How Zimbabwe Actually Stopped Its Hyperinflation

At its November 2008 peak, Zimbabwean monthly inflation hit roughly 79.6 billion percent by the Hanke–Kwok estimate — second only to Hungary's 1946 pengő in recorded history. Prices doubled about every 25 hours. Supermarket workers re-ticketed shelves on rolling schedules. The central bank issued a 100-trillion-Zimbabwe-dollar note, worth about five US dollars the day it came out and less by evening.

The inflation was the direct consequence of a budget deficit financed by printing money. After the 2000 land reforms broke the commercial farming sector, government revenues collapsed. Spending did not. The Reserve Bank of Zimbabwe made up the gap on the printing press. The first $100,000 Zimbabwe note appeared in 2006. Within two years the same piece of paper could not buy a loaf of bread.

What stopped it was neither tighter monetary policy nor a new central bank governor. In January 2009 the finance ministry allowed foreign currencies in settlement; by April the US dollar, South African rand, and Botswanan pula were legal for all transactions. The Zimbabwe dollar quietly dropped out of circulation. With no printed supply expanding, prices stabilized inside a single quarter.

The Weimar Republic ended its 1923 hyperinflation the same way: by killing the old Reichsmark and substituting a new, limited-supply currency, the Rentenmark, notionally backed by mortgage claims on German land. Hungary's 1946 pengő — still the worst recorded daily inflation rate on record, about 207 percent per day — died when the forint replaced it in August that year.

The pattern is older than any of these cases. A hyperinflation is not a monetary mystery. It is a printing machine. It stops when you unplug the machine.