Can you imagine? A $100,000,000,000 bill. You heard right…
In a previous post, I wrote about my personal experiences with our $2 bill. At the moment, the U.S. economy is slowly moving toward a recession, and economic pressure is everywhere. We all certainly feel it at the gas pump, and in the grocery stores. However, what is occurring economically in Zimbabwe should put things in perspective for all of us Americans.
With the official Zimbabwe inflation rate now at 2.2 million percent, the once-prosperous Zimbabwe has seen an unprecedented economic meltdown since it gained independence in 1980. According to the New York Times, in January 2008, “the government of President Robert G. Mugabe, battered by hyperinflation, said it would begin issuing new currency beginning Friday: $1 million, $5 million and $10 million notes.”
Newsweek ran an article earlier in 2008 entitled: ‘Poor Billionaires’. The sub-heading read, “In a nation with rampant hyperinflation, bread is a bargain at just $10 million.” The article went on to explain, “The bill, released for the first time last month, is actually not a proper currency note at all but rather a “bearer check.” Zimbabwe stopped printing real money long ago, when its inflation rate was still at a manageable level. Today these bearer checks are the only currency remaining. Last week in Zimbabwe 10 million dollars could buy exactly two rolls of toilet paper.” Terribly, only several months would go by and things would get exponentially worse.
Now (July 19, 2008) CNN has released an update: “Zimbabwe’s troubled central bank introduced $100 billion banknotes Saturday in a desperate bid to ease the recurrent cash shortages plaguing the inflation-ravaged economy.
A shopper displays a $500 million Zimbabwean bank note.
The bills officially come into circulation Monday, although they were on the foreign currency dealers market Saturday. As high as they are, though, the bills still aren’t enough to buy a loaf of bread. They can buy only four oranges.”
After doing some research for this post, back here in America, what seems to me as outrageously high gasoline and food prices is now more palatable, yet still unacceptable, but ultimately, not stinging as badly. Of course, still these crazy prices has driven inflation (5.3% in June) to the biggest annual jump since 1991 (in Hawaii, we vividly remember the impact the Gulf War had on our island economy). A separate Labor Department report showed the average hourly wage up only 3.4% over the same 12-month period, meaning the typical American is having trouble keeping up with the price increases.
One measure of the economic stress on households is the so-called economic misery index which is calculated by adding the 12-month inflation rate and the unemployment rate. With the jump in inflation to over 5% in June from 4.2% in May 2008, the misery index is now at 10.5, the first time it has hit double digits since 1993.