From Hyperinflation to Deflation

I have just lived in a hyper-inflationary situation for a few years. A a matter of fact, Zimbabwe has probably been the country with the highest rate of inflation in History. The actual rate is unimportant, when a loaf of bread costs 30 trillion dollars, the problem for the ordinary citizen lies elsewhere. 

When one thinks that it was less than six months ago that the Reserve Bank cut 10, that´s right, ten zeroes off the currency and for a few brief days, the dollar US hovered around 4,500, then things start getting funny. 

Again, not even 2 years ago, the Reserve Bank cut another 3 zeroes off the currency of the time. That is a total of 13 zeroes off, and still a loaf of bread is 30 trillion Zimbabwean dollars.

But the real problem is that the salary of a Teacher, or a Nurse, is also 30 trillion. That is to say their monthly salary doesn´t cover a single loaf of bread. The ZANU-PF solution: you simply make bread unavailable. You can´t find bread in Zimbabwe today.

After that experience, I come back home to Europe and find myself in a deflationary situation. All in a matter of hours! Prices of nearly all goods and services are falling quite sharply, and people are still not buying. Most European governments´ solution: spend their way out of recession and deflation. Wrong choice again! 

As one of my favorite blog writers reminded us all yesterday, Margaret Thatcher once said:  “The problem with Socialism is that you eventually run out of other people’s money”

Today I have to think that something is really very wrong with this world we live in.