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M$1
June 06, 2009 05:22 AM
Is war the primary cause of hyperinflation for Zimbabwe?
What is causing Zimbabwe to have runaway inflation?
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Best Answer Chosen by Asker
| June 06, 2009 05:59 AM |
A short, yet detailed explanation of Zimbabwe's hyperinflation can be found in this article:
http://www.newzimbabwe.com/pages/inflation180.17386.html
| Asker's Rating: |
• Your saying corruption and forced distribution caused exports to drop and government debt to increase
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Other Answers (3)
June 06, 2009 08:02 AM
Hyperinflation in Zimbabwe has persisted since the early 2000s, shortly after that country's confiscation of white-owned farmland and its repudiation of debts to the International Monetary Fund. In April 2009, Zimbabwe abandoned printing of the Zimbabwean dollar, and the South African rand and US dollar became the standard currencies for exchange. The government does not intend to reintroduce the currency until 2010. MONEY IS THE MAIN CAUSE
The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This results in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money, similar to a bank run. Enactment of legal tender laws and price controls to prevent discounting the value of paper money relative to gold, silver, hard currency, or commodities, fails to force acceptance of a paper money which lacks intrinsic value. If the entity responsible for printing a currency promotes excessive money printing, with other factors contributing a reinforcing effect, hyperinflation usually continues. Often the body responsible for printing the currency cannot physically print paper currency faster than the rate at which it is devaluing, thus neutralizing their attempts to stimulate the economy.
SUMMARY
Hyperinflation in Zimbabwe main cause is massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This results in an imbalance between the supply and demand for the money.
So basically it is not a result of war. :)
Source(s):
http://www.newzimbabwe.com/pages/inflation180.17386.html
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June 06, 2009 02:54 PM
From normal person's perspective, the inflation was caused by corruption and bad economic policies. If you want to look at it from an economist's point of view, I recommend using the internet. If you are studying, the topic, try searching for websites with economic news. It would be better than asking ordinary net surfers. Hope this helps.
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"Zimbabwe’s hyper-Inflation is a result of the monetary authority irresponsibly borrowing money to pay all its expenses and funding quasi-fiscal activities."
There is never a clear, concrete cause of inflation, especially hyperinflation. However, wikipedia has this to say:
"Inflation was stable until Robert Mugabe began a program of land reforms that primarily focused on taking land from white farmers and redistributing those properties and assets to black farmers; this in turn sent food production and revenues from export of food plummeting."
It's also a national psychological crisis more than a political one.
Again, according to the article:
"In neo-classical economic theory, hyperinflation is rooted in a deterioration of the monetary base; that is the confidence that there is a store of value which the currency will be able to command later. The perceived risk of holding currency rises dramatically, and sellers demand increasingly high premiums to accept the currency. This in turn leads to a greater fear that the currency will collapse, causing even higher premiums."