Sunday, January 25, 2009

Big numbers

via, this interview with Zimbabwe's central banker:
In November you shut down Zimbabwe's stock exchange. Will you open it again?
The stockbrokers were creating a money supply that wasn't there. I printed Z$1.5 quadrillion, but the exchange was operating with Z$100 sextillion. So I said, "Who is doing my job?" Unless there is more discipline and honor, the exchange will stay closed. I can't be bothered. I don't know when it'll open. It's a free market, a business which must be allowed to succeed or fail.
But it gets better, as they attempt to outdo astronomy in the orders of magnitude department:
In the absence of credible official statistics, Hanke developed a hyperinflation index for Zimbabwe and in an article in the December 2008 issue of the financial magazine, Forbes Asia, put the annual inflation rate at around 6.5 quindecillion novemdecillion percent - 65 followed by 107 zeros. "Prices double every 24.7 hours," he noted. "Shops have simply stopped accepting Zimbabwean dollars."
I don't believe I've ever seen the words "quindecillion" or "novemdecillion" used before, certainly not concatenated. Whether this number actually means anything in the context of economic reality is another thing -- it's about 2^365, so was probably calculated on the questionable assumption that prices can continue to double every day for a year. It seems that people would just stop using the currency long before then, and indeed they are starting to, but on the other hand the government just issued a Z$ 100 trillion banknote, which will probably be available on eBay for US$10 in a few months.

[Update: I'm not the first to notice that economics far outstrips the natural sciences in the size of the exponents it can generate:

There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.

-Richard Feynman, physicist, Nobel laureate (1918-1988)



TGGP said...

Like Carter van Carter I've come to reflect on Zimbabwe a lot when I hear certain ideas. At Mondoweiss, for instance, though I should be predisposed to be more receptive.

mtraven said...

You are probably drawing the wrong lessons then.

It's not like white-ruled countries have ever experienced evil rulers or hyperinflation.

mtraven said...
This comment has been removed by the author.
TGGP said...

I don't think I ever claimed they hadn't, though I will say that the Weimar government looks quite good in comparison to Mugabe.

Neutrino Cannon said...

As I understand it, shop stores are usually empty, and the few purchases still conducted are with rand or US dollars. As early as 2006 there were reports that barter was becoming important. The absurd hyperinflation of the native currency is primarily of academic interest, it having long since exceeded a meaningful level.

As for Mugabe, the world should have known he was a thug in 1988. Pundits are free to debate whether this remarkable oversight occurred because the man was once a media darling or because nobody actually gives a damn about Africa.

Michael said...

Weimar Germany and Rhodesia/Zimbabwe had in common the removal of pre-existing authorities and a sudden introduction of universal-franchise democracy to peoples having little or no experience with self-government.

On the specific point of hyperinflation, however, in 1920s Germany, debasement of the currency was an understandable, if diastrous, consequence of the stringent Allied demands for the payment of war reparations. What is Mugabe's excuse?

Anonymous said...

Weimar hyperinflated on purpose to screw the Allies. Zimbabwe hyperinflated out of corruption and incompetence.