About the Zimbabwe dollar and the danger of extreme money printing.
The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. During this time, it was subject to periods of extreme inflation, followed by a period of hyperinflation.
The Zimbabwean dollar was introduced in 1980 to directly replace the Rhodesian dollar (which had been introduced in 1970) at par (1:1), at a similar value to the US dollar. Over time, hyperinflation in Zimbabwe reduced the Zimbabwe dollar to one of the lowest valued currency units in the world. It was redenominated three times (in 2006, 2008 and 2009), with denominations up to a $100 trillion banknote issued. The final redenomination produced the “fourth dollar” (ZWL), which was worth 1025 ZWD (first dollars).
Use of the Zimbabwean dollar as an official currency was effectively abandoned on 12 April 2009. It was demonetised in 2015, with outstanding accounts able to be reimbursed until 30 April 2016. In place of the Zimbabwean dollar, currencies including the South African rand, Botswana pula, pound sterling, Indian rupee, euro, Japanese yen, Australian dollar, Chinese yuan, and the United States dollar were used.
On 24 June 2019, the Reserve Bank of Zimbabwe abolished the multiple-currency system and replaced it with a new Zimbabwe dollar (the RTGS Dollar), which was the only official currency in the country between June 2019 and March 2020, after which multiple foreign currencies were allowed again.
All four issues of the Zimbabwean dollar experienced high rates of inflation, although it was not until the early 2000s that Zimbabwe started to experience totally unsustainable hyperinflation.
On 13 July 2007, the Zimbabwean government said that it had temporarily stopped publishing (official) inflation figures, a move that observers said was meant to draw attention away from “runaway inflation which has come to symbolise the country’s unprecedented economic meltdown”. In 2008, the inflation rate accelerated dramatically, from a rate in January of over 100,000% to an estimated rate of over 1,000,000% by May, and nearly 250,000,000% in July. As predicted by the quantity theory of money, this hyperinflation was linked to the Reserve Bank of Zimbabwe’s choice to increase the money supply.
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In June 2008 the annual rate of price growth was 11.2 million percent. The worst of the inflation occurred in 2008, leading to the abandonment of the currency. The peak month of hyperinflation occurred in mid-November 2008 with a rate estimated at 79,600,000,000% per month, with the year-over-year inflation rate reaching an astounding 89.7 sextillion percent. This resulted in US$1 becoming equivalent to Z$2,621,984,228.
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