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Monday, June 11, 2012

Repost: Zimbabwe Currency

~ Doesn't this Zimbabwean woman look happy with all that money in her hands?

This posting was originally written October, 2010-- still relevant today...
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You hear many fiscal conservatives talk about reigning in spending and debt loads and they mention the currency of Zimbabwe as example of the path the US and the rest of the world is going down.   Those who are seriously concerned about the devaluation of the US dollar and other world currencies, also tend to use Zimbabwe as a means to emphasize their points.

But how many people really have seen what Zimbabwean currency looks like?

Let's take a look...
~ Wow- Ten Million Dollars! Bank guaranteed too.. That man is RICH!!!

~  Wowie-Zowie!  a Fifty Billion Dollar note!!  He Must be the wealthiest man alive!

~  Goodness, look at all that money- he must live like a King!

~ Look how pretty the money is.. all those fun, happy colors.. Kinda like Monopoly money except in Monopoly, the play money stops at $500

~ Ooh, now we're talking... a One Hundred Billion dollar note!  MMMmmmmm!!

Did you notice on the currency, it had expiration dates?  Yep.  Each reserve note says "Pay the bearer on demand X dollars on or before Y date"   After the date expires, the little pieces of paper with colorful words and numbers becomes 100% valueless.

When you devalue the currency, eventually it becomes worthless and you need stacks and stacks of bills backed by nothing, to buy basic necessities of life such as milk, eggs and bread. This occurred in pre-Nazi Weimer Republic Germany and is currently what life is like in Zimbabwe.

So what does the money buy. For instance, how much does a person spend for a loaf of bread?  Or a home?

The following answers I found through an old article from Huffington Post entitled Zimbabwe Money Worth More On eBay Than As Actual Money, dated July 24. 2008-

"Amid Zimbabwe's mind-boggling hyper inflation, a new 100 billion dollar bank note has more value as a novelty item on eBay than on the streets of the capital. The note, launched this week, is worth enough to buy a loaf of bread - if you can find one on Zimbabwe's depleted store shelves. Meanwhile on eBay, the bill was on offer for nearly US$80."

"Notes in the millions of dollars are useful only as toilet paper and it's cheaper to light a fire with low denomination bills than with newspaper.  House prices and lottery prizes are quoted in quadrillions - that's with 15 zeros (1,000,000,000,000,000). Zimbabweans says it's only a matter of time before big ticket items will be priced in the quintillions, which have 18 zeros. (1,000,000,000,000,000,000) Official inflation is quoted at 2.2 million percent but independent finance houses say it's closer to 12.5 million percent."

~  Notice the price to buy a home in Zimbabwe isn't in millions, billions, trillions or even zillions- but quadrillions.  People can say 'It will never happen here" and hopefully they are correct- but it is not as far-fetched a doomsday scenario as some wish to believe.

When government devalues its currency with such intensity, as ours is doing with the Fed and Bernanke's Quantitative Easing stimulus and dramatically expanding the National Debt, it is akin to playing with fire.