BBC: Zimbabwe to print own version of US dollar

[SkyMan]

Here's a link to a BBC article about Zimbabwe getting ready to print it's own version of the US dollar.

 

 

LINK

[CaptHenway]

Good luck spending that down at the 7-11!!!

 

 

[Conder101]

Wouldn't it just be easier to get more dollars from the US? If the Zimbabwe government is doing the printing of the notes I'm afraid the temptation to print in excess of the bonds will prove too tempting and lead back to the hyperinflation again

[Mr.Mcknowitall]

Wouldn't it just be easier to get more dollars from the US? If the Zimbabwe government is doing the printing of the notes I'm afraid the temptation to print in excess of the bonds will prove too tempting and lead back to the hyperinflation again

 

No, it would not be easier. Currency exchange, other currencies presently used in the location that may or may not be accepted, and the unavailability of present U.S. cash to prop up the economy because the people of the local region are refusing to accept the currency of their own country. It would be much more dangerous, and destabilize the region and be interpreted as a colonial conversion attempt. Think India in the 19th/early 20th century. What would be the next step, the issuance of U.S. MPC?

[RWB]

Pegging a national currency to the US dollar either by decree, or simply using US money, has been used by many countries to encourage economic stability and fiscal responsibility. Zimbabwe under President Robert Mugabe has been neither economically stable nor fiscally responsible. Once they were one of the largest exporters of food in Africa, now they live hand-to-mouth - except for Mugabe and his friends.

[SkyMan]

...Zimbabwe under President Robert Mugabe has been neither economically stable nor fiscally responsible. Once they were one of the largest exporters of food in Africa, now they live hand-to-mouth - except for Mugabe and his friends.

 

 

As many of you know, I've got a Ph.D. specializing in interpreting satellite imagery. A friend of mine in the same field worked in South Africa (SA) for about 10 years (circa 1994 - 2004).

 

During this time frame many of the large scale farms (think agribusiness in the USA) in Zimbabwe were nationalized by the Zimbabwean government... in essence, stolen from the owners. These lands were then given to Mugabe supporters. (FWIW, historically, these lands had been stolen from the native African population when the Brits colonized Zimbabwe, so there was a certain amount of justice to this expropriation). The modern day farms practiced modern agricultural techniques and were conscientious towards long term usage of the land, before they were expropriated.

 

As mentioned, Mugabe gave the land away (wink, wink, nod, nod... CLEARLY he and others benefitted financially, in addition to politically) to his supporters, most of whom practiced subsistence agriculture. The large scale farms were broken up into many small plots of land. However, given that the African population had sky rocketed during the 20th century, this form of agriculture was no longer suitable to Zimbabwe.

 

Once SA became a majority ruled country, many of the other countries in Sub-Saharan Africa started to use SA's technological competence to do work that the countries of that region were incapable of doing. My friend interpreted satellite imagery for various of the countries just north of SA. One of the things my friend noticed in satellite imagery of Zimbabwe was that within ONE year of expropriation, soil erosion on what had been the agribusiness farms had climbed DRAMATICALLY. Within five years most of the soil had essentially been either washed or blown away. What this means is that even if Zimbabwean agriculture moves back to more rational agricultural practices it will be literally hundreds of years before the damage has been mitigated.

[RWB]

Interesting way to visualize political/policy decisions and possibly quantify change. Data and the common wealth benefit should be driving decisions, not political expediency or ideology. Anyone recall Trofim Lysenko's ideology?

 

[bstrauss3]

The interesting thing is "so what"? You can denominate currency in anything you like.

 

But unless the money is actually backed by and exchangeable into USD, then it's still going to inflate.

 

So the real ?s are:

 

/1/ Is 200M pounds enough money for the daily use within the country.

 

/2/ Who is going to steal the backing currency or use it for other purposes

 

 

[CaptHenway]

The interesting thing is "so what"? You can denominate currency in anything you like.

 

But unless the money is actually backed by and exchangeable into USD, then it's still going to inflate.

 

So the real ?s are:

 

/1/ Is 200M pounds enough money for the daily use within the country.

 

/2/ Who is going to steal the backing currency or use it for other purposes

 

 

Exactly! The backing currency will "disappear."

[RWB]

Bird cage liners?

[bsshog40]

Man, if I'm not mistaken, I have a couple of their Trillion Dollar notes.

[Conder101]

Zimbabwe already uses US dollars (The real thing not currency pegged to the dollar). The problem is they don't have enough of them for day to day commerce. This new currency would be like their current "Bond" coins. A bond of $200M would be held by another country, possibly even the US government, and it would be the backing for the new currency on a one to one basis. Ideally the currency would also be printed by another country as well so the Zimbabwe government would have to request shipment of currency. If they tried to request more than the bond they have deposited the printed can turn down the request. Since Zimbabwe isn't doing the printing they can't just turn on the presses and inflate the currency like they did before. That will help keep the bond dollar on a 1 to 1 exchange rate. It has worked for about a year and a half now with the bond coins. ($50M bond)

 

 

No, it would not be easier. Currency exchange, other currencies presently used in the location that may or may not be accepted, and the unavailability of present U.S. cash to prop up the economy because the people of the local region are refusing to accept the currency of their own country.

Zimbabwe gave up their own currency years ago. Since then they have been using mostly US dollars and South African rand. The people have no problem accepting it because it is a much more stable currency. And there is no currency exchange problem. The bond is the equivalent of $200M US, you give it to the US and get $200M in cash. It's like saying there would be an exchange rate problem going to the bank here giving them a $100 bill and asking for 5 $20's. And since they have been using the dollar in Zimbabwe for so long things are priced in US dollars so there is no exchange problem there either.

 

Instead they are going to give the bond to someone, and then go PAY some company to have notes printed equal to the bond on deposit.

[Mr.Mcknowitall]

That is an oversimplification of the issue.

 

1) The SA rand is not preferred, and is only bring used sparsely because of: Rate of Exchange. When it is used the Rate of Exchange is pegged to the U.S.D..

 

2) The Yuan is preferred over the SA Rand. Zimbabwee is partial of course to the U.S.D., but it is an any port in the storm issue until they can manipulate the people into accepting a local currency thru sleight of hand and try to work out of the problem, by receiving a boost via the Bond Notes.

 

3) The Africa EXIM Bank is funding the Bond Exchange. AEXIM Bnak will peg the exchange rate daily based on their fee basis, and draw down, specifically as applied to the U.S.D and the Chinese Yuan.

 

4) It has not worked as well as hoped, because the Bond coin denominations have not been enough to fund daily commerce and are not trusted entirely via Rate of Exchange because of the problems associated with not enough large denominations, and this has caused further manipulation of Exchange Rates, a B

[Mr.Mcknowitall]

...Don't know what happened, slip of finger. Apologies.

 

To continue:

 

...A black Market within a Black Market, if you will.

 

5) The example you use as a counter-observation is not the same at all. There is no change of Rate of Exchange within U.S. Borders, and U.S. Banks will not exchange dollar fro dollar a SAEXIM Bond Note within the U.S. Borders.

 

6) The Bond limitation is set at 140 Mil. Pounds, approximately $200 Million U.S.D. The Chinese Yuan is still in play, pending SA/China Rate of Exchange, which is a very volatile issue at the moment.

 

7) $200 Million is a far cry from the long term needs....and possibly the short term (90 day float as an example) needs if the present Bond issuance fails to produce local populace trust in the Government...of Zimbabwee. This is an experiment to avoid a Colonial Currency uprising and local insurrection due to very difficult economic conditions the Government is presently facing. The large denomination Bond Notes will disappear due to hoarding and illegal activities and be washed via the Chinese Yaun.

 

Again, compare previous monetary activities and manipulation in British and German and Dutch held colonies on the continent in the past.