Want to hear about inflation?

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Guysanto
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Want to hear about inflation?

Post by Guysanto » Fri Jul 18, 2008 2:26 am

What comes after a trillion?

Inflation in Zimbabwe is 9m%, a Z$50bn note is worth just 17p - the cost of a single egg - and there is more than 80% unemployment. How are ordinary people coping with this disastrous economic meltdown?

Chris McGreal reports
The Guardian, Friday July 18, 2008

They call them the "walking clubs", and Grace Sibanda is an involuntary member. Each working day, the 36-year-old shop assistant rises before dawn in Dzivaresekwa township to the west of Harare, slips out of her tiny home without waking the three children who share her bed, and makes her way to the clusters of people gathered at the roadside. When there are enough of them - a few dozen usually - they set off on the three-hour walk to work in the city centre.

"We are lucky to have jobs but the bus fare in one day is more than I earn in a week. So we walk," she says. "We walk together because it's not safe. They wait in the bushes by the road and attack you if you are alone. They don't want money. We don't have any. They want my food." Sibanda holds up a plastic bag with her lunch of fruit and vegetables. Bread long ago became an unaffordable luxury.

"No one believes what has happened to our country. Now we talk of prices in billions of [Zimbabwe] dollars and people are asking what comes after trillions. They laugh about it but we know it's not funny. People are dying. I wonder how long I will be able to feed my children."

Around Harare, in the dark of the cold winter mornings, the walking clubs can be found setting off. But the numbers have been falling as jobs disappear under the barrage of hyperinflation - currently estimated to be about 9m% but predicted to hit 100m% within three months - and a currency devaluing so fast that banknotes issued just a few months ago are now not worth enough to buy a single sheet of toilet paper.

That is, if toilet paper could even be found in the empty supermarkets. Zimbabwe's economic and political crisis has wormed its way in to almost every aspect of everyday life as people spend their days struggling with intermittent power supplies and water shortages, or waiting hours in queues for bread or cash. Many schools and hospitals barely function as teachers and nurses flee to South Africa in search of a salary that can feed their families back home. And deep in some rural areas, Zimbabweans are saying that starvation is taking hold for the first time in living memory.

Zimbabweans used to feel sorry for their war-blighted neighbours in Mozambique, who were forced to cross the border to buy the most basic goods. Now queues of Zimbabweans, black and white, line up at the checkout tills in Chomoio, across the Mozambican frontier, loaded down with bread, flour and tinned foods because the supermarkets at home are all but empty.

Zimbabweans also used to laugh at Zambia's currency, the kwacha, as Monopoly money. Nowadays, in Victoria Falls on their own side of the border, Zimbabweans are using kwacha as a hard currency, while the Zimbabwean dollar loses half its value every few days.

In August 2006, Zimbabwe's central bank issued a one cent note. In May this year, it issued a $50bn note. At the time it was worth about £2; now it is just 17p, and that won't be for long. Meanwhile, an advert in yesterday's Harare Herald newspaper trumpeted that this week's Lotto bonanza is "$1.2 quadrillion" in prizes (£2,100, and not for long either).

Inflation means hourly price rises while wages - for those lucky enough to have a job in a country with more than 80% unemployment and industry virtually at a standstill - lag far behind. Sibanda earned $150bn last month. Police officers and teachers made about the same. At the time, it was enough to buy 20 eggs or about 10kg of maize on the black market.

Increasingly people are getting by on one meal a day and praying that they don't get sick. Few can afford to go to hospital. In any case, they rarely have drugs or staff, as so many of the doctors and nurses have fled abroad in search of a living.

In one of Harare's upmarket suburbs, Ishmael Dube is having to sell off the trappings of his life, despite a long history of close association with President Robert Mugabe's government. Testament to this are the two government-issued identity cards carried by the warm, if pensive, 60-year-old. One says he is a "Liberation War Hero". Dube took up arms against white rule in 1966 at the age of 18. He was captured by the Rhodesian army a year later and served 15 years in jail as a "terrorist". The other says he is a former staff member of Mugabe's presidential office. After independence in 1980, Dube became an intelligence officer on Mugabe's staff and then went on to a diplomatic career, serving in Europe and Washington. He retired a decade ago and lived comfortably enough on two pensions. No more. This month his war veteran's pension brought him $109bn (currently worth about 37p) and the other, for his government service, $130bn (46p).

With that he is expected to feed his wife and seven daughters. He also has to pay for four of his daughters to go to university, two to go to primary school and the seventh to board at a secondary school. "I can buy a bucket of maize with my pensions. That keeps us going for about five days. So how can we survive?" he asks. Dube is doing what so many Zimbabweans - from the once well-off to the poor - have to do these days: hawking his possessions piecemeal.

Dube retired as a diplomat owning two cars. He brought three television sets back from Washington. In the 90s, like many in Zimbabwe's rising black middle class, he accumulated the goods and chattels that flow from a comfortable income. Now most of them are gone.

"I've sold the two cars to pay for the girls to go to university. First one car two years ago, then the other. I don't have a vehicle any more. Then I've been selecting certain household items to sell. I used to have three TV sets. I sold two. I sold the washing machine. Last month I sold my radio stereo to another parent at my daughter's school, Queen Elizabeth, for $1trn," he said.

"I owe the school $1.2trn in fees but I had to use some of the money to buy food so I'm trying to negotiate with them to pay $500bn monthly." But the school wants the money now because at 9m% inflation it is virtually worthless in a month.

Dube at least has something to sell. Retired people across Zimbabwe have seen their pensions wiped out by inflation and increasing numbers live on handouts from organisations such as Save Our Ageing Pensioners. Sometimes the elderly looked after by local women paid a comparative fortune - £75 a month - by relatives abroad. Mugabe calls them BBCs: British Bum Cleaners.

Dube wants to meet in the Wimpy at what had been one of Harare's most upmarket shopping malls, the Westgate complex. It was built with South African money a decade ago and attracted boutiques and bookshops. Most are closed now. Dube wants to order chips but the waitress says there aren't any. No hamburgers, either, despite the luridly coloured menu on the table offering the usual meat-filled buns. Instead she lays down a worn photocopy of typed offerings. The list includes pig's trotters and knuckle bones at $90bn a dish.

"A lot of us have been diagnosed with high blood pressure," says Dube. "It's not surprising. We've been relying on beer for stress management - a drink or two a night. But beer last week was $10bn a quart. This week it was $20bn on Monday (July 7). On Wednesday it was $40bn and now it is $60bn. So this thing we have been using as stress management is beyond our reach. That is very bad." By yesterday, beer was $150bn a quart.

Many people, Dube says, have found themselves forced to become black market traders. "More or less every family finds it imperative to have a vendor," he says. Walking long distances into the countryside to buy food to resell in the towns is one way of trading. People used to be too scared to disobey the law requiring maize growers to sell their crops to the state-run Grain Marketing Board at a predetermined price, but these days hunger often overcomes fear.

"The maize is coming in to the city direct from the few farms able to harvest," says Dube. "You see people on the roads. They walk 30km carrying 50kg of maize. They buy it at $30bn and sell it at $250bn. A lot of people are doing that. Not only maize but beans and vegetables."

Sibanda's mother is among them. The shop assistant cannot survive on her pay alone so she gives it to her mother who travels back to her rural village to buy vegetables. She brings them back to the city and sells them, along with cooking oil by the cup, on a stall she has set up on a few planks of wood and bricks in Dzivaresekwa.

"We make more money from selling the vegetables than I earn but I don't want to give up my job - I may never get another one," Sibanda says. "My money used to be enough to pay for everything - food, clothes, school. We could afford to take bus trips to places. Now we don't go anywhere we can't walk."

Even for those with money, shopping is a logistical nightmare. The first problem is to get hold of cash. The central bank cannot print it fast enough to keep up with demand. But neither does anyone want to hold on to it very long when prices are rising by the hour. So there is a merry-go-round of cash in which people queue for hours to draw their allotted $100bn (36p) limit from the bank each day but then spend it as fast as possible before it loses what little value it has. It is still possible to write a cheque, but shops demand that they are made out for twice as much as the bill, because cheques lose half their value while clearing.

Zimbabwe has a fairly advanced electronic banking system so it is possible to bypass the cash shortage by using a debit card. But the limits on individual transactions mean a basket full of groceries requires the card to be swiped dozens of times to pay the bill. Some supermarkets have staff standing full-time at the card machines and queues of customers lining up to pay.

Other supermarkets have no such problem because they have nothing to sell. Smaller shops with government connections, such as Spar, import many of their goods from South Africa and sell them well above the price-controlled rate. But the larger chains - such as TM and OK - are closely watched by the authorities and can no longer afford to sell at official prices that are a fraction of the real cost. Their shelves are bare except for locally produced vegetables and cleaning fluids. Even the baked beans factory has closed down. Last week, the government accused both chains of conspiring to make "regime change" by starving people, and ordered them to stock their shelves or face their businesses being seized. When the owners protested that they could not afford to import goods that they were then only permitted to sell at prices substantially below cost, officials said that unless the shelves were filled within a week the state would take over.

Those with hard currency - South African rand or US dollars - are increasingly drawn to underground supermarkets set up in warehouses. Shopping is by appointment, and customers are screened to ensure they won't blow the whistle. It is a criminal offence to accept foreign currency in payment but in recent weeks some businesses have thrown caution to the wind. Restaurants even price in what they call "units", a euphemism for US dollars. Petrol at garages can be bought only with US dollars after drastic fuel shortages forced the government to accept that was the only way Shell and BP would bring it into the country. And increasingly, rents and salaries in private firms are pegged to the American dollar.

Much of the foreign currency comes from the 4 million Zimbabweans - one-third of the population - who have gone abroad for work. Most are in South Africa but some estimates say there are 1 million in Britain. The cash they send back to their families has now replaced tobacco as Zimbabwe's single largest source of foreign earnings.

These foreign remittances mean there are enough people with money to buy what Dube has to sell. "There are people who refurbish cars and sell them to people with relatives overseas who have money to send back. They are in the UK or South Africa. They get money from the sons and daughters. They even buy houses," he says. Zimbabwe's property market is buoyant because exiles are buying up houses in Harare from people desperate for foreign currency. There is also a form of vulture capitalism, with foreign investors realising that industrial property can be snapped up for far below its real value.

The collapse of their country is all the more shocking for many Zimbabweans because it has been so sudden. Nigeria, and what was then Zaire under the tutelage of Mobutu Sese Seko, slid into decay over three decades as their wealth was diverted to the pockets of an elite indifferent to the plight of those they ruled. Infrastructure, education, health care and jobs crumbled away. In parts of Zaire, the only people who had ever seen a car were the elderly. Zimbabwe, by contrast, was on the up. Its education system was arguably the best in Africa, a growing black middle class took root and aspirations flourished, sometimes being realised.

The remnants of those times are still here. The ballet performs and Harare sports club continues with cricket on Saturday afternoon. The horses at Borrowdale race course compete for $100trn prize money (value on the day, £500) in the Air Zimbabwe Handicap and Republic Cup. At first glance, little seems to have changed: the jockeys parade in colours, a smartly turned out army band strikes up between races. But the signs of erosion are everywhere. The dress code in the owners' bar has fallen away. Entry is open to anyone with enough money for a beer, US dollars welcome. The minimum bet is Z$20bn.

After the races, punters return to homes with no power and water. Some Harare suburbs haven't had water in three months. Swimming pools are now personal reservoirs.

There is every sign the situation will get worse. Food has been in even shorter supply since the government banned foreign aid organisations from working in rural areas - a move that appeared to be an attempt to keep outside witnesses away from Zanu-PF's campaign of terror against the voters in this year's elections. Now people are beginning to starve.

The UN's Food and Agriculture Organisation estimates that Zimbabwe will this year produce only about a quarter of the grain it needs to feed its people. The numbers being treated for malnutrition in hospitals have doubled in recent months. About 5 million people are expected to need food aid.

Yet so far, there has not been any of the popular protest - either against the economic crisis or the stolen election - that has hit other African countries at such times, most recently in Kenya. "A lot of people regard Zimbabweans as docile," says Dube. "But there's docility based on intelligence that says if there's a chance to survive there is no point in risking your life. But people have their backs against the wall and they are wondering if they can survive.

"It's firefighting. Us and them: ordinary people and the government. No one has a plan. We're all just firefighting to get through each day".

guardian.co.uk © Guardian News and Media Limited 2008

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Guysanto
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How many zeros in your wallet?

Post by Guysanto » Wed Jul 23, 2008 6:37 am

Zimbabweans play the zero game

By Kathyrn Westcott
BBC News

Quadrillion, quintillion, sextillion - crazy numbers with lots of zeros, that independent Zimbabwean economist John Robertson found himself chewing over with colleagues in the capital Harare this week.

The financial throes of the country are now so severe, that some people are seeking a new language to understand it.

On Monday, the Zimbabwe government introduced the 100 billion Zimbabwe dollar note (for the uninitiated, a billion is nine zeros).

The counting of zeros had already become a nightmare for bankers and shoppers before the introduction of the new note - which at the time of writing would buy about two loaves of bread.

So far this year, the country ravaged by hyperinflation has been forced to print 100-million, 250-million and 500-million notes in rapid succession. All of them are now almost worthless.

It has become common now for Zimbabweans to talk of their daily expenses in trillions (one trillion is 12 zeros).

When John Robertson pinned a chart to the wall of office naming numbers up to twice as long, he says he "raised a bit of a laugh" from his colleagues.

But for many officials and accountants, a quadrillion - a million billion - is the number of the day.

Code: Select all

BIG NUMBERS
Quadrillion: 15 zeros
Quintillion: 18 zeros
Sextillion: 21 zeros
Septillion 24 zeros
This formulation is from the widely-used US system
Only last week, the Harare Herald advertised the Lotto bonanza prize being offered was 1.2 quadrillion Zimbabwean dollars. At the time, that was equivalent to around 4,000 US dollars.

So how do Zimbabweans deal with such astronomical numbers?

"I actually Googled what comes after trillion about a month ago, and sent that out to all my friends so they'd be prepared," says 28-year-old Esther, a Harare resident who writes a regular diary for the BBC.

Day-to-day transactions for ordinary people have not reached the quadrillion stage, she says, but even trillions present difficulties.

"What is confusing is counting of the figures on your cheques as you try to make sure you are not under or over paying someone, or the struggling to read price tags in shops that have not yet knocked off zeros and so on," she says.

This practice - knocking off zeros - is the most common way of preserving sanity.

Most calculators simply cannot show enough digits.

Tills throughout the country have been struggling to cope, as have banking computers, and accounting systems.

As a result, the banks recently agreed to lop six zeros off transactions and documentation.

Economist John Robertson predicts that within a month they will be forced to drop another three.

The other main technique for keeping zeros under control, is to think in terms of a hard currency - in this case, US dollars.

It would be against the law to advertise your house in US dollars, Mr Robertson says, but in practice this is the currency used for big purchases.

"Nothing would be written down and on the day of exchange, that figure would either be paid in US dollars, or converted into Zimbabwe dollars. Then you would be talking big numbers - which will take a bit of getting used to."

While Zimbabwe is the only country suffering from currently suffering from hyperinflation its economic woes are not unprecedented.

History has shown that in countries experiencing hyperinflation - characterised by a monthly inflation of more than 50% - the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless.

In Yugoslavia, for example, the rate of inflation was five quadrillion per cent between October 1993 and January 1994. The government was forced to issue a 500 billion dinar note in 1993.

In Germany after World War I, prices were doubling about every two days and workers were paid daily or more often with bundles of cash. The highest value banknote issued by the Reichsbank had a face value of 100 trillion marks.

Marcus du Sautoy, professor of mathematics at the University of Oxford, says in general people are very bad at assessing numbers of this size.

"Beyond a million it all becomes a blur," he says.

"People are really looking for the ratio of one product to another, and then it's irrelevant how many zeros there are at the end of the number," he says.

If shops and banks don't drop the zeros, it's done instead by the human brain.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/a ... 516874.stm

Published: 2008/07/23 08:20:12 GMT

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