Commentary

Inflation Inferno Roared Away until Mid-November 2008

Sir, Andrew England’s otherwise edifying reportage in “Mugabe undaunted” (Analysis, August 16) contains errors of omission and commission, when he brushes up against the topic of Zimbabwe’s hyperinflation — the second highest in world history.

Mr England asserts that, in 2008, “inflation had become incalculable, with an official figure in July that year putting it at 231m per cent.”

First, the error of commission: in 2008, calculations of implied inflation rates were being made in every shop in Harare, on a real-time basis — as is always the case during hyperinflations. Indeed, everyone in Zimbabwe was keeping their eye on the black-market Zimbabwe dollar/US dollar exchange rate, knowing that local prices in Zimbabwe dollars were rising tick-for-tick as the Zimbabwe dollar lost value against the greenback.

In addition, Alex Kwok and I were making objective and reliable calculations of inflation on a weekly basis. Among other things, this gets to the error of omission. Yes, Zimbabwe stopped producing inflation numbers in July 2008, as Mr England states. But the hyperinflation inferno kept roaring away until mid-November 2008 (See S H Hanke and A K F Kwok “On the Measurement of Zimbabwe’s Hyperinflation.” Cato Journal, Spring/Summer 2009).

On November 14 2008, Zimbabwe’s hyperinflation peaked at a year-over-year rate of 89.7 sextillion per cent — that’s roughly 9 followed by 22 zeros. At that rate, prices were doubling every 24.7 hours. While this is still below Hungary’s July 1946 world record hyperinflation, in which prices were doubling every 15 hours, Zimbabwe’s mid-November peak rate was still 30m times higher than the last official inflation statistic produced by the government, and reported by Mr England.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C.