Runaway hyperinflation : Zimbabwe inflation rate now over 1 million percent

Weary Zimbabweans are facing a new wave of price increases that will put many basic goods even further out of their reach: A loaf of bread now costs what 12 new cars did a decade ago. Independent finance houses said in an assessment Tuesday [27 May 2008] that annual inflation rose this month to 1,063,572 percent based on prices of a basket of basic foodstuffs. Economic analysts say unless the rate of inflation is slowed, annual inflation will likely reach about 5 million percent by October.

The collapsing economy was a major concern of voters who dealt longtime President Robert Mugabe a defeat in the March 29 elections. His challenger, Morgan Tsvangirai, topped the poll but did not win the simple majority needed to avoid a runoff. The two face each other in a second round June 27. Zimbabwe's official annual inflation was given by the government as 165,000 percent in February, already by far the highest in the world. The government has not updated that.

- Looking at Zimbabwe's April 2008 CPI inflation rate of 165,000% and comparing it to May 2008's rate of over 1 million percent, one could probably expect 10 million percent in June. When I talk about inflation going exponential, this is a prime example out there in the real world, happening in real time.

A government could hyperinflate to the point of absurdity and beyond, but actually, all you need to know is the first 2,3 or 4 significant digits and the exponent, and you could write the prices in scientific notation, for example $2.30E+12 dollars for a loaf of bread. If payments are made by electronic means, say cashcards or something like that, then adding zeroes is not a problem, it's just a matter of changing the exponent part (E+xx).

The problem then, from a peakoiler's point of view, is really about affordability and availability. It's fine if petrol costs a million dollars a litre (or gallon, or what-have-you), but you earn a hundred million a day. Everything's relative. But if petrol costs a million dollars a litre and you earn a million dollars a day and anyway, the petrol station keeps running out and there's a queue going on for miles, then, yes, you have a problem.

In times of inflation, prices tend to rise faster than wages. Conversely, in times of deflation, wages tend to fall faster than prices do. In other words, the working class is usually screwed. You can call that a corollary if you like.

(2008-06-06 11:27:34 SGT) [Biz] Permalink

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