty of all sorts; Milosevic carrying on just like Mugabe that it was the foreign sanctions that were ruining the economy. It's very similar."
