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<nettime> Now this is inflation...
Patrice Riemens on Tue, 15 Jul 2008 20:28:49 +0200 (CEST)


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<nettime> Now this is inflation...


>From The Zimbabwean, July 14, 2008


Banknote paper shortage spells trouble

(pic.)
[1] A man shows a new Zimbabwean note in May. It was replaced by
25-billion and 50-billion-dollar bills (worth a U.S. dollar). With
printing slowed, a shortage has arisen.

see orig at: http://www.thezimbabwetimes.com/?p=895 for pic.
pics of 25bn and 50 bn Zim$ notes at:
http://www.tomgpalmer.com/archives/042582.php#comments

HARARE (Los Angeles Times) - It has come to this: Zimbabwe is about to run
out of the paper to print money on.

Fidelity Printers & Refiners, the state-owned company that tirelessly
churns out bank notes for the Robert Mugabe regime, was thrown into a
crisis early this month after a German company stopped supplying bank note
paper because of concerns over Zimbabwe's recent violent presidential
election, widely seen as fraudulent by international observers.

The printing operation drastically slowed. Two-thirds of the 1,000-strong
workforce was ordered to go on leave, and two of the three money-printing
shifts were canceled.

The result on the streets was an immediate cash crunch.

"If you think this currency shortage is bad, wait two weeks. By then it
will be a disaster," said a senior Fidelity staffer, who spoke to The
Times on condition of anonymity because he would face dismissal for
talking to a Western journalist. The paper will run out in two weeks, he
said.

Fidelity Printers is Mugabe's lifeline. It prints the money to pay the
police, soldiers and intelligence organs that keep the regime in power.
Lately, the money has been used to set up a network of command bases
around the country staffed by liberation war veterans and youth militias,
hired muscle to terrify the population into voting for Mugabe in the June
27 presidential runoff election.

If the regime can't pay the security forces on which it relies, it would
face economic paralysis - and potential collapse.

Zimbabwe's economic meltdown harks back to the collapse of its major
export industry, commercial farming, after Mugabe's controversial land
reform program early in the decade. That left the nation starved of
foreign exchange, but government spending went on.

How did it do that? It printed money. But printing more and more money
without an increase in productivity fueled rampant hyperinflation.

As hyperinflation spiraled last year, Fidelity printed million-dollar
notes, then 5-million, 10-million, 25-million, 50-million. This year, it
has been forced to print 100-million, 250-million and 500-million notes in
rapid succession, all now practically worthless. The highest denomination
is now 50 billion Zimbabwean dollars (worth a U.S. dollar on the street).

Despite the recent currency shortage, the Zimbabwean dollar has continued
to slide against the U.S. dollar and shopkeepers are still increasing
their prices steeply. The price of the state-owned Herald newspaper has
leaped from 200 000 Zimbabwean dollars early this month to 25 billion now.
Before the crunch, a beer at a bar in Harare, the capital, cost 15 billion
Zimbabwean dollars. At 5 p.m. July 4, it cost 100 billion ($4 at the time)
in the same bar.

An hour later, the price had gone up to 150 billion ($6).

Apart from the paper crisis, the real fear inside Fidelity is that its
software license for the European bank note design technology that it uses
could be withdrawn because of new sanctions threatened against the Mugabe
regime, the staffer said. The design department is crucial: It must
constantly conceive new notes as those on the streets are rendered
worthless by hyperinflation.

"If that happened, that would be it," the staffer said.

The internal workings of Fidelity Printers have been one of the regime's
best-kept secrets for years. But as the government looks increasingly
tenuous, institutions that were once impossible to penetrate are starting
to show cracks.

Fidelity may be the beating heart of the regime, but the staffer revealed
an institution under severe pressure.

The place pulsates with sound and smells of ink. The printing machines are
old and frequently break down, requiring spare parts from Germany, which
will no longer arrive. Workers are unhappy about salaries and fear for
their jobs because of the paper shortage.

"When the machines were operating 24 hours a day, there was so much
pressure on the employees that they just could not take," he said. "You
couldn't take time off. Even weekends, people had to come in.

"People are aware that printing money is also one of the causes of the
inflation. But you know, it's a job. You've got to do it."

Now that the production has slowed, the pressure of working full time is
replaced with the terror of being laid off, he said. The plant is planning
to use paper from a local producer, but that manufacturer already has
trouble meeting its orders for paper for checks.
..........

(I remember a cartoon-vignette in the FT where you saw two 'suits' staring
worriedly at a currency printing press, with one saying to the other: "I
don't think it works fast enough to pay for the printing" ...


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