Inflation is such a fascinating example of the psychological basis for currency, and how it can crumble. If prices are rising two fold per day, it's obvious that anything earned today will be worthless in a couple of weeks time. Yet people still go through the motions of exchanging something of symbolic 'value', however transient that symbolic value might be. Reading 'One Hundred Trillion Dollars' is comical, and yet these bills are printed despite the fact that the paper and ink expended is going to exceed the symbolic value shortly thereafter.
I'm guess that inflation in Zimbabwe is more a function of the quantity of money and a shortage of goods, mostly food, caused by the collapse of agriculture. I'd guess that the psychological effect is more of a side show. Of course psychology has to factor in, people are constantly trying to predict the value of the their currency and that is the basis for which they have to make all economic decisions. With the government constantly flooding the market with money and where the competition to quickly spend your money before it becomes worth less in an a relatively low output economy (agriculture is devestated, few imports because no one wants to hold the native currency) prices drive up inflation even more than volume of money. Milton Friedman's Money Mischief is a great book about the value of money through history. You can skip the mathy bits, enjoy the yarn and learn a great deal. Somalia had no inflation for a decade of war, which is almost unheard of. The central government had collapsed and no money was printed and out put stayed steady as the government wasn't having a lot to do with output to begin with (large informal sector).
I disagree. I think inflation is an interesting sideshow committed by those in charge of monetary policy so that they can disburse their debts without being accused of reneging on the loans. Take retirement funds, for example. The Fed keeps interest rates at 2%, 3%. The CPI hovers around 3%, 4%. Your pension is appreciating at under 1% (and may actually be depreciating!) but you're still "earning." It's not like they're robbing your retirement fund to buy liquidity; it's entirely up to you whether you choose to pull your savings out of the bank and go play the stock market with it (where yields are much, much higher!). And it's not like the unions are to blame for having a pension fund that they have to disburse at rates under the CPI, while also being allowed to invest in speculative markets. That's just the luck of the draw; monetary policy is never punitive towards retirees! Or take Zimbabwe. What funny money they have! How lackadaisical their hundred trillion dollar bank notes! Never mind that their economy started out crippled from the Rhodesian Civil War, that they've been a vassal of the IMF and World Bank ever since, or that their transactions have been effectively conducted in dollars since 2010 because they've been embargoed from lending practices since 2000. Or that their runaway native currency debt punishes those being paid in native currency (government workers, proletariat) while those being paid in dollars (NGOs, entrepreneurs, criminals) go about their business. The problem is that Zimbabwe's debt is counted in dollars while Argentina's was counted in Pesos. When Argentina had too much debt, their currency spiraled out of control and poof no more debt. So they had a rough ten years, then a great ten years. Zimbabwe, on the other hand, has been under the heel of the WTO since 1980.
do you think something similar might happen to Greece, but with the Euro? The drachma will just become valueless joke currency?their transactions have been effectively conducted in dollars since 2010 because they've been embargoed from lending practices since 2000.
Greece, Italy, Spain and Portugal are on track to go down like Argentina, Brazil, Mexico and Mexico.