Readers Question: If inflation is too much money, too few goods then how come…..Zimbabwe has the world’s highest inflation rate, at more than 100,000%, and just one adult in five is believed to have a regular job? With no job, no money so no demand so…why inflation?
A likely explanation for the situation in Zimbabwe could be the government printing money in response to a shortage of output, and thereby increasing the money supply much faster than Real GDP.
A few years ago, national debt in Zimbabwe increased to over 100% of GDP. To finance the National Debt, the Government started printing money; but, this only devalued the value of existing money and caused prices to rise.
The inflation is also exacerbated by a shortage of supply. Because basic goods are in short supply it is easy for market prices to be increased causing a spiral effect of upwardly rising prices.
Ironically, this shortage of supply has been made worse by the imposition of price controls. These fix prices for basic goods. But, because the cost of production has been increasing faster than prices, suppliers have little incentive to supply (at least to official channels). This makes the shortage worse and therefore the likelihood of inflation stronger.
Note: I think that there is ‘weak demand’ rather than ‘no demand’ Some people still have the ability to buy goods; the problem is that the supply of goods is still less than the very ‘weak’ demand.
Also, the thing here is that there is little ‘effective demand’. i.e. people want to purchase goods, they just don’t have the necessary income to be able to do it. Leading to tragic consequences such as Funeral Costs soar
Inflation Rates in Zimbabwe
2005 – 585.84%
2006 – 1,281.11%
2007 – 66,212.3%
2008 – 231,150,888.87%
Causes of Inflation MV=PY
The Monetarist explanation of inflation is that prices are linked to growth in the Money Supply. The quantity theory of Money states MV=PY. If we assume a constant V (velocity of circulation) and Constant Y, an increase in the Money supply leads to an increase in prices. In practise, the link between the money supply and inflation is not as simplistic as this formula states; but, as a rough rule of thumb if the money supply increases by 1000% and Real GDP stays the same you can expect inflation of around 1000%
Mugabe’s Explanation of Inflation
I believe Mugabe once blamed inflation on ‘Greedy businesses’ demanding price rises. This encouraged him to set up price controls. But, as mentioned these have been ineffective in preventing inflation.
Other Mugabe supporters have tried to blame the inflation as a ‘Western Import’. Although this assertion is rather bizarre given that inflation is relatively low in Western economies.
Hyperinflation and Exchange Rate
Hyperinflation causes a rapid decline in the value of a currency. This graph shows how inflation in Zimbabwe led to a steep decline in the value of the Zimbabwe currency.
Question related to hyperinflation in Zimbabwe
Readers Question: I do not understand the responses. If prices are rising by 1000% and unemployment is 80% then WHO is buying the goods? It cannot be the people unemployed as they would not have the money. If the answer is ‘no-one is buying the goods, hence starvation’ then why would prices be so high as if there’s no demand….
Usually in the West, inflation is caused during periods of rapid growth; it is termed demand pull inflation. However, this particular case of inflation is not caused by an economic boom, but, a collapse in the economy where the money supply is growing despite a fall in output and number of goods available.
Although unemployment is close to 80%, there are still people with money. There are many groups of workers who have rising nominal wages because the government is printing more money, but, because the output of goods is falling, the value of money is decreasing rapidly.
Basically, even if only a small % of the population has any money that is sufficient to cause inflation, if the output is falling. The real problem is that many people have more cash / money, but have declining real incomes.
Because there is a shortage of goods and the printing of more money it is inevitable that inflation occurs.
Note printing money does nothing to increase Real output, Real GDP. It is a basic economic paradox that you can’t get richer by printing more money. But, it doesn’t stop people in desperate situations trying.
Keep doing ԝhat you аre dⲟing - looking forward tо more posts.
my web paցе; obtain reduced price facebook fanpage likes
yet again to read additional news.
My blog post; Backlink
artkcle here at my house.
Also visit my blog post; Eva
I'll be sure to bookmark it аnnd return tߋ
reaⅾ more of your useful information. Tһanks for the ⲣost.
I'll dеfinitely retuгn.
my website; get Youtube followers
of any discussion boards that cover the
same topics talked about in this article? I'd really like to be a
part of group where I can get responses from other knowledgeable people that share the same interest.
If you have any suggestions, please let me know.
Take a look at my web-site ... Cryptosuite Review And Demo
Some people successfully gain financial freedom by dealing
products a number of teams of people, even though some multi-level
MARKETING OPPORTUNITIES companies offer
special bonuses and incentives for the best-performing affiliates.
What remains is the question must while you check out the mirror each day.
Although very difficult, but I think to accept the truth. My children it affected a lot, we have moved to a new place and is gradually adapting to it. run 3
new tto me. Anyways, I'm definitely delighted I discovered it and I'll bee
book-marking it and checking back regularly!
Here is my weblog - Kia
How about making more on this topic soon? I really enjoyed it and found it helpful. Waste removal London
The article you have shared here very awesome. I really like and appreciated your work. I read deeply your article, the points you have mentioned in this article are useful
We offer companies, individuals, gov and city agencies options to manage their obsolete electronics. gold scrap
This article is really fantastic and thanks for sharing the valuable post.
Download Jurassic Craft APK Mod
The information you have posted is very useful. The sites you have referred was good. Thanks for sharing ...
Khasiat walatra sehat sendi
I don't know as it has improved my tips, but I am hoping what I have done over the course of this first year will make a difference this Christmas. These are the things I have done ...
rental mobil banjarmasin
sewa mobil banjarmasin
rental mobil banjarbaru
sewa mobil banjarbaru
rental mobil murah banjarmasin
sewa mobil murah banjarmasin
rental mobil murah banjarbaru
sewa mobil murah banjarbaru
rental mobil di banjarmasin
sewa mobil di banjarmasin
I must spend a while learning much more or understanding more.
Thanks for great info I used to be looking for this information for my mission.
Look at my site :: Mini cooper Roadster - kdnrp.com,
It was really informative. Your website is very useful.
Thanks for sharing!
Also visit my homepage :: Nissan 370z Nismo
been conducting a little research on this. And he actually bought me dinner due to the
fact that I found it for him... lol. So let me reword this....
Thank YOU for the meal!! But yeah, thanx for spending some time
to discuss this issue here on your blog.
Here is my weblog; Volkswagen Beetle (http://wekerala.com/index.php?do=/blog/147916/how-to-meet-attract-and-buy-single-women-with-a-vw-beetle/)
Review my website Maxadrex Male Enhancement Reviews
the excellent experience my daughter enjoyed visiting your web site.
She discovered such a lot of things, not to mention what
it is like to possess an awesome teaching mindset to let men and women really easily thoroughly
grasp some extremely tough topics. You undoubtedly did more than my
desires. Many thanks for providing those essential, safe, informative
not to mention cool thoughts on the topic to Jane.
Feel free to visit my web site: Poseidon CBD Reviews
Mafia City, BOSS, hurry and go to wipe out the other Families!
Thanks for the blog.Thanks Again. Awesome Tutuapp APK
I would like to thank you for your nicely written post
WEBSITE CIPTA KREASI visit : atap membran jakarta visit : jual atap membran murah visit : aplikator atap membran visit : spesialis atap membran visit : jasa atap membran visit : jasa pasang atap membran visit : ahli pasang atap membran visit : kanopi membran jakarta visit : jual kanopi membran visit : aplikator kanopi membran visit : spesialis kanopi membran visit : ahli pasang kanopi membran visit : jasa pasang kanopi membran visit : kanopi membran jakarta visit : jasa kanopi membran visit : tenda membran jakarta visit : jual tenda membran visit : aplikator tenda membran visit : Toko tenda membran visit : jasa tenda membran visit : tenda membran murah visit : awning gulung jakarta visit : jual awning gulung visit : aplikator awning gulung visit : jasa pemasangan awning gulung visit : ahli pasang awning gulung visit : awning gulung murah visit : kanopi kain jakarta visit : jual kanopi kain visit : aplikator kanopi kain visit : kanopi kain murah visit : jasa pasang kanopi kain visit : ahli pasang kanopi kain
Here is my webpage - Fit Cleanse Premium Review
gadai bpkb mobilgadai bpkb gadai bpkb mobil di pegadaian jasa pembuatan website jasa website jual komputer bekas terima komputer bekas terima lelang komputer bekas lelang komputer bekas terima server bekas web hosting hosting murah hosting murah unlimitedhosting jasa pembuatan website jasa website jasa web jasa pembuatan website jasa website jasa website jasa pembuatan website surabayajasa website surabaya jual komputer bekas jual beli komputer bekas terima komputer bekas terima beli komputer bekas terima beli komputer bekas beli komputer bekas warnet jual laptop bekas pinjaman dana tunai dana tunai jaminan bpkb gadai bpkb mobil gadai bpkb mobil di pegadaian obat aborsi jual obat aborsi obat aborsijual obat aborsi obat aborsi jual obat aborsi obat penggugur kandungan sedot wc surabaya sedot wc sidoarjo sedot wc obat penggugur kandunganjual obat aborsi obat aborsi
jasa desain interior jasa desain interior jakartajasa desain interior bandung jasa desain interior tangerang jasa pembuatan website jasa websitejasa web jasa seo jasa seo website gadai mobil tanpa bpkb gadai mobil di pegadaian daftar harga pipa pipa pvc snipipa limbah pipa hdpe pipa air bersih hdpe obat aborsi jual obat aborsi obat aborsi cytotecasuransi mobil asuransi mobil terbaikasuransi mobil all risk mesin crusher mesin stone crusher stone crusher best steam cleaner harga pagar brc jual pagar brc pagar brc Jual obat aborsi surabayaJual obat aborsi semarangJual obat aborsi karawang jual obat aborsi jual cytotec obat aborsi asli gadai bpkb mobilgadai bpkb gadai bpkb mobil di pegadaianmadu hutan madu hutan sumatera
I don't know who you are but certainly you are going to a famous blogger if you aren't already ;) Cheers!
My web page: situs judi bola
Whenever I look at your website in Safari, it looks fine however when opening in IE, it
has some overlapping issues. I merely wanted to provide you with a quick heads up!
Besides that, excellent blog!
Look into my webpage; Rapid Spot Forskolin Side Effects
(from what I've read) Is that what you're using on your blog?
my web site :: Rapid Spot Forskolin