Specific Purpose Statement
Inflation is one of the global problems of our time. It would seem that changes in the value of certain currencies are commonplace in a world where much depends on the state of financial markets. However, in some cases, inflation can turn into an economic catastrophe and destroy the financial infrastructure of the country. That is precisely what happened in a hot and exotic land, Zimbabwe, and that is what I want to tell you about today.
Introduction
Attention Getter
Did you know that an ordinary loaf of bread can be worth a million dollars?
Core Idea
Hyperinflation is a much more scary phenomenon than residents of countries with developed economies may think.
Credibility Statement
The consequences of hyperinflation in Zimbabwe will continue to apace in 2022.
Preview
Hyperinflation is a threat not only to the countries with lagging economies but also to developed nations. The U.S. may soon face hyperinflation as well because the government constantly prints dollars and distributes them to the population as benefits. Hyperinflation in Zimbabwe has led to terrible consequences for the country’s economy.
Body
To begin our discussion, I would like to discuss with you the preconditions for hyperinflation in Zimbabwe.
The main problems in the country began in 2000 when the so-called land reform
The reform involved a massive seizure of agricultural land from white planters and its transfer to new owners, primarily supporters of the authorities. The reform led to a sharp decline in the production of Zimbabwe’s chief exports – tobacco, cotton, tea, sugar cane. The new plantation owners, lacking proper knowledge and experience, proved to be poor stewards. The white population began to leave the country in droves. In addition, President Mugabe’s actions were severely criticized by the international community (Chirikure, 2020). The U.S. and European Union imposed economic sanctions against Zimbabwe. All of this led to a sharp deterioration in the economic situation of large segments of the population in the country. Following agriculture, the manufacturing industry suffered. The government found nothing better than to resort to a proven method – the printing press (Johnson, 2018). In the meantime, the money supply was not supported by producing goods and services.
Knowing the causes of the crisis, it is worth talking about its consequences for the country
The Zimbabwe dollar has been denominated three times. The first time it happened was on August 21, 2006, at a relatively modest rate of 1:1000 (Chirikure, 2020). The second exchange of old money took place on August 1, 2008. For one new dollar, Zimbabwe was given 10 billion old ones. In January 2008, a $10 million bill was introduced. It was followed by 50, 100, and 150 million banknotes, then 5, 25, and 50 billion in May (Chirikure, 2020). The release of the 100-billion bill marked July. At this point, 50 million Zimbabwean dollars were given for 1 American dollar. Naturally, this situation was accompanied by a deep economic and social crisis. Work in Zimbabwe during this period was practically unavailable. The unemployment rate has risen to a record 80% (Chirikure, 2020).
Having seen how catastrophic the consequences of hyperinflation can be, I would like to draw parallels with the modern U.S. economy
The U.S. may soon face hyperinflation as well because the government constantly prints dollars and distributes them to the population as benefits. It is estimated that the state authorities spent more than $9 trillion from the Federal Reserve on anti-crisis measures (Mangena et al., 2021). Most of this amount was simply printed. Since June, the rate of money supply growth has never dropped below 22% p.a., the highest ever (Stirling, 2019). This has led to inflation, and if the Fed continues in this vein, we will be talking about hyperinflation. The critical conditions for hyperinflation have already developed since there is an overabundance of paper money without a corresponding increase in the production of goods and active government regulation. New measures to support the economy for $1.9 trillion, which U.S. President Joe Biden proposes, can strengthen this trend (Stirling, 2019).
Conclusion
Summary
Hyperinflation in Zimbabwe began with an unsuccessful bill on the privatization of land and ended with record damage to the economy. If the United States does not take a more careful approach to create laws and payments, it may face the same inflationary crisis.
Final Comments
Currency volatility is now one of the decisive factors for the economies of world states. A careful attitude to the publication of bills and the provision of their consequences can save countries from economic ruin. That is why it is essential to pay special attention to the foreign exchange reserve on the part of the government.
References
Chirikure, S. (2020). Great Zimbabwe: Reclaiming a ‘confiscated’ past. Routledge. Web.
Johnson, J. W. (2018). Political economy of the United States. Routledge. Web.
Mangena, T., Nyambi, O., & Ncube, G. (2021). The Zimbabwean crisis after Mugabe: Multidisciplinary perspectives. Routledge. Web.
Stirling, C. (2019). The United States and the world economy: Policy alternatives for new realities. Routledge. Web.