Tuesday, December 23, 2008

A Land of Billionaires

I could be a billionaire in Indonesia, of course in rupiah sense. It was fun to be in Indonesia, our last vacation was in 2006, with that bundles of cash in our pockets.

And reading this article below, I could not imagine that many zeros. I am a quintillionaire. Wondering if I want to take cash from the ATMs, do I need to have a small pick-up?

In Zimbabwe, you need to have ZW$100 million to take a bus....wow everyone is a millionaire by sheer values of the notes!

Robb WJ Ellis of the blog The bearded man commented on what can be bought with the new 10 billion bill. Either three eggs, according to Reuters, or a carton of ten boxes of matches according to an email from a friend. He went on to calculate the price of each match:

The cost of a carton (10 boxes) of matches was ZW$ 210 billion.Therefore each box was ZW$ 21 billion.Each box, on the label, states that one can get, on average, 45 matchsticks per box.Therefore each match costs 466.66 dollars.Normally about 5 don’t work, so each successful light probably costs in excess of half a billion dollars.

The zeros get out of hand in Zimbabwe
Los Angeles Times-Washington Post News Service

Published: December 22, 2008, 23:36
The pale blue bank note that says 1,000,000 Zimbabwean dollars really means 10,000,000,000,000,000,000. Yes, that is 10 quintillion, taking into account the 13 zeros Zimbabwe's central bank has lopped off in the last couple of years to make the country's currency somewhat more manageable.
Every time the zeros get out of hand, Zimbabwe's Reserve Bank scythes away 00000s. The largest note, Z$100,000,000,000, released in July and useless within weeks, looked so bizarre with all the zeros squeezed in that it became an instant collector's item.

Regardless, inflation is soaring so fast in Zimbabwe that it is hard to figure out what a Z$1 million note is actually worth on a given day.
Somewhere between July's Z$100 billion note and the more recent zero-reduced Z$1 million note it is easy to get mixed up. Even more confusing are the wildly different exchange rates that depend on how you pay for purchases.
Zimbabweans chuckle when they see a foreigner bumbling with their currency. They launch into long, looping explanations that leave you lassoed by the zeros, and more confused than when you started. It is difficult to resist just holding up the Z$1,000,000 note and asking a reliable local, "What's this worth?"
But they can get confused themselves. To my surprise, when I tried it recently, my math-savvy friend no longer had the calculation in his head. So he pulled up his cell phone calculator and tapped away.
"Ech! My cell phone can't cope with all these zeros," he grumbled, while I stared at the bustling crowd on Robert Mugabe Street, wondering where they could be going, in an economy where nothing works.
Finally he had an answer: "That's worth about 50 cents (Dh1.8), a bit less than 50 cents."
So I used the blue notes for tips. Fifty cents might not sound like much, but in early November, Z$1,000,000 was more than a week's pay for a police inspector.
After tipping car guards, parking men and waiters for several days, I checked the value again. It turned out my friend had been mistaken; the note had been worth about $4, not 50 cents.
Zimbabwe's hyperinflation rate, the highest ever known, is officially more than 230 million per cent, but some economists place it in the quadrillions. It seems just a matter of time before Zimbabweans will be grappling with octillions, nonillions, decillions, duodecillions and more.
Just trying to explain the complications in the money system is, well, complicated.
Imagine this: You go from the crowded, dusty streets of the capital, Harare, into a dimly lit black market money changer's shop that masquerades as a video outlet. Ask the dealer the rate for a US dollar and he says "27." Twenty-seven "what" is not clear.
Ask him the rate for a South African rand (worth about 10 cents US), and he still says, "27." But this time the decimal point is in a different place. You walk out with a handful of pale blue notes and little idea of what they are worth. If all that is complicated, try this scenario: You are in a supermarket, and for the first time in months there is food there (though it is too expensive for most Zimbabweans). You calculate the cost of about 2 pounds of meat: If you have a Zimbabwean bank account and pay with a debit card, it will cost about $10.

If you exchange American cash for enough Zimbabwean notes to buy the same meat, you will be out $1,000 because of a huge difference in the official exchange rate, which applies to electronic payments, and the rate on the black market. It would seem easy enough to just pay by debit card, but nothing is easy here. In many supermarkets, bank debit cards do not work, either because there is no power or the electronic transfer systems in banks are overloaded.
For the masses squashed together like upright sardines in queues outside banks, buying staples such as maize meal and cooking oil is a struggle. They stand in line for hours to withdraw the maximum weekly limit of $Z100 million, about $10 on the black market these days, but not even enough for a loaf of bread. The withdrawal limit was just lifted to Z$10 billion a week to enable people to buy food for Christmas. The government also released a new Z$10 billion note.

'Burning' cash
Many people use their Z$100 million for bus fare to town. It is a bizarre situation: People come to town to stand in line to get money that barely covers the cost of coming to town. Crowds of 500 or more jostle outside banks in the heat. Soldiers prowl, beating people with batons when fights break out.
Other Zimbabweans use their phones at work to track down hard-to-come-by necessities and do quick deals.
That is not the only complicated trick. Ben, 28, a used-car salesman, explains the art of "burning" money. He has the air of a magician making a rabbit appear in a hat, only this time it is conjuring $1,000 out of $100 in US currency in a day.
"It's very easy and simple," said Ben, who gave only his first name for fear of prosecution for profiteering.
In a nutshell, by shuffling money between the exchange rates - one for cash and the other for bank transfers - one can multiply a sum of US dollars by tenfold or more. Zimbabweans who are sent foreign funds by relatives abroad are generally in the best position to employ the strategy.
At one point the government banned bank transfers to try to eliminate "burning," but in December they re-introduced them with stricter limits.
Ben made several long, patient explanations before I got the gist of "burning," carefully writing down each convoluted twist.
But as soon as I got the trick, it seemed to vanish, like looking at a mirage.
It is confusing.

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