50 MILLION Dollar Bill

**Jakaleel** · 04-08-2008, 02:48 PM

Zimbabwe released a 25 million and 50 million bank note last week. The 50 million note is worth one US dollar on their black market and would at the time buy three loaf of bread at 16 million each. The inflation rate is around 100,000% and a BILLION note is expected soon.

**MagnaCentipede** · 04-08-2008, 03:45 PM

lol, fiat currency.

Wiki says the highest printed nominal value is 500 Billion, so Zimbabwe has a bit more to go.

Question: Do the guys printing the money get paid in paper?

I figure in Africa, commerce would centre around barter. Barter is neat because it is inflation-proof.

**Jakaleel** · 04-08-2008, 03:56 PM

The goverment pays it's goverment bills in US dollars and print what they need to make the exchange. Some goverment officials exchange for personal gain at the official exchange rate of 30,000 Zimbabwe to one US dollar for a killing.

**Switchcraft** · 04-08-2008, 04:14 PM

Originally Posted by MagnaCentipede

Barter is neat because it is inflation-proof.

No it's not. If today I would have been willing to sell you my car for 3 chickens, but tomorrow I decide I want 4, you just experienced inflation.

**leejo** · 04-08-2008, 04:16 PM

And you just experience seller's remorse!

Edit: damn. You said would have been willing. Curse you, subjunctive mood!

Edit redux: btw, exactly what do these chickens do such that they are worth 1/3 of a car? PM me: I might be interested in working something out.

**El_Gringo_Grande** · 04-08-2008, 06:13 PM

a story about it

**Switch** · 04-08-2008, 06:28 PM

Originally Posted by Switchcraft

No it's not. If today I would have been willing to sell you my car for 3 chickens, but tomorrow I decide I want 4, you just experienced inflation.

Thats not inflation... inflation happens to a currency as its value goes down because its volume goes up or other such things happen that effect only the currency but not what is bought with it.

Changes in barter values are just a matter of supply and demand.

Inflation happens ON TOP OF supply and demand.

**Kerostasis** · 04-08-2008, 06:43 PM

I don't think that's quite accurate, Switch. Inflation is just a fancy word used to describe the impact of supply and demand on the value of a currency instead of on the value of a good. But its really the same process at work either way.

**ScratchMonkey** · 04-09-2008, 06:42 PM

I've been told in other threads that inflation is good, that it means you don't have a shortage of currency as the population increases. So Zimbabwe is all set for population growth!

**leejo** · 04-09-2008, 06:59 PM

I agree that moderate inflation is good. High inflation is still better than moderate deflation. So yeah, inflation is very good insofar as we need to stay well away from deflation.

High inflation is not so good. It stifles capital investment and encourages converting cash into commodities like gold or oil or bullets.

**MagnaCentipede** · 04-09-2008, 07:26 PM

You need just enough inflation to encourage investment. I hear the sweet spot is around 2%.

**leejo** · 04-09-2008, 08:51 PM

Originally Posted by MagnaCentipede

You need just enough inflation to encourage investment. I hear the sweet spot is around 2%.

Bingo.

**Jakaleel** · 07-20-2008, 03:12 AM

Bump

Zimbabwe has issued a 100 Billion Banknote (actually bearer checks since 2003). Bills aren't enough to buy a loaf of bread. They can only buy four oranges and are worth one $1. The official inflation rate now at 2.2 million percent (real estimated to be over 9 million percent). The new bills carry an expiration date of December 31.

**Nikolas** · 07-20-2008, 04:15 AM

I'm not quite sure what inflation would have to do with encouraging investment.

I will say that there is a fascinating discussion between two pro-growth economists regarding the utility of inflation vs. deflation vs. perfectly stable currency. The biggest advantage to inflation according to these guys was that it permits for wage cuts in real terms: If you don't get a raise, but inflation is running at 5%, then you actually just experienced a 5% wage cut. This was viewed as such a positive trait by one of the economists that he considered it alone to be good cause for having an inflating currency as opposed to a perfectly stable currency.

People are happy to get a raise, even if their raise doesn't match inflation - and is therefore actually a wage cut.

People are somewhat okay if they don't get any raise at all, even if it is in effect a wage cut.

People are furious if their wages are cut - even if the wage cut is in fact a raise!

If a currency deflates at 5%, and your wages are cut 3%, then you actually just received a 2% raise. But of course people don't feel that way about things - at least in general.

So I suspect that the economist was more or less correct, and I do agree with him; it's preferable to have a mildly inflating currency if only for the psychological advantages which permit more fluid wages and therefore more adaptable labor force.

It is also of great importance that the inflation rate be kept stable. But that's a whole 'nother story.

Of course, on the other hand it's entirely possible that the general populace isn't so daft as we all seem to think, that people would adapt and learn that in a consistently 5% deflationary environment a 3% wage cut is in fact a 2% raise.

**ScratchMonkey** · 07-21-2008, 01:46 AM

The vast majority of people will be snowed by that scam. Witness the number of people who over-withhold each year so that they can get a bigger refund in April. They don't understand that the money is earning someone else interest.