Sunday School: Hyperinflation in Zimbabwe Part 2

by wisdomhunt

Last week I told you about the hyperinflation Zimbabwe experienced that was so severe prices were doubling every 24 hours.

So how did Zimbabwe get to that point?

In one sentence: the citizens of Zimbabwe lost faith in their currency.

This didn’t just happen on a whim. It was a stepped process:

1. government spending increased

2. the government used debt to finance the increased spending

3. the government printed money to pay off the debt

4. the people lost faith in their currency

But once step 4 was hit, there was no turning back as people dumped their Zim Dollars as fast as they could for hard assets and commodities. The government was forced to continually increase the printing of Zim Dollars to keep pace, until you had this:

Next week I will explain why this will never happen in the United States of America.