Read now to learn how inflation and hyperinflation repeatedly took their toll on Zimbabwe's people and economy over the course of decades.
I spend a lot of time in this newsletter extolling the virtues of Bitcoin and highlighting the deficiencies of fiat. That focus is of course intentional on my part, as most people on the planet, including myself, aren’t old enough to remember the time before money was created solely by a decree (i.e., “fiat”) from the governments of the world. In other words, it can be difficult to understand how egregious fiat really is when one has no experience with any alternatives.
Perhaps nothing is more illustrative of the destruction caused by fiat than a review of the hyperinflationary episodes that have plagued every fiat currency throughout history and have bankrupted the people misfortunate enough to have used them.
Inflation: A Crime Most Evil
One of the primary purposes for any monetary medium is that of storing value across time and space. That should be easy enough for us to understand. Since money itself has no productive value, there would be no sense in trading our valuable goods and services for money if it couldn’t retain its value long enough to buy something else that we need.
All monies throughout history, with the exception of Bitcoin, have suffered or are at risk of suffering from the effects of currency inflation, which, simply put, is the devaluation of a currency through the expansion of its supply. Inflation is wholly unacceptable, as shown by a nearly endless number of examples of wealth being stolen via inflation to enrich powerful people and organizations while impoverishing victims.
Perhaps no example is quite so astonishing as those in which hyperinflation has been observed.
Zimbabwe: A Tale Of Two Countries
Hyperinflation is the rapid devaluation of a currency before its total destruction and abandonment. There are a number of hyperinflationary episodes throughout history that commonly come up when the topic is discussed, but perhaps none is as frequently used as that of Zimbabwe and the Zimbabwean Dollar:
History shows that the Zimbabwean economy was systematically destroyed over the course of a number of years through the massive printing of Zimbabwean dollars to fund wars, failed social programs, and widespread bureaucratic corruption.
No currency can withstand the steady march to irrelevance that comes through inflation, and the Zimbabwean Dollar was no different. Annual inflation repeatedly spiked into the hundreds and thousands of percentage points, and denominations of commonly-used banknotes rose into the billions and trillions, causing participants in both local and international markets to lose any semblance of confidence in the currency’s future and stability.
Daily inflation was perhaps even more painful as the cost of bus fares, groceries, wages, and more would explode upwards throughout the day, impoverishing in real-time anyone who was unfortunate enough to hold onto the currency for any amount of time. To put it mildly, the ability for the economy to even function was almost entirely lost, at least for people who were doomed to use the Zimbabwean dollar and nothing else.
The country has experienced some periods of relative stability by using less volatile currencies in place of its own, such as throughout most of the 2010s. However, there is one option that I believe will work more than any other:
Bitcoin: A Cure Is Born
The only cure for hyperinflation is its complete eradication from society. It is not enough to move from one fiat currency to another with the hope that the new currency’s overlords won’t hyperinflate it into oblivion. Instead, societies must make the conscious decision to move to a currency that can’t inflate at all. That currency is Bitcoin.
Inflation is carried out by people who control a currency’s supply, but there is no one in charge of Bitcoin at all, let alone its supply. Bitcoin is money that is controlled by its full community of users, and there is simply no viable reason why part of the user base would accept the devaluation of their money and the expropriation of their wealth to benefit someone else.
A world on Bitcoin is a world without hyperinflation and associated wealth destruction.
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This is not financial or business advice. This newsletter and related content are for informational purposes only. Cryptocurrencies and digital assets can be risky. Always do your own research before making any sort of investment.
