Asymmetrical Information

Political collapse in Zimbabwe? Faster, please.

...and Mandela and Castro will continue to prop up Mugabe.

I'm sure Soros has a hand in this too...

MPH: What kind of cash can Castro and Mandela bring to the table? Because just spewing niceties won't keep Mugabe in power, though cold hard cash may. Or he could go the North Korean route, I suppose, but then Castro's and Mandela's support would still be irrelevant.

Soros could spare the cash, if he wanted to, but I doubt he'd throw his money down that hole (no matter what kind of money wastage he does in the U.S.)

South Africa is Mugabe's main foreign benefactor. The relationship is getting strained, however, because South Africa is getting a big influx of impoverished refugees from Zimbabwe. These refugees are the real losers, not the white farmers who've had their land confiscated in Zimbabwe - many of them have moved to Mozambique, where the government has welcomed them and made land available.

According to the same source:Second on a list put together from various international inflation sites is Iraq at 40 percent.

Well, I hear there's a war going on in Iraq, so that's never great for an economy.

By my admittedly simplified math, at 40% inflation, a loaf of the Pepperidge Farm bread I like to buy would cost about $6 in two years. Very bad. At 782% it would cost about $200 in two years. Much worse. "At levels like that, the financial system essentially ceases functioning."

Classic store sign in South America during the hyperinflationary 1980s: "Closed for lack of prices."

Consumer Prices Mostly Flat in February

How does this figure in..

One big difference between Iraq and Zimbabwe is that Iraq is still in the middle of an "insurgent" war in parts of the country whereas Zimbabwe doesn't really have any excuses. Another difference is that inflation in Iraq is high but not insane (even at the more conservative estimates of inflation in Zimbabwe, 247% per year, Iraq's inflation is 1/6th of Zimbabwe's, at 782% it's 1/20th). And the most important difference is that Iraq's economy grew at a real growth rate, adjusted for inflation, of 2.4% last year, which is very healthy, while Zimbabwe's economy "grew" at a real growth rate of negative 4%, which is not healthy at all.

With a growth rate of -4% per year, an economy has a "half-life" of about 17 years. Super-high inflation (>100% per year) and substantial negative growth has been a trend in Zimbabwe for the past several years, it doesn't take a genius to spot a trend or to see where that country is headed (collapse). This hyper-inflation may be the first indication that such a collapse is going to happen "real soon now".

It is, or used to be, an economic rule of thumb that sustained inflation in excess of 20% meant that the government in question was almost certain to fall. It's not because high inflation is so destructive to a country, however; the reason is actually that only a collapsing government is likely to have such high inflation for a sustained period.

I used to know an American who lived for many years in a Latin American country often plagued by high inflation (he lived in the local economy, not in an expatriate bubble). He said the common practice at such times was to spend every bit of money you made right away for tangible resources that could be bartered.

I lived in Russia during the great inflation of the early 90s. 2,000, 3,000 % per year for a couple of years. Fortunately, in an expat bubble.
Zimbabawe is worse of course. Shades of Weimar, wheelbarrows needed to carry enough money for a loaf of bread.

Jonothan Moyo, the former Minster of Information who masterminded the country's most repressive media legislation, once commented that the economy was mugabe's biggest enemy. In the absence of a viable opposition party that certainly seems to be the case now, and Zimbabweans keep hoping with the next wave of inflation, or surge in black market forex rates that, 'this is it, political change is about to happen'. It never does though - and if it did, who would step in to take over? The opposition is in a total mess.

You'd think with inflation at a humiliating ~1000% that the government would be taking measures to address it. Instead, despite the failures of their agricultural policies, they seem to be heading towards doing the same with mining. Very hard to know what's going on in their heads.

As for needing 'wheelbarrows to carry money' (previous comment), we don't actually have 'money' anymore. We're using what the government calls 'bearer-cheques' - paper-stuff, because the government can no longer afford to print money.

Very hard to explain life here. It's totally surreal.

MPH wrote:

"...and Mandela and Castro will continue to prop up Mugabe."

Note to MPH: Mandela hasn't been President of South Africa since 1999.

From the Namibian:

Monday, May 8, 2000

Mandela expresses anger at Mugabe

CAPE TOWN - Former South African President Nelson Mandela has slammed Zimbabwean President Robert Mugabe, labelling him a tyrant who has held on to power for too long."

Either you're clueless, or just making sh*t up.

Well, MPH seems to think that George Soros of Open Society Institute fame would back Mugabe, so I'll go with a little from column A, a little from column B.

Second on a list put together from various international inflation sites is Iraq at 40 percent.

Which has a war, plus a host of other effects from recent sanctions being lifted, price controls being lifted or relaxed in some areas (the "inflation" from relaxing even slightly the gas subsidy/price ceiling is very high), and all sorts of other things.

Zimbabwe has very few excuses other than Mugabe's insanity.

Ahhh, Ramtha.

Regarding South Africa:

"Mbeki is seen as one of Zimbabwean President Robert Mugabe's main foreign allies. He has relied on quiet diplomacy rather than open criticism to try to encourage Mugabe to embrace political and economic reforms, but to little avail."

If anyone will step in, China will be the Sugar Daddy. There is some oil there, and China has been very friendly to Mugabe in order to get preferential rights to it.

If anyone will step in, China will be the Sugar Daddy. There is some oil there, and China has been very friendly to Mugabe in order to get preferential rights to it.

The relationship between South Africa and Zimbabwe is fairly complex. A lot of it has to do with the fact that support from Zimbabwe was instrumental to the ANC during its darkest years.

Sort of like your mentor gradually going mad. You really want to avoid denouncing him, even if you think he's doing the wrong thing.

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