Should I buy a 100 billion dollar Zimbabwe Bank Note?

by Manshu on January 28, 2009

in Opinion

Zimbabwe is going through one of the worst humanitarian crisis that the world has ever seen, and the economy has all, but collapsed.

The inflation rate exceeds 2 million percent per annum, and that means Zimbabwe is issuing some banknotes with – a very very high value. In fact you can pay – 15 USD ,and buy a – 100 billion dollar Zimbabwe – bank note from Ebay.

Would you buy a 100 billion dollar Zimbabwe banknote for 15 dollars?

I asked this question to a few friends, and they said – maybe four months ago; not now.

Which brings me to my next question –

Should we let the GDP contract?

To calculate GDP, one needs to sum up:

C + I + E + G

Consumption + Investments + Net Exports + Government Spending

By not buying a 100 billion dollar banknote, which has no utility whatsoever, you are in fact, contributing to the contraction of the economy. Since the – C – in the above equation reduces, as we spend less.

Ordinarily, what you don’t consume, you – Save, and the savings in your bank – ultimately form capital for entrepreneurs and businessmen, and translate into – Investments. So even if you consume less, it should eventually translate into Investments.

The key word here is – eventually. So while today the economy may contract, tomorrow the savings will help it to bounce back.

A lot of wasteful spending characterizes any boom, and during recessionary times – people are more thrifty and careful. That just goes to show that if an economy contracts – it contracts for a reason, and artificially propping it up will do more harm than good.

I don’t know the right answer to the question of allowing the GDP to contract, but I’ve always felt that – what is good for a person is good for the country, and if you use that train of thought; the answer is obvious.

{ 3 comments… read them below or add one }

Super Saver January 28, 2009 at 8:27 pm

At 2,000,000% inflation, I’d wait a month and buy the 100 billion note for a penny US. Then I could be a billionnaire πŸ™‚

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manshuv January 28, 2009 at 9:03 pm

I think you just created a Futures market for the 100 billion dollar note Super Saver πŸ™‚

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Prakhar Misra July 11, 2012 at 11:20 am

What are the various factors that govern the volume of bank notes to be printed for a given financial period and how does it become part of the circulation?

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