Zimbabwe and it's latest Monopoly currency

Zimbabwe and it's latest Monopoly currency

Zimbabwe’s President, Robert Mugabe has just had his 93rd birthday, this is also his 37th year in power.

Thursday 23, February 2017 by Georgina Enzer



In the last 20 years he has driven the once prosperous country to its knees. The once thriving “breadbasket of Africa”, a country that provided maize to much of southern Africa and could amply feed itself, is teetering on the edge of complete and utter economic and social collapse.

The final blow to this, one of Africa’s jewels, was the re-introduction of the Zimbabwe Bond Note. This monopoly money, backed not by gold reserves (although there is a rumour of $200 million but no indication this is actually true) - but rather a hope that if you print it, it will happen - was the Government’s answer to there being no currency in the banks. When I say no currency, I mean not a single bank note in any currency. Nothing. There was nothing to withdraw from the ATMs, and those outside the country couldn’t send anything home, because there was nothing physical to represent the money they sent. Their friends and relatives could not simply go to a money exchange or bank and get physical cash.

So, in comes the Zimbabwe Bond Note. Harking back to the years of hyper-inflation in the early 2000’s with the introduction of the second Zimbabwe Dollar (ZWN), followed quickly by the third Zimbabwe dollar (ZWR), that saw bank notes being printed up to ZW$100 trillion (with several zero’s having been knocked off that figure already). This move saw the Zimbabwe Dollar being discontinued as a currency, and withdrawn from circulation towards the end of 2009.

But, now they did it again. In November 2016, the Zimbabwean Reserve Bank issued Zimbabwe Bond Notes to be used as legal tender, they are supposed to trade at ZW$1 to $1. But just a few weeks later, retailers saw the flaw in this plan, for no country outside of Zimbabwe will accept Zimbabwe’s version of a currency. That means that they cannot pay any external suppliers with Bond Notes. Because it is not a currency. It has no meat behind the paper. The new notes, nicknamed “bollars”, are worse than useless. Shopkeepers are now so desperate for real money, they have three prices in the shops, one the cost of the item if paid for in Zimbabwe Bond notes, one (with a hefty 50 per cent discount on the price) for USD and one – much more expensive than both - if you pay with debit card. Because again, there is no hard cash backing up an electronic purchase.

Before the Bond notes and the no-cash-at-all scenario, shopkeepers had to become masters of the exchange rate, when up to seven different currencies could be used as legal tender in any Zimbabwean shop, these included USD, RMB, ZAR, AUD, and GBP.  While this may not have been an ideal scenario, at least the people of the country were able to get their hands on cold, hard cash, purchase goods, purchase supplies components for their businesses and generally survive. If only you could take a country’s economy, screw it up into a ball, throw it in the trash and start again. To wipe the slate completely clean, get a brand new government from top to bottom, and start again may be the only option for the country to have any chance of becoming a shadow of the economic and agricultural power house it once was.

http://www.cpifinancial.net/blog/post/39762/zimbabwe-and-its-latest-monopoly-currency