Will sanctions on the paper trade stop Zimbabwe?

When all else fails, try to cut off the revenue source:

The Munich-based company that has supplied Zimbabwe with the
special blank sheets to print its increasingly worthless dollar caved
in to pressure on Tuesday from the German government for it to stop
doing business with the African ruler.

Mr. Mugabe’s regime
relies on a steady supply of the paper — fortified with watermarks and
other antiforgery features — to print the bank notes that allow it to
pay the soldiers and other loyalists…

Here is the story.  And in case you are wondering, it’s the same company that printed up the bills for the famous Weimar hyperinflation of the 1920s.  In fact only a few companies in the world can make so much "quality" money in such quantities so quickly.  When in doubt, go with experience!  They’ve been airlifting the bills to Zimbabwe in huge quantities; by the way their motto is "Creating Confidence."  Not as good as "Always Low Prices" if you ask me.

The deeper question is why any tyrannical government would find such a high inflation rate to be seigniorage-maximizing.  At some point people simply abandon the currency or prices end up rising as fast or faster than the government spends the newly printed money.  (Related query: When the number "quadrillion" is in play, are the "anti-forgery" features of the paper really needed?  Isn’t the value of the bill higher as paper in any case?)  Under one hypothesis, the time horizon is very short and the mass printing of bills maximizes seigniorage on a week-to-week basis but not overall.  Under another hypothesis, seigniorage is declining (given price expectations), but without the stream of new bills it would be declining even more rapidly.  I know who to ask.


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