The stock market fell 99.95% in the past 20 days: what economic tragedy happened in this country?

Correct Answer Station

2024-04-25 15:24Posted in Anhui Finance and Economics Creator

If there is one of the world's most astonishing evaporations of wealth this year, it must be the Zimbabwe stock market.

How weird is it?

Straight down 99.95%.

In fact, to be precise, they have basically fallen since April this year.

Think about it, if you have 1 million in the stock market at the beginning of April, and you end up with only 500 yuan left in 20 days......

"Evaporation" cannot be used to describe the speed at which such wealth is disappearing.

Zimbabwe's stock market index trend so far this year

The immediate cause is the issuance of a new generation of banknotes in Zimbabwe.

When it comes to Zimbabwe's currency, it's nothing short of a spectacle in human history:

In the 44 years since the founding of the People's Republic of China, 5 generations of currency have been abolished, and the shortest-lived generation has only taken more than 2 months!

This time, we are going to engage in the 6th generation currency.

Behind this madness is the great collapse of Zimbabwe's entire national governance.

There is also the rampant inflation.

But who would have thought that just twenty or thirty years ago, Zimbabwe was still the "Pearl of Africa" and a relatively developed country.

Now, it is a veritable failed state!

What the hell is going on?

Currency is an important symbol of national sovereignty.

But Zimbabwe's history of demonetization is completely like throwing paper.

Jaw-dropping.

Let's start with a brief recap.

Zimbabwe officially became independent from British colony on April 18, 1980, and began printing its own banknotes.

First generation: In 1980, Zimbabwe issued the Zimbabwean dollar (abbreviated as ZWD). This is by far the longest-lived Zimbabwean currency.

Second generation: On 1 August 2006, Zimbabwe issued a new currency. This generation, it took 2 years.

Third generation: On August 1, 2008, Zimbabwe issued the third generation of Zimbabwe (abbreviation: ZWR), which took 6 months.

Zimbabwean banknotes

Fourth Generation: On 2 February 2009, Zimbabwe issued a fourth generation currency. On April 12, 2009, the Zimbabwean government decided to formally suspend the use of the Zimbabwean dollar for the next year, however, the fourth generation of the Zimbabwean dollar has actually stopped circulating in the market, and the lifespan of this generation of currency is only about two months, which is pitifully short.

In fact, since 2008, foreign currencies such as the US dollar and the South African rand have been widely used in the Zimbabwean market.

After the abolition of the fourth generation of Zimbabwe, Zimbabwe effectively has no credible national currency.

Fifth generation: On February 20, 2019, that is, 10 years later, Zimbabwe launched a new generation of Zimbabwe, called: Instant Total Settlement Dollar (ZWL).

This time, barely lasted 5 years.

Sixth generation: On April 5 this year, Zimbabwe announced the launch of a new currency: Zimbabwe Gold Currency (ZiG).

The most direct reason for Zimbabwe's change of currency like a change of face is:

Inflation, like a poisonous snake, bites Zimbabwe.

The denomination of banknotes can no longer keep up with the rising prices, and there is not enough money, so you can only print money with a larger denomination.

After 2000, inflation in Zimbabwe soared.

Zimbabwe's inflation rate was 112.1 per cent in 2001, which is not surprising in Africa.

In 2002, it soared to 198.93 per cent, 598.75 per cent in 2003 and 132.75 per cent in 2004.

It began to accelerate in 2005, when the inflation rate was 585.84%, 1281.11% in 2006, 66212.3% in 2007, and 2200000% in 2008......

Trends in the inflation rate in Zimbabwe

Reflected in real life, it is the money that has become hairy (currency depreciation).

Take the exchange rate, for example.

In the early days of Zimbabwe's founding, the Zimbabwe dollar was still very strong, and it could even reach 0.68 Zimbabwe dollars to 1 US dollar at its peak.

But by the beginning of 2008, it had become 5,300 Zimbaba that could be exchanged for 1 dollar, and in just eight months, by August 2008, the ratio of Zimbabween to the US dollar had increased sharply to 120 billion:1.

The most exaggerated thing is that on February 2, 2009, 1 US dollar could be exchanged for 300 trillion (3 followed by 14 0) Jinyuan!

In order to keep up with skyrocketing prices, Zimbabwe's currency is getting bigger and bigger.

The maximum denomination of the first generation was 1,000 Jinwon, and by the second generation, the maximum denomination reached 500 million Jinwon.

In the third generation, the maximum denomination is 100 trillion jinyuan......

During this period, the local method of exchanging the old and new currencies was also simple and crude: for example, the fourth-generation Zimbabwean banknote directly erased the 12 zeros, that is, the 1 trillion Zimbabwean dollars of the third generation is equal to 1 yuan of the fourth-generation Zimbabwean dollars.

All Zimbabweans, who were "billionaires" one moment, are veritable beggars the next.

There are too many zeros on Zimbabwean banknotes to count

Behind these boring figures is the daily miserable life of more than 16 million ordinary Zimbabweans.

It costs 50 million to eat a sausage sandwich and 260 million to buy a bag of potatoes......

Ten years ago, 500,000 could buy a house, and ten years later you can't buy anything.

At the craziest time, Zimbabweans could only buy half a loaf of bread with the largest denomination of 100 trillion Zimbabweans.

Just like in the picture at the beginning of the article, Zimbabweans need to take a small cart to load a cart of money to buy a random daily necessities.

Prices are rising all the time.

Even, people don't dare to swipe the card to consume, because the denomination to be paid is large, the number of inputs is large, and the time is long, and the price may have doubled before the card is swiped.

When you travel in a taxi, it can take as long to get out of the car and count the money as it does on the road.

In the end, people had to take measures: boycott national currencies, use dollars and banknotes of other countries.

Or, simply barter.

The government's credit is completely bankrupt.

Finally, government procurement is also done in US dollars only.

Originally, it wasn't like that.

Zimbabwe used to be a country with a good economic foundation in Africa.

In the early years of independence, Zimbabwe's level of economic development was second only to that of South Africa.

Zimbabwe is one of the countries with the best natural conditions in Africa, although it is located in the savannah climate zone, because the average altitude is more than 1,000 meters, so the climate is mild, and the arable land area is as high as more than 33 million hectares.

The stamps issued by Zimbabwe in 1986 show the level of development at that time

Historically, Zimbabwe was the world's main exporter of flue-cured tobacco and the fourth largest supplier of flowers in Europe.

Zimbabwe has proved more than 40 kinds of minerals, such as chromium (mainly used in stainless steel, alloy, electroplating) reserves of about 12% of the world, as well as a large number of iron, coal, asbestos mines, nickel, gold reserves are also rich.

In 1981, Zimbabwe's per capita GDP once exceeded $1,000!

It was only in 2003 that China's per capita GDP exceeded $1,000.

South Korea, which we are familiar with, had a per capita GDP of more than $1,000 in 1977, and Taiwan exceeded $1,000 in 1976.

In this comparison, it can also be seen that Zimbabwe's foundation is not bad.

But who would have thought that the early days of Zimbabwe's independence would be the most glorious period of the country, and then it would go all the way downhill.

Zimbabwe's GDP per capita (blue line)

It is said that in 1985, after seeing off guests at a foreign affairs event, Deng Gong commented: "If this person can't listen to the persuasion, he will suffer a big loss in the future." ”

The man he was talking about was Mugabe, the political strongman who had been at the helm of Zimbabwe for 37 years.

And he was also a direct author of the tragedy in Zimbabwe.

Mugabe

After Zimbabwe's independence, white British colonists were driven out.

Mugabe gradually came to power.

In the early years of Mugabe's rule, he pursued mixed policies, including increasing spending on education and health care, and increasing the welfare of the people.

At the same time, however, Zimbabwe's public sector, including the government, has swelled dramatically, with the number of civil servants alone growing at an average annual rate of 12 per cent throughout the 1980s.

Government spending soared, and by the end of the 1980s, Zimbabwe's central government expenditure was 44.6% of GDP!

The government does not directly produce economic benefits, but consumes a huge amount of economic output.

Eventually, government deficits soared and debt piled high.

The famous economist Grigory Mankiw once said that all hyperinflation comes from the country's fiscal policy.

Mugabe is exactly like this, he chose an easy path to take, which is what you have seen earlier:

Crazy money printing, collecting the "seigniorage" of the whole people.

A street scene in Harare, Zimbabwe, in 1997

And even more reckless, it is also a trick to find death by yourself, which happened in 2000.

Since 2000, Mugabe has promoted a radical land reform movement.

Zimbabwe once faced a colonial legacy: white people, who make up 3 percent of the population, own 70 percent of the country's arable land.

Under the slogan of fairness, Mugabe demanded that a handful of white farmers give up their surplus farms and resettle the landless blacks.

On the one hand, in the face of the coercive power of the government, most white farmers dared not speak out, and even fled abroad to take refuge.

And most of the recovered land, it is said, was divided among the privileged classes of the country.

On the other hand, even if they were given the land, the local blacks lacked farming experience and were not willing to learn, so they did not care about the seeds as soon as they sowed them, did not apply fertilizer, weed, watered, ignored them, and relied entirely on the harvest from the sky.

As a result, domestic grain production in this former "granary of southern Africa" has been declining, not only has there been no exports, but five or six million people in the country have fallen into famine.

In such a large agricultural country, there is no food, which, in turn, exacerbates inflation.

The standard of living of the people has even returned to the 1950s, more than 50 years back.

Zimbabweans receive relief food from the United Nations

The socio-economic situation is in shambles, and Zimbabwe is dissatisfied.

In 2017, the Zimbabwean military staged a coup d'état, and Mugabe, who had been in power for 37 years, was ousted.

But Zimbabwe has been tossed to the point of dying, and to this day, there is still no recovery.

Looking back at Zimbabwe, the biggest feeling may not be the inflation that has broken the skyline, but a shock:

The development of the country is not always upward, and under the regression of the country, the situation of ordinary people can be called miserable.

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