The Collective
Monday, July 14, 2008
By Dr. Steven Taylor

The LAT explains the functioning of the Zimbabwean “economy” in recent years (Lack of bank note paper threatens Zimbabwe economy):

Zimbabwe’s economic meltdown harks back to the collapse of its major export industry, commercial farming, after Mugabe’s controversial land reform program early in the decade. That left the nation starved of foreign exchange, but government spending went on.

How did it do that? It printed money. But printing more and more money without an increase in productivity fueled rampant hyperinflation.

As hyperinflation spiraled last year, Fidelity printed million-dollar notes, then 5-million, 10-million, 25-million, 50-million. This year, it has been forced to print 100-million, 250-million and 500-million notes in rapid succession, all now practically worthless. The highest denomination is now 50 billion Zimbabwean dollars (worth a U.S. dollar on the street).

And now?

It has come to this: Zimbabwe is about to run out of the paper to print money on.


Fidelity Printers is Mugabe’s lifeline. It prints the money to pay the police, soldiers and intelligence organs that keep the regime in power. Lately, the money has been used to set up a network of command bases around the country staffed by liberation war veterans and youth militias, hired muscle to terrify the population into voting for Mugabe in the June 27 presidential runoff election.

If the regime can’t pay the security forces on which it relies, it would face economic paralysis — and potential collapse.

And, to add insult to injury, as they may lose the license to he software needed to design new bank notes, which they need to do to keep up with hyperinflation. While on the face of it, one would think that the regime would have no problem using unlicensed software, the story suggests that somehow the loss of the license would mean loss of functionality.

So, if you were wondering how the situation in Zimbabwe could get even worse, now you know.

(The whole LAT piece is worth a read, btw.)

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  1. Wow. This answers the question of all students who ask why we can’t just print more money to do things like “pay off the national debt” or things like that. We had Germany back in the day, but no one remembers that now. The difference between Zimbabwe and Germany is that in Germany, the dictator came to power because of the inflation crisis. In Zimbabwe, the dictator has caused the crisis.

    Comment by B. Minich — Monday, July 14, 2008 @ 9:47 am

  2. [...] will they have enough paper to print the new bills? Sphere: Related Content Previous Related Posts Zimbabwe Running out of [...]

    Pingback by PoliBlog (TM): A Rough Draft of my Thoughts » Zimbabwe Issues 100-billion-dollar Bill — Saturday, July 19, 2008 @ 10:46 pm

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