Monday, February 2, 2009

Saved By 12 Zeroes; Zimbabwe Gets Creative in Battling Hyperinflation

In what may not be the most effective way to battle hyperinflation, Zimbabwe Central Bank governor (now that is a misnomer) Gideon Gono is making "its foreign exchange more transparent" and cutting 12 zeroes from the currency, i.e. a trillion to one exchange conversion. Too bad nobody cares how opaque or not Zimbabwe's foreign exchange rate is. A brilliant side effect of the move will be to kill any remaining business left in the rapidly liquidating country: the central bank will require all businesses to apply for foreign-exchange licenses which will cost between $12,000 for urban-based businesses (or 48 quadrillion old Zimbabwean dollars based on the old exchange rate, cash please we do not take checks) and $10 for small-scale vendors.

The amusing punchline "platinum and diamond-mining companies will be required to open foreign-exchange accounts with Zimbabwean banks to ensure that Zimbabwe's extractive industries fully benefit the local economy." The good news is the US Treasury should be able to hire a hyperinflation-worn Gideon Gono for extensive consulting and zero-clipping advice in 5 or so years when the dollar bill has to be printed on legal paper to fit all its zeroes.
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