Wednesday, February 04, 2009

The Psychological Damage of Hyper-Inflation

A very good friend of mine, Jill, recently returned from Harare, Zimbabwe where she had spent six weeks looking after her mother who has suffered a stroke. Not quite the best place to fall ill. It was interesting to hear some of her stories. Unless you are seriously loaded with Forex, there is literally nothing to do. Those good old days of going down to the Postal’s Club at Lake McIIwaine (now Lake Chivero), having great braais and burning petrol by zoom-zoom zooming up and down the lake in high powered speed boats are all long gone days. She says the lake is just one giant cess pit. Then there is the problem with electricity. No power means no TV, DVD, PC and Game consuls. Guess what? She thought it was great. Card and board games along with conversation replaced technology.

Other observations: For all the hardship, waking up in the morning, the sun shining, the garden vibrating with life, was tonic for her soul after London’s hustle and bustle and media doom and gloom shoved down everyone’s gullets. You see, most people there don’t know what is really going on in Zimbabwe. That the situation is bad is obvious, but the majority, not having access to the internet or satellite TV are blissfully unaware that they live in a failed state. They are too busy making ends meet and that brings me to her final and most important observation, for the omens are very bad.

What Mugabe and Co has done is create a population of wheelers and dealers. Business, as we know it, hardly exists. The Zimbabwean currencies insane inflation created a world of unreality as far as the worth, in currency, of goods. As we all know eventually it had to implode. It has, very little is now in Zim dollars. With the semi-authorization of Forex, goods have returned to the shops, but here is the catch. The hyper inflation mentality has crossed over as well. Now Zimbabweans are stealing en-mass from each other. When Jill arrived a tray of 30 eggs cost US$5, when she left, they wanted US$7. She protested vehemently. This wasn’t hyper inflation, this was exploitation and theft. Can you imagine what would happen in the UK or anywhere in the West. ‘There will be blood!’

Coincidently, I came across this letter which was placed on the Zimbabwe Situation website yesterday and it confirms exactly what my friend said. I have reproduced it in its entirety because it is worth reading. It does not bode well for the people of Zimbabwe.

PEOPLE, PEOPLE of Zimbabwe (letter)

Bulawayo Morning Mirror 320

PEOPLE, PEOPLE of Zimbabwe, what are we doing to ourselves? We have gone from the cheapest place in the World to live, to now easily the most expensive place in the World to live, and we have only ourselves to blame. We seem to think that because we have all held out so long here in Zimbabwe, against all odds, that now Zimbabwe and everyone who is left owes us a favour.

The whole country except maybe some poor unfortunate workers who are getting ripped off by their employers, is now operating in foreign currency in one form or another. Since we are now dealing in foreign currency we need to throw away our mindset that we pick up our calculators and start hitting the 0's to calculate what we are now going to pass onto the next person.

In the rest of the world, investors are lucky to get 10% a year on their money, possibly a good business that can rotate its product every month, might achieve close to 100%.

Here everyone who hears that someone , knows someone, that might need something,

adds their 30 or 40% to the commodity before it gets to the person who is finally stupid enough to buy it, and this disease is spreading.

We are even beginning to hurt ourselves across the borders, because some businesses

there are realizing just how stupid us Zimbabweans are at parting with our money, and are increasing their prices there as well. By the time it hits our streets its more than 3 times the value of what it actually costs in SA.. You will also notice, the smallest denomination we use is R10 or USD1, there is a lot of change in between if you put a value to it, in SA , you could get 2 loaves of bread for R10. Silver doesn't exist.

Most people in the country who are trading in one form or another are literally doubling their foreign currency every week or turnaround, that puts their profits into the 1000% in less than a year, its not a wonder that people and businesses outside the country are looking at sending money and commodities on credit to their friends and families still here to sell. They can invest their money much better that way.

I know that I am painting everyone with the same brush here, there are exceptions, but

they are few are far between, and to them I apologize, but we need to all pull together to stop this rot. Its time that Import Parity and competition stepped in, be realistic, it is real money we are now dealing with no longer the useless paper that we have had in the past. The value does not change overnight like it used to, as with our Zim dollar which could triple overnight, it is the same real money that our friends and neighbours have been using next door for years, and it hardly moves.

Another thing while I am about it, guys stop being so quick to flick between US and Rand. When you are charging for labour you are inclined to charge in US, because it gives the impression that it is 10 times less than Rand. I personally had a 7 minute mechanical job done for me the other day, and it cost USD 50, hey that is R500. This is more than a Brain Surgeon charges for a 15 minute consultation, and the job was done by a spanner boy. Yes, I'm guilty I was part of the rot, but the job had been done, and I was stupid enough not to get a quote before hand, so I paid.

What about bribing to get things done, I know its a schlep, and we all do it, but lets all try not to wherever possible. You may be interested to know that it works, I took a personal stand the other day, when I was caught talking on a cell phone whilst driving. I had to go to court, because I refused to pay a bribe.

2 weeks later I appeared in court, where once again I was given the option by the Court Officials and the Policemen to pay R300 and my problem would disappear, I can tell you that by then because of the time wasting, I was ready to, but I did not. After about 3 hrs, I stood before the magistrate and was given a Z$ 20 fine ( worth about R,0001 ) at the time, or an option to do 10 days in Jail. I naturally opted for the fine, but felt like asking if the food was free for the 10 days because it might have been an option! Someone in the Fines office did benefit because the smallest note that was in circulation at the time was about $1000, and I did not wait for my change.

Guys it can be done, Its not the Government or the Fat Cats we can blame here anymore, it’s ourselves, we are making our own Fat Cats, lets all try to stop this rot, if someone is ripping it, tell them, and if its you, stop it, even if we have to embarrass each other in public, lets do so, so that we can get back to some sort of normality and at least get value for our hard earned foreign currency.

The most adaptable people in the world us Zimbabweans have managed to survive against all sorts of odds, to get to this stage, and everyone out there is cheering us on and ready to support us, as has been evident with the fantastic support of our old folk, in these dying moments, lets not lose sight of the bigger picture, by stabbing ourselves in the back.

Graham Jardine

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