the wackonomiscists tell us that the root of all economic evil is the failure of consumers to consume, and they assure us that government interventions are necessary to overcome the myriad problems caused by the peoples wont of greed and materialism. So, I wonder what they would do in the situation described below???? Maybe print a few extra zimbabwe dollars to lower interest rates, cut taxes a bit, build a new park somewhere, re-re-regulate some industry, set a few price controls....
Quote:
Zimbabwe: Cash Limits - Case of the Dog Chasing Its Own Tail
Zimbabwe Standard
Vusumuzi Sifile and Ndamu Sandu
8 December 2008
PRICES of basic goods and services more than quadrupled within hours after banks increased cash withdrawal limits last week, further piling pressure on already hard-pressed Zimbabweans. On Thursday banks started allowing depositors to withdraw $100 million a week, up from $500 000 after the Reserve Bank of Zimbabwe reviewed the limits. Depositors, who were resorting to sleeping in queues to access their funds, had called on the RBZ to remove the withdrawal limits. RBZ governor Gideon Gono finally succumbed to pressure after the Zimbabwe Congress of Trade Unions threatened to stage protests against the central bank.
But the rushed measures quickly backfired before depositors could make their first withdrawals. A few hours after banks opened on Thursday morning, the few remaining shops that sell in local currency closed their doors to adjust prices to capitalise on the "windfall". A snap survey in Harare indicated that prices in some cases had gone up four times within hours, creating another nightmare for ordinary consumers who now have to wait for another week before their next withdrawal. Simple household items have become out of reach for most Zimbabweans whose salaries are still pegged in local currency. A loaf of bread selling at $3 million on Thursday morning was pegged at $15 million before the end of the day. Commuter fares went up to $5 million, from $1 million. A 10 kg bag of maize-meal shot up to $100 million from $10 million. A 10kg pack of seed maize cost $405 million.
Only a few people managed to get $100 million at any given time as banks did not have adequate cash. The most affected depositor banks were CABS, ZB, Intermarket and Beverley. "I had to sleep at the queue for me to withdraw $100 million," said Brian Shoko. "I got my cash around 11 am and went straight to the supermarket to look for items I wanted to buy. "But I couldn't believe what I saw: the money was enough to buy just a small bar of bath soap and a loaf of bread." After giving up on buying items at the shop, Shoko decided to go and buy his groceries in outlying areas. "I failed to go there," Shoko said. When I got to the terminus, commuter omnibus operators had hiked the fares to $5 million." "When I resolved to just board the expensive omnibus, I was told that they had no change and I had to find somewhere to change my money."
ZCTU had warned that the tendency by the RBZ to review cash withdrawal limits to match inflation was burdening ordinary people. A fortnight ago, ZCTU President Lovemore Matombo said haphazard increases in withdrawal limits only served to increase the cost of living. But Kumbirai Katsande, the newly elected Confederation of Zimbabwe Industries (CZI) president, said price increases were a response to the demand and supply position. Before the withdrawal limits increases, Katsande said, shops were well stocked. However, there was no corresponding increase in the supply of goods after the limits were increased, he said. Katsande said businesses had to consider the cost of restocking.
The CZI boss called for coordination among stakeholders in policy formulation, implementation and monitoring for the RBZ interventions to work. "They are very good intentions which now have some collateral damage. They have unintended consequences," Katsande said.The government has tried in vain to control prices and the National Incomes and Pricing Commission, which was set up for that specific task has been rendered a toothless bulldog. Katsande said the business sector had called for the disbandment of the Goodwills Masimirembwa-led outfit because it had no influence in the setting of prices. "The problem with the institution is that it gives people false hope," he said.
Economic analysts said the rocketing prices were a natural consequence of the depreciation of the Zimbabwean dollar against major currencies. "The dollar is falling in value and prices have to be adjusted," said John Robertson, an independent economist.
But in an interview on local television, Gono said the NIPC "should do its job". Masimirembwa was not answering his mobile phone on Friday. No comment could be obtained from the Consumer Council of Zimbabwe as executive director, Rosemary Siyachitema, was said to be in Conakry, Guinea, on a business trip.
|
$15,000,000 for a loaf of bread in zimbabwe, and you thought $4 / gallon of gasoline was high!? I think thats 15 million dollars of the re-valued zimbabwe currency, so that loaf of bread actually cost something like $15,000,000,000 in the pre 2005 or 2006 zimbabwe currency.
$15 billion! You could bailout the big three with $15 billion.
Anyway, as I was saying, I wish one of the Krugman's of the world explain to me how the zimbabwe people's unwillingness to rack up a little credit card debt and purchase goodies is causing such dire economic straights.