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Views from the Center


This is a joint posting with Robin Kraft

nameWhen I lived in Zimbabwe a mere 18 years ago, one U.S. dollar was worth about 2.5 Zimbabwe dollars. A few years later I returned and was shocked that the value of the local currency had fallen by more than 50% to Z$6: US$1. (How quaint!) Since the central bank has spent much of the last few years pointlessly trying to defy the laws of money supply -- printing more and more cash to pay its bills -- we are witnessing both hyperinflation (231 million % at last official count) and a mind-spinning vortex of collapsing value for the local currency. The government released a new Z$500 million note last week. As of last Friday, this was worth around US$10. But let's not forget that 14 zeros have been lopped off the currency in the past two years. Thus, using the original Zim dollar (I must still have a few in an old backpack) the exchange rate is really US$1 to:

Z$ 5,000,000,000,000,000,000,000

This number is so big that it loses any meaning. Here's another way to try to understand an exchange rate of 5 x 10^21:

  • If we exchanged just one American greenback into Zim dollars using the old Z$1 coins, the iron required to strike those nickel-coated steel coins (2.38x10^19 kg) would be about 120,000 times estimated global reserves of iron.
  • Fortunately, Mars has lots of iron, and it's not so far away. Instead of coins, if we converted a buck into Z$1 notes (assuming infinite paper supply, of course) and stacked them on top of each other, the pile would be high enough to reach Mars. Actually it could reach Mars 10 million times over.
  • Another way to see how far a single George Washington would reach is to lay the Z$1 bills end to end. We could easily reach the center of our galaxy, some 27 light years away.

If that's not far enough away, you need only wait a few more days.

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.