Inflation of Zimbabwe...worst than a roller coster

I was recently doing my pre assignment for my Econs and I was shock to find that Zimbabwe is suffering such high inflation in this era. Studies of inflation also make me realise that how fortunate we are to be born in Singapore. Even Gong Li want to be a Singaporean and we are lucky to be born one. I always think that there we have a choice in whatever we do. A choice to be a happy or sad in whatever situation but you can't choose where to be born and born into which family.

Seeing the situation in Zimbabwe make me realise that we are God bless being born here even though we are not in a rich family.

Below are the readings of Zimbabwe from my assigment.

Zimbabwe is one of the recent countries in the 20th century that suffers greatly from inflation. (Source: Anonymous, 2008. Zimbabwe inflation hits 100,000%. http://news.bbc.co.uk/2/hi/business/7255588.stm)
Their economy has been in trouble for the past seven years with long term shortage of food and fuel. About 80 percent of the country population lives in poverty and over these few years their inflation has hits an annual rate of 100,000%. (Source: Angus Shaw, 2008. Zimbabwe inflation passes 100,000% officials say. http://www.guardian.co.uk/world/2008/feb/22/zimbabwe)
It fact their inflation or better known as hyper inflation was so great that over ten days difference, the exchange rate of Zimbabwe Dollar, ZWD to 1USD shoot up from $70,000 to $1,000,000 a jump of 14.28%. (Source: Chipo. This is Zimbabwe, 2008. Hyper-inflation, genocide and rock-bottom http://www.sokwanele.com/thisiszimbabwe/archives/2164 )

Image a meal that cost $10,000 just 10 days ago is now $142,800. How can a fixed salary worker of $1,500,000 able to survive with his pay. He will need to worry about the cost of food tomorrow due to the instability of the currency. How can he be able to work in such a stage? Worrying if the day’s work is enough to buy a loaf of bread tomorrow or who will still willing to work at a fixed salary in this situation. Even if the pay is given by per day but they must spend it on food and will not keep it as they are unable to predict the inflation tomorrow. There is no point in saving the money in the bank as the 10 million you have today is not even able to buy an egg tomorrow.

How about firms and companies? In such a situation, workers will not be willing to work with a fixed salary unless they are paying in USD instead of ZWD. Even if there are people who are willing to work but how about the consumers? Are they willing to spend? If the company is providing service instead of goods which are not essential to their daily needs, will the consumer buy it from them? Consumers have only limited cash and the value is depreciating by the days therefore they will not be willing to spend on luxury goods. Firms offering luxury goods and service will get the direct hit. Firms that are in the production sector will also face the challenge. Are they able to calculate their cost and mark up their goods at the right pricing? Too much and the people cannot afford but too low the price, they will not cover for the cost.

The uncertainty of the market will not bring in investors for the country as the investors were unable to predict the rate of investment and returns. With no or less investors, job creation by the market demand will be limited too. It will become a cycle and the nation and its’ people will continue to suffer.
Will anyone or groups or people benefit from such situation? The answer is yes too as those that are in debts will benefit greatly if their debts are in ZWD instead of USD.

But this is temporarily as the overall country is suffering and the cost of living will become higher which will also have impact on this minority that seems to enjoy some benefits at first. On the long run, the whole economy of the country will be in a bad stage and difficult to recover.