Today's Topic

Since there's an economics exam tomorrow, today's topic will be on economics!

Boooo... sau pei lah, so free until blog about economics? Sien douu..talk about something else la tiuu..

I admit it's a desperate and stale topic, but it'll be educational! =P

Ok, to show everyone the power of failing to understand the basics of economics, please turn over to look at Zimbabwe, once dubbed the the Kitchen of Africa (or something along those lines). President Robert Mugabe (a graduate of the same university I'm at, eek!) and his version of Mugabenomics has created a typical textbook version of hyperinflation which is a good study for any economist, and in the process, made everyone in the country unwilling millionaires. The gameshow Who Wants To Be A Millionaire will surely be condemned in this situation.

It all started when his government seized control of commercial farms, controlling all food output. That put workers out of jobs, and pretty much destroyed the agricultural industry. Then what happens, is a recession, followed by inflation.

US$50 makes u half a millionaire in Zimbabwe.

So, as each day passes during the inflation period, the government's coffers are getting emptied, so, unable to pay for the high prices of stuff, the Central Bank prints more money to finance it's expenditures. Beeep, wrong move. Effectively, as of now, the government is probably bankrupted, but it still prints money to finance it's expenditures.

Official inflation rate is at 7500%, but unofficial ones predict above 15000%. Official exchange rate is at 250ZW$ per US$ but black market rates push past 120,000ZW$ (120,000,000 in old currencies) per US$. Golfers prefer to buy drinks before they tee-off because by the time they come back they won't be able to afford the drinks.

That's gone too.

Being the master of his own version of economics, President Mugabe ordered inflation to be illegal, banks do not allow more than $10000 to be withdrawn in a day, and in order to buy support from his allies, has promised to triple current salaries to $33m a month, and printing even more money to flood his close circle of allies with.

So we all know that the theory in Mugabenomics is doing everything contrary to the economic dogma practised everywhere. One should cease printing money because printing money isn't gonna work, it only makes the current amount of money even more worthless. One should also not continue spending, but the government cannot afford to cut it's expenditure (to maintain support), and are using draconian policies to stem money growth. Price controls and economy regulation exacerbate the situation. But President Mugabe did it anyway, and even forced a legislation to say that prices are to be cut by 50%.

This corrodes confidence in both the government, and the money. So people will move back to the stone ages where barter trade is used. Once, money was stored in the bank, now money is stored as bread. The newest currency is $20million in plastic bag of $500 notes. (The $500 note cannot be used to even buy one ply of tissue paper.)

The latest currency is bags of money.

For the people, a majority of whom depend on remittances in US$, or earn in South African rands, are coping well with the situation. But poor souls who are trapped have to suffer and rely on aid organisations distributing food.

At this point, if you're still failing to grasp the theory of hyperinflation. Take your bank balance, let's say $100 push it back by 5/6 zeros, then try to buy a 30 cents loaf of bread with that. Kind of tough isn't it. That's if you were unlucky enough to have your money in a bank when that happens. Ok, enough for today, I feel smarter already typing through all this.

The author would like to clarify that he's not a boring person with no life but studying economics and talking about politics. Nononono, that's not true. He's in fact an ah-beng who slacks around, plays DotA, talks crap, and listens to trance, techno, dance, electronic, n house. He also lives most of his life on Facebook, and MSN. =P