Recently, two nations of the world- Zimbabwe and Venezuela were ravaged by another wave of economic crisis-"hyperinflation." Hyperinflation implies skyrocketing prices of commodities in short span of time. Triggered by fragile economic policies of government, the nations were soon plunged into economic turmoil. Lets have a glance at the root cause of this menace.
Venezuela: A Latin American country bestowed with rich repositories of crude oil reserves. It generated nearly 96% of its revenue from crude oil exports. The revenue so earned was used for the import of essential commodities like food and medicines. In light of deteriorating crude oil prices in the international market, the economy began to crumble. Bereft of any other source of revenue to finance its import expenditure coupled with mounting fiscal deficit, there was dearth of commodities in the market. Consequently, prices of goods began to soar. Black marketing and hoarding fanned the flames of inflation.The enormity of the situation was so high that one million was required to buy a single loaf of bread!! Thus, epitomizing the advent of hyperinflation in the economy. The country soon spiraled into one of the worst economic crisis of all times.
The repercussions were marked by widespread hunger leading to an upward trend in crime and social unrest. The perpetrators of violence finally paved way for mass emigration. Thus, common people were the victims of callousness of its government and faced the brunt of this economic disaster. The major lacuna of government policy was lack of investment in alternative sources of revenue. Relying solely on crude oil exports, being unaware of the volatility of this sector led to ultimate collapse.
Zimbabwe: A poor country in Africa hit hard by the idiosyncrasies of political drama. The evidence of immature government is vividly depicted through amateurish policy of indiscriminate note printing to finance its populist measures. It increased subsidies in order to emancipate impoverished sections, provided money free of cost to the youth rattled by rampant unemployment and infused more and more capital in banks which were staggering with poor credit and bank run. All these were financed by deliberate printing of currency. Poor visualization of the aftermath of unprecedented money supply in the economy led to emergence of hyperinflation.
More money supply triggers more demand for goods. One point which must be reckoned is that economy of Zimbabwe was reeling with adverse agrarian and industrial productivity coupled with poor investment by government to boost these sectors. Thus, more money in hands for same quantity of goods propels inflation. The inflation had reached its pinnacle to an unbelievable trillion times!!! Imagine people carrying trucks of currency symbolizing affluence getting infinitesimal amount of goods in return. Thus, an erosion of currency value. The government later tried its best so that the situation ebbed such as endorsement of new currency and devaluation of currency. But, all these steps proved abortive. The politico-economic turmoil resulted in nationwide pandemonium leading to complete derailment of economy.
The resurgence of economic crisis is the consequence of lackadaisical fiscal and monetary policies in an economy. Sloppy measures have no space amidst economic vagaries of modern age. Slight recklessness in policy formulation can have indelible impact on socio-economic sphere of a country which is well elucidated in the above two instances.
Venezuela: A Latin American country bestowed with rich repositories of crude oil reserves. It generated nearly 96% of its revenue from crude oil exports. The revenue so earned was used for the import of essential commodities like food and medicines. In light of deteriorating crude oil prices in the international market, the economy began to crumble. Bereft of any other source of revenue to finance its import expenditure coupled with mounting fiscal deficit, there was dearth of commodities in the market. Consequently, prices of goods began to soar. Black marketing and hoarding fanned the flames of inflation.The enormity of the situation was so high that one million was required to buy a single loaf of bread!! Thus, epitomizing the advent of hyperinflation in the economy. The country soon spiraled into one of the worst economic crisis of all times.
The repercussions were marked by widespread hunger leading to an upward trend in crime and social unrest. The perpetrators of violence finally paved way for mass emigration. Thus, common people were the victims of callousness of its government and faced the brunt of this economic disaster. The major lacuna of government policy was lack of investment in alternative sources of revenue. Relying solely on crude oil exports, being unaware of the volatility of this sector led to ultimate collapse.
Zimbabwe: A poor country in Africa hit hard by the idiosyncrasies of political drama. The evidence of immature government is vividly depicted through amateurish policy of indiscriminate note printing to finance its populist measures. It increased subsidies in order to emancipate impoverished sections, provided money free of cost to the youth rattled by rampant unemployment and infused more and more capital in banks which were staggering with poor credit and bank run. All these were financed by deliberate printing of currency. Poor visualization of the aftermath of unprecedented money supply in the economy led to emergence of hyperinflation.
More money supply triggers more demand for goods. One point which must be reckoned is that economy of Zimbabwe was reeling with adverse agrarian and industrial productivity coupled with poor investment by government to boost these sectors. Thus, more money in hands for same quantity of goods propels inflation. The inflation had reached its pinnacle to an unbelievable trillion times!!! Imagine people carrying trucks of currency symbolizing affluence getting infinitesimal amount of goods in return. Thus, an erosion of currency value. The government later tried its best so that the situation ebbed such as endorsement of new currency and devaluation of currency. But, all these steps proved abortive. The politico-economic turmoil resulted in nationwide pandemonium leading to complete derailment of economy.
The resurgence of economic crisis is the consequence of lackadaisical fiscal and monetary policies in an economy. Sloppy measures have no space amidst economic vagaries of modern age. Slight recklessness in policy formulation can have indelible impact on socio-economic sphere of a country which is well elucidated in the above two instances.
Informative bro... Keep posting๐
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