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Text book question on hyperinflation answered

WHEN you see a headline like “Inflation set to tumble”’ in a local newspaper, you cannot resist the urge to buy it especially when you are living in an economy whose official rate of inflation is above the dreaded 1 000% mark.

After some minutes of fight

ing my conscience I eventually bought the Sunday Mail of May 14 with the faintest hope that for once I would read about a real solution to our problems.

As a marketer, I understand very much how cognitive dissonance works out with customers and have always tried my best to avoid putting my customers in such situations.

Unfortunately, it was me who had  to bear the brunt and cursed myself all the way back home.

I don’t know if I will buy the paper again but thank God, the dissonance I got led me to my library where I found myself flipping through the pages of an economics text book entitled Positive Economics by R Lipsey and A Christal 8th edition of 1995.

I am not about to share with you those text book kind of economics which Uncle Bob and our dear Reserve Bank governor threw away some years back when the rate of inflation was still in the double digits, but some historical analysis of what happened to other countries that went through hyperinflations like us may be useful.

Here is a paragraph from page 792 of the book: “There are a dozen documented hyperinflations in world history. 

Every one of these hyperinflations was accompanied by great increases in the money supply; new money was printed to give governments the purchasing power that they could not or would not obtain by taxation.
“Further, every one occurred in the midst of a major political upheaval in which grave doubts existed about the stability and the future of the government itself.

“Is hyperinflation likely in the absence of civil war, revolution, or collapse of the government?”

I seriously took note of the last question to the extent that left me thinking; there might not be a civil war, a revolution or a collapse of the Zanu PF government, but will there be a solution so long as current policies remain in place?

Ndingi J Mutarauswa

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