Hyperinflation 2

In my previous treatment of hyperinflation I said that instead of thinking of it as a monetary phenominon, happening when a government prints a lot of currency very fast, we should think of it as a systemic rejection of the currency by everyone engaging in commerce. At that time I didn't have proof, but now with money supply figures I got out of Wikipedia, I think I can demonstrate the point.

OK the way this is done is, we take the value of the Zimbabwe dollar in terms of US dollars and multiply it by the number of Zimbabwe dollars we think might have been around at every particular time and, voila, that gives us the value of the money supply. Now, it is important to realise that all of the figures I used are subject to systemic and random error, and there are large gaps I had to fill in with numbers I guessed were intermediate. So you can forget about accuracy, but I do believe that the data will still serve to illustrate my point.

The first chart shows the relative value of the Zimbabwe dollar over 10 months of the hyperinflation. As you will see, holding on to the currency at this time is economic suicide. Your money will be essentially worthless in about half a year:
This period, beginning on 5th of January 2007, doesn't even deal with the worst hyperinflation. Under extreme hyperinflation the graph has roughly the same shape, but the time taken to lose all your money can be measured in days or even hours.

In order to chart the magnitude of inflations this high, we have to resort to logarithmic measurements. The chart below shows the growth in the amount of money you would have to give in exchange for US currency:
0 here means 1, which is the index point on 5th of January 2007. Two and a half years later you'd need $853 sextillion to buy the same thing. Such numbers are simply beyond the experience of everyone. Even physicists who regularly deal with extremely small numbers (like the size of an atom) or very large ones (like the mass of the galaxy) would have trouble getting their heads around this one. Rather conveniently, for me, it is roughly the number of atoms in a lump of aluminium weighing 38 grams. If you laid those atoms end to end in a single line, they would go from the Sun to Neptune and back 12 times. See what I mean?

Now that we have some idea of the changing value of the currency, we need to have some idea of the amount of currency in circulation. The chart below shows a very rough view of the money supply - on a logarythmic scale, of course, otherwise the fine structure of the graph would disappear and we'd just have a "hockey stick":
This chart begins in August 2006. These figures are subject to a lot of uncertainty, of course, but as a ball park this allows us to get some idea of the value of the money supply:
Bingo! Observe the money supply's value going to 0. Again, this tracks the supply from 5th of January 2007. An important point on this data is that the first 11 months is a period when the Reserve bank did not report money supply data, so it is pure interpolation. There is further interpolation later on as well, but the overall picture is not deceptive: the money supply is being rejected and the most interesting portion of the graph, around 10-14 months, has plenty of data points. Consider the logarithmic version of this chart:
The bubble towards the end there is telling us that the very large increase in the money supply that happened around the beginning of 2008 temporarily caused an uptake in the economy. People started to accept the new currency, but notice how quickly that currency bubble went south. Five months later, the currency was worse off than ever, even though the face value was rocketing upward. At this point the currency was re-indexed at a rate of 10 billion old dollars is 1 new dollar. The fresh currency has been no better accepted.