In May 2008 I wrote an article about how inflation in Zimbabwe hit 100 000 per cent. Since then, almost 2 years have past and this is what has happened in the mean time.

In November 2008 inflation in Zimbabwe hit 89.7 sextillion percent – that is 89 700 000 000 000 000 000 000%.

To get a rough idea how much that is – a sextillion is a billion trillions.

In addition to the staggering hyperinflation, unemployment in Zimbabwe also went up to 85% and over the third of the people left the country. Check out the pictures below to get an idea how was life in Zimbabwe during the hyperinflation

Pictures of Inflation in Zimbabwe

A boy with 200 000 dollar notes…

At the time this picture was taken – 200 000 dollars of Zimbabwe were about 0.10 US cents.

On December 22nd 2007 a new 500 000 Zimbabwean dollar note was introduced

A few days later the 750 000 dollar note hit the market…

January 2008 – a ten million Zimbabwean dollar note

A man holding 60 million Zimbabwean dollars in January 2008 – about 40 US dollars at the time of taking this picture.

In May 2008 10 million Zimbabwean dollars are worth about 6 US dollars

A boy going to buy groceries

A case with 65 billion dollars… Too bad it is only 2000 US dollars.

A local citizen going to a supermarket. The exchange rate was about 25 million Zimbabwean dollars for $1 US.

See this huge pile of money? Well, it’s only worth about $100

Things keep getting better… well actually worse… A 50 million dollar bill is introduced to the people of Zimbabwe

And a few days later the 250 million dollars from the Reserve Bank of Zimbabwe… Or should we say the local print shop.

Want to but a T-shirt? No problem… 276.5 million dollars please! Compared to the 2.765 billion the trousers are going for, it’s a steal…

May 2008 – a 500 billion Zimbabwean dollar note is introduced. This was also the time where I wrote the blog post about inflation in Zimbabwe. For some reason it was listed under Fun

By this time the hyperinflation was at 100,000%.

I wrote:

June 2008 – 25 billion and 50 billion notes are printed. In the background you can see president of Zimbabwe Robert Mugabe – the mastermind behind the hyperinflation. It all started in the beginning of the 2000s when he decided to confiscate all the land from people with white skin – effectively ending all farming in the country.

A quote from president Mugabe:

“The only white man you can trust is a dead white man”.

July 1st 2008 – a 100 billion dollar bank note is issued

What can you buy with it? Well… it’s not enough for 4 eggs but you can get 3…

I have an idea – lets have a fun evening in the restaurant! (better take the truck for all that money)

Restaurant bill for the evening: 1 billion 243 million 255 thousand dollars and 0 cents.

Too much money to stack under the mattress, too much to carry it all to the bank…

August 2008 – the government of Zimbabwe decided to take 10 zeroes away from each dollar bill.. You know – they just didn’t fit…

Not again??? Despite getting rid of the zeroes, the inflation kept going up… This was the amount just 1 month later you needed to buy 4 tomatoes!

Want some bread? No problem…

Late September – 1 month after losing 10 zeroes from each note of money… the new 20 000 Zimbabwean dollar bill is born!

A couple of weeks later… the new 50 000 dollar bill…

The largest bill in the history of money

As time went on the inflation became unbearable. The government of Zimbabwe had to issue the largest bank note ever in the history of mankind – the one hundred trillion dollar bill.

How the inflation in Zimbabwe ended?

In 2009 the government of Zimbabwe was tired of printing new money (and they were probably out of paper as well) and decided to get rid of the Zimbabwean dollar.

Instead they are currently using the South African rand and the US dollar.

In the beginning of January last year we made a post about what we predicted will happen in 2009.

2009 is now over. Here is a look back to the predictions and how well we did.

1. The dollar will fall 20% or more against the Chinese yuan.

Verdict: WRONG! The Chinese yuan has staid on the same level in regards to the dollar thanks to the Chinese policy of keeping it fixed to the US dollar (+ some other currencies).

2. The price of gold will be up 10% by the end of the year.

Verdict: WRONG! The price of gold is up 23.4% in 2009. This means that jumped well over the 10% we predicted.

3. The price of oil will stay between 40 and 60 dollars for the most of the year and will rise to as high as 75 dollars/barrel by the end of 2009.

Verdict: CORRECT! The price of oil climbed gradually throughout the year but managed to stay in the 40 to 60 dollars range all the way from January to July. The end of the year saw oil prices rise as high as $79.

4. The Dow Jones Industrial Average will be up about 15%.

Verdict: CORRECT! The Dow Jones Industrial Average was up 19% in 2009. That’s close enough!

5. The world economy will not recover from the financial crisis by the end of 2009.

Verdict: CORRECT! Unemployment rates are the highest in decades. The real estate bubble has not bounced back. The economies of the world are still weak.

6. There will not be any more major bank failures. We will possibly see governments taking proactive steps to save banks and other major companies before they are in actual trouble.

Verdict: CORRECT! Following the failings of 3 major banks in 2008 we have not had any major bank fail in 2009. All the large banks and insurance companies have been saved by the government before they went under. There have however been a large number of smaller banks that have failed and that have not been saved that remain mostly unknown to the public.

7. None of the three big US auto companies will fail in 2009.

Verdict: CORRECT! Despite fears in 2008 and the beginning of 2009 – Ford, General Motors and Chrysler are all here!

8. The housing market does not bounce back.

Verdict: CORRECT! The housing market is down and it doesn’t look like it will bounce back any time soon.

9. Inflation in the US rises.

Verdict: WRONG! According to official figures the inflation plummeted from 3.8% in 2008 to 1.8% in 2009. The USA has however changed how it used to calculate inflation. Using the old method it should be around the 10% figure.

10. Obama’s stimulus package passes in his first months in office.

Verdict: CORRECT! The controversial 800 billion dollar stimulus package was passed in February 2010.

11. More bailout money will be needed by large companies.

Verdict: CORRECT! Bank of America received an additional 20 billion dollar loan  in January 2009 in addition to the 25 billion dollars that bailed them out in October 2008.

12. US economy will not come out of recession.

Verdict: FALSE! The 3rd quarter of 2009 was the first quarter in more than a year that saw economic growth in the US. That means that officially the recession is over. In reality however unemployment rates are highest in decades, consumer fears are still rising and people are saying that it is still a recession.

13. There will be an assassination attempt on Barack Obama. If you won’t hear about it, it is because it will be kept secret.

Verdict: CORRECT! Obviously! Could it have been any other way?

14. Apple will launch a smaller version of the iPhone.

Verdict: FALSE! Although we saw the iPhone 3G S, we are still waiting for a smaller and cooler model. Odds are that we will be waiting for a long time…

15. Financial Jesus will end the year with more than 1000 subscribers.

Verdict: FALSE! 2008 started with a whopping 119 subscribers and ended with 469. We were about 500 users too short.

Total Score

9 out of 15. That is pretty decent if you ask me!

“Never make predictions, especially about the future.”
Casey Stengel

One of the worst things you can do is to predict the future. Your predictions will almost always be wrong and you will look like a fool. Looking back – you have no idea how you couldn’t even predict the simplest of things.

Regardless, here are the predictions of Financial Jesus for 2009.

1. The dollar will fall 20% or more against the Chinese yuan.
2. The price of gold will be up 10% by the end of the year, as uncertain investors will be looking to gold for support.
3. The price of oil will stay between 40 and 60 dollars for the most of the year and will rise to as high as 75 dollars per barrel by the end of 2009.
4. The Dow Jones Industrial Average will be up about 15%. If you correlate this with the falling dollar it will actually mean that those investing in the US will actually lose money.
5. The world economy will not recover from the financial crisis by the end of 2009. We will see the making of an economic crisis that has its roots in the credit crunch of 2008.
6. There will not be any more major bank failures. The governments of the world will not let that happen. We will possibly see governments taking proactive steps to save banks and other major companies before they are in actual trouble.
7. None of the three big US auto companies will fail in 2009. They will get enough help to just “hang in there” for a year or possible more – only then will we see a failure among the big three.
8. The housing market does not bounce back. We will see falling prices throughout next year.
9. Inflation in the US rises. Fears of deflation are largely without grounds and are only fueled by the falling real estate prices. Oil and gas will be on the rise and will therefore help to fuel the inflation.
10. Obama’s stimulus package passes in his first months in office but it fails to address the real problems. This is sadly realized only toward the end of 2009.
11. More bailout money will be needed by large companies. The government can’t deny their help because “everyone will already expect them to help”.
12. US economy will not come out of recession.
13. There will be an assassination attempt on Barack Obama. If you won’t hear about it, it is because it will be kept secret. (Yes, I just made sure that at least 1 prediction will become true)
14. Apple will launch a smaller version of the iPhone. Let’s call it the iPhone nano.
15. Financial Jesus will end the year with more than 1000 subscribers.

“My predictions are notably inaccurate.”
Robert Caro

“I figure lots of predictions is best. People will forget the ones I get wrong and marvel over the rest.”
Alan Cox

What are your predictions for the coming year? Let us know in the comments so we can find the best fortune teller when we sum things up in the end of 2009!

Here is a fun and addicting game to all you money loving FinancialJesus.com readers.

In the Fed Chairman Game you are in charge or the national monetary policy of the US.

Your goal is simple – you must adjust the Federal Funds rate in order to keep the inflation and unemployment rate stable. This game makes you realize just how difficult it is to steer the national monetary policy.

It took me at least 10 tries to keep inflation in the target 2% area, while at the same time keeping the unemployment rate at around 5% and finishing the game successfully. See if you can do better.

You can play the Fed Chairman Game here.

What is The Federal Funds Rate?

The Federal Funds rate is the interest rate that Federal Reserve (the central bank of US) uses to lend money to other banks. By changing this interest rate the FED has the ability to control the supply of money in the U.S economy. Among many things this basically gives them the power to control the amount of business done in the US and also the unemployment rate.

Be the first to find out about new fun and educational financial games. Sign up to my full feed RSS or subscribe via email.

You’ve probably heard about rising fears about inflations in the US and pretty much all the countries in the world. Current inflation in USA is about 4%.

How bad can it get?

Meet Zimbabwe

This Southern African country currently boasts inflation over 100,000%. What does this mean?

With inflation at 4% it takes 18 years for money to lose half of its value. By using the rule of 72 we can calculate that with inflation at 100,000% it takes about 6 hours and 20 minutes for your 100 dollars to become $50.

With inflation this high it means that when you leave your shopping for the next day you have effectively lost 93,75% of your money.

Germany in the 1920-s

In 1922 and 1923 Germany went through it’s worse inflation. According to Wikipedia in 1922, its highest denomination was 50,000 Mark. By 1923, the highest denomination was 100,000,000,000,000 Mark. In December of 1923 the exchange rate from marks to US dollars was 4,000,000,000,000:1. During the worst times, one U.S. dollar was equal to 80 billion Mark.

Here are some pictures about living with hyperinflation

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The rule of 72 is an easy and necessary rule for investors and ordinary people alike who wish to know how long will it take for their investment to double.

In order to get to know how long will it take for your investment to double you need to take the interest rate of your investment and divide 72 with it.

For example if the money in your bank account generates 6% interest per year you need to make the fallowing calculation:

72/6= 12 years

This means that when you invest 1000 dollars with an annual interest rate of 6%, it will take 12 years for it to grow to $2000.

The average annual return for the stockmarket in the US has been 12% per annum. Using the 72 rule we get that investing your money with this rate will take (72/12% = 6) 6 years to double.

Current inflation in the US is about 4% a year. By using the 72 rule we get that (72/4=18) it takes 18 years for your money to lose half of its value. Your $100 will buy 50 dollars worth in 18 years.

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Below is a great video of Jim Rogers who is widely know as one of the most successful investors in the world. Among other things he was the guy who helped George Soros start the Quantum Fund which grew 3365% (yes, three thousand) during the first ten years. That’s 42.6% per year for 10 years straight.

This video is spectacular because we have a chance to see what a man who knows more about the economy than most of the people on earth think about what’s going on. Stuff like this rarely gets aired. Enjoy!

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