Back to The Undercover Economist homepageThe BBC reports:
Zimbabwe’s central bank is to introduce new higher-denomination banknotes in an effort to ease the critical shortage of cash in the country.
Zimbabwe has been in economic decline for the past eight years, with annual inflation widely thought to be in excess of 50,000%.
The highest value note that will go into circulation on Friday is worth 10m Zimbabwean dollars.
But that is worth less than US$3.90 (£2; 2.60 euros) on the black market.
Grim. About eighteen months ago, I wrote:
It is a measure of inflation’s whimsy that nobody really knows whether inflation is worse for the poor or for the rich. Much depends on the intricacies of the tax system: what corporate profits truly are after inflation; how much tax people pay on interest payments that look generous but in fact are just compensating for the melting away of their savings accounts; whether tax thresholds are adjusted in line with inflation. But an important World Bank research project led by William Easterly and Stanley Fischer, who is himself now a central banker, showed that inflation hits the poor hardest and is also feared most by the poor.
Of course, if inflation really takes off, people will no longer know if they are rich or poor, or what goods are really worth any more.People trade cigarettes and coffee in hyperinflationary times, not asobjects of barter but as alternative currencies. Money is supposed totell you how much things cost and if the dollar and the pound and the euro no longer fulfil that function, a pack of Lucky Strikes will have to do.
The whole article is here.
Tim writes about the economics of everyday life. His 