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September 1, 2007
Mugabe Hits Rock Bottom and Begins to Dig
With inflation unofficially at 15,000% (the official rate of 7,600% is bad enough), Robert Mugabe continues to plunder what's left of the Zimbabwean economy while visiting untold misery on those who are too poor to have already fled.
Mugabe's latest gambit is to freeze wages for the next 6 months - wages that were already lagging far behind the hyper inflated cost of living.
The freeze follows a decree issued in late June that forced merchants and wholesalers to reduce all prices by at least 50 percent. Swell. Note the economist said as goods "cease to exist" not grow scarce. So even with less money, there's not going to be anything to buy anyway.
Shoppers stripped store shelves of clothes, meat and other basic goods after that decree, and producers have largely failed to ship new stock because goods now sell for less than it costs to make them.
Most commodities are now available only on the black market, where prices have continued to skyrocket. Moreover, as the last remaining stocks of goods trickle out of factory warehouses and onto the market, Zimbabwe could soon see the start of an inflationary spiral that would make today’s prices seem cheap, John Robertson, a Harare economist, said in an interview.
“It could go much higher — 10 times as much for some things in the next couple of weeks, as goods cease to exist,” he said.
Economic activity is as close as a modern country can get to a standstill. What workers that are left are being laid off which means less payroll tax revenue pouring into government coffers - 13 trillion Zimbabwean dollars less which works out to $55 million in real money. This is a considerable sum for a government that can't pay its teachers, or civil servants, or more ominously, the army.
Zimbabwe would be an interesting laboratory to study economic collapses except for one thing; the fear, panic, and real pain being endured by ordinary people is unlike any seen in modern history. For the sake of the Zimbabwean people, let us hope that there is an intervention by either a foreign power like Great Britain (Zimbabwe is a former colony) or perhaps the army whose patience must be wearing thin given the fact that their salaries are not buying much of anything.