Notes From The Field
By Simon Black
Zimbabwe Hyper-Inflation, Round Two
Zimbabwe is back to its old tricks.
In 2009 Zimbabwe abandoned its currency altogether after its legendary episode with hyperinflation devalued the Zimbabwe dollar to Z$35 QUADRILLION per $1 USD.
And for years, the US dollar has been widely used in Zimbabwe as a sort of unofficial currency; everything I’ve ever purchased on my multiple trips to the country has been in US dollars.
Then a couple of years ago, Zimbabwe introduced a type of bond that was officially pegged to the US dollar, but in reality worth much less.
Now Zimbabwe’s government has re-introduced its own currency and banned the use of all other foreign currencies, including the US dollar.
Prices have already skyrocketed, and they are currently looking at 100% inflation this year. Curiously, Zimbabwe’s president called this an “important step in restoring normalcy to our economy.
Full Story Here:
Why Zimbabwe Has Banned Foreign Currencies
Post From BBC News 26 June 2019 Africa
Image copyright: EPA A headline of a local newspaper on the ban of the foreign currency is displayed on a street in Harare, Zimbabwe, 25 June 2019
Zimbabwe's government has taken the controversial decision to ban local trading in foreign currencies, including the US dollar, with immediate effect.
It has also reintroduced the Zimbabwe dollar, which was abandoned because of hyperinflation in 2009 when the country mainly adopted the US dollar and the South African rand.
The move has shocked Zimbabweans, who have little faith in a local currency - the exchange rate when the Zimbabwe dollar was scrapped was Z$35 quadrillion to $1.
What Has Prompted The Move?
The economy is a mess. Nearly everything is imported and there is a shortage of physical cash . The cost of living is very expensive. Unemployment is widespread.
Image copyright: AFP A man wearing a hat decorated with worthless notes, Harare, Zimbabwe - 2016 | Image caption: Zimbabwe's old currency became absolutely worthless
Various things have been tried to solve the problem, including the introduction in 2016 of bond notes, a parallel currency that was only accepted in Zimbabwe.
It was officially pegged to the US dollar but in reality was worth much less - so a thriving black market developed and Zimbabwe has become a cashless society, relying on card-based transactions or trading with mobile money.
In February, bond notes and electronic cash were re-branded RTGS dollars and allowed to float to try and crush the black market.
However, workers, who used to get their salaries paid in US dollars, have found that their salaries in RTGS dollars are not able to keep up with inflation - now running at 100%.
People were often expected to pay for goods in shops and services, like doctors' fees, in US dollars.
President Emmerson Mnangagwa said the ban was an "important step in restoring normalcy to our economy".
"While the multi-currency regime helped stabilise the economy, it did not give us control of monetary policy and left us at the mercy of US dollar pricing which has been a root cause of inflation," he added.
The authorities also say because the US dollar is so strong, producing goods locally is expensive which is why businesses prefer to import goods.
What Has Been The Reaction?
Anger and exasperation.
Image copyright: EPA A list of new prices in Zimbabwe dollars for electrical products in a supermarket in Harare, Zimbabwe, 24 June 2019 | Image caption: Some retailers have produced new prices lists: here an iron that usually costs about $30 is priced at Z$104
Most people, who associate the Zimbabwe dollar with food shortages and runaway inflation, have complained about the lack of warning. The RTGS officially became the Zimbabwe dollar on Monday, the only legal tender.
"We should have our own currency. But they shouldn't have abolished it as if they were swatting a fly. They should have given us notice," one man told the BBC.
Supermarkets and those in the formal sector responded a day after the announcement by issuing new prices in Zimbabwean dollars - but they were beyond the means of many.
A first-time doctor's consultation is now Z$1,800 - more than a teacher or nurse earns in a month.
Informal traders, who dominate the economy and need US dollars for imports, have vowed to defy the directive.
A street vendor in the capital, Harare, told the BBC: "How is it possible that the US dollar is no longer accepted? It won't work. We actually want greater use of it, so that as street vendors we can have them. Scrap the bond note instead."
Opposition Movement for Democratic Change (MDC) lawmaker David Coltart called the move "sheer madness".
"The market has been re-dollarising because of lack of confidence in the RTGS dollar. You can't force people to love a currency... This will exacerbate the chaos," he said on Twitter .
Will These Objections Make Any Difference?
The trade unions have threatened "mass action" if the policy is not reversed.
Image caption Unrest broke out after a fuel price hike in January
The Zimbabwe Congress of Trade Unions (ZCTU) wants workers to be paid in US dollars again.
In January, it led nationwide protests against a 150% fuel price increase, triggering a violent crackdown by the army and police that rights groups say left at least 12 people dead.
On the streets of the capital, black market traders are still exchanging and accepting US dollars.
The value on the black market has remained unchanged - one US dollar is worth 11 Zimbabwe dollars, compared with the official rate of 6.2.
Ultimately Zimbabweans have proved good at adapting over the years to one economic crisis after another.
Why Do Zimbabweans Prefer Foreign Currencies?
They are scarred by the mismanagement of the economy by the government of then-President Robert Mugabe. The central bank was forced to print banknotes of ever higher values to keep up with surging inflation.
Image copyright: AFP A person holding US dollars in Zimbabwe | Image caption: US dollars are the most highly prized currency in Zimbabwe
Annual inflation reached 231 million per cent in July 2008. Officials gave up reporting monthly statistics when it peaked at just under 80 billion per cent in mid-November 2008.
The prices of goods multiplied several times a day. Though it was illegal at the time, many people opted to keep US dollars, which they bought on the black market.
Businesses began demanding foreign currency. Eventually authorities were forced to catch up, scrapping the Zimbabwe dollar and sanctioning the use of several currencies, including the Chinese yuan and Indian rupee.
You could purchase something with one currency, and get change in another currency .
But in reality Zimbabwe ran out of all these currencies because it was importing far more than exporting - and has become a cashless society.
Zimbabwe Country Profile
https://www.bbc.com/news/world-africa-14113249
Zimbabwe Currency Crisis: No Cash, No Bread, No KFC
By Andrew Harding BBC News, Harare
https://www.bbc.com/news/world-africa-45822166
How Do You Solve Catastrophic Hyperinflation?
By Pablo Uchoa BBC World Service
https://www.bbc.com/news/business-45523636
https://www-bbc-com.cdn.ampproject.org/v/s/www.bbc.com/news/amp/world-africa-48757080?amp_js_v=0.1#referrer=https%3A%2F%2Fwww.google.com&_tf=From%20%251$s&share=https%3A%2F%2Fwww.bbc.com%2Fnews%2Fworld-africa-48757080
Until tomorrow,
To your freedom and prosperity, Simon Black, Founder, SovereignMan.com
______________________________________________________
If you wish to contact the author of any reader submitted guest post, you can give us an email at UniversalOm432Hz@gmail.com and we'll forward your request to the author.
______________________________________________________
All articles, videos, and images posted on Dinar Chronicles were submitted by readers and/or handpicked by the site itself for informational and/or entertainment purposes.
Dinar Chronicles is not a registered investment adviser, broker dealer, banker or currency dealer and as such, no information on the website should be construed as investment advice. We do not support, represent or guarantee the completeness, truthfulness, accuracy, or reliability of any content or communications posted on this site. Information posted on this site may or may not be fictitious. We do not intend to and are not providing financial, legal, tax, political or any other advice to readers of this website.
Copyright © 2019 Dinar Chronicles
By Simon Black
Zimbabwe Hyper-Inflation, Round Two
Zimbabwe is back to its old tricks.
In 2009 Zimbabwe abandoned its currency altogether after its legendary episode with hyperinflation devalued the Zimbabwe dollar to Z$35 QUADRILLION per $1 USD.
And for years, the US dollar has been widely used in Zimbabwe as a sort of unofficial currency; everything I’ve ever purchased on my multiple trips to the country has been in US dollars.
Then a couple of years ago, Zimbabwe introduced a type of bond that was officially pegged to the US dollar, but in reality worth much less.
Now Zimbabwe’s government has re-introduced its own currency and banned the use of all other foreign currencies, including the US dollar.
Prices have already skyrocketed, and they are currently looking at 100% inflation this year. Curiously, Zimbabwe’s president called this an “important step in restoring normalcy to our economy.
Full Story Here:
Why Zimbabwe Has Banned Foreign Currencies
Post From BBC News 26 June 2019 Africa
Image copyright: EPA A headline of a local newspaper on the ban of the foreign currency is displayed on a street in Harare, Zimbabwe, 25 June 2019
Zimbabwe's government has taken the controversial decision to ban local trading in foreign currencies, including the US dollar, with immediate effect.
It has also reintroduced the Zimbabwe dollar, which was abandoned because of hyperinflation in 2009 when the country mainly adopted the US dollar and the South African rand.
The move has shocked Zimbabweans, who have little faith in a local currency - the exchange rate when the Zimbabwe dollar was scrapped was Z$35 quadrillion to $1.
What Has Prompted The Move?
The economy is a mess. Nearly everything is imported and there is a shortage of physical cash . The cost of living is very expensive. Unemployment is widespread.
Image copyright: AFP A man wearing a hat decorated with worthless notes, Harare, Zimbabwe - 2016 | Image caption: Zimbabwe's old currency became absolutely worthless
Various things have been tried to solve the problem, including the introduction in 2016 of bond notes, a parallel currency that was only accepted in Zimbabwe.
It was officially pegged to the US dollar but in reality was worth much less - so a thriving black market developed and Zimbabwe has become a cashless society, relying on card-based transactions or trading with mobile money.
In February, bond notes and electronic cash were re-branded RTGS dollars and allowed to float to try and crush the black market.
However, workers, who used to get their salaries paid in US dollars, have found that their salaries in RTGS dollars are not able to keep up with inflation - now running at 100%.
People were often expected to pay for goods in shops and services, like doctors' fees, in US dollars.
President Emmerson Mnangagwa said the ban was an "important step in restoring normalcy to our economy".
"While the multi-currency regime helped stabilise the economy, it did not give us control of monetary policy and left us at the mercy of US dollar pricing which has been a root cause of inflation," he added.
The authorities also say because the US dollar is so strong, producing goods locally is expensive which is why businesses prefer to import goods.
What Has Been The Reaction?
Anger and exasperation.
Image copyright: EPA A list of new prices in Zimbabwe dollars for electrical products in a supermarket in Harare, Zimbabwe, 24 June 2019 | Image caption: Some retailers have produced new prices lists: here an iron that usually costs about $30 is priced at Z$104
Most people, who associate the Zimbabwe dollar with food shortages and runaway inflation, have complained about the lack of warning. The RTGS officially became the Zimbabwe dollar on Monday, the only legal tender.
"We should have our own currency. But they shouldn't have abolished it as if they were swatting a fly. They should have given us notice," one man told the BBC.
Supermarkets and those in the formal sector responded a day after the announcement by issuing new prices in Zimbabwean dollars - but they were beyond the means of many.
A first-time doctor's consultation is now Z$1,800 - more than a teacher or nurse earns in a month.
Informal traders, who dominate the economy and need US dollars for imports, have vowed to defy the directive.
A street vendor in the capital, Harare, told the BBC: "How is it possible that the US dollar is no longer accepted? It won't work. We actually want greater use of it, so that as street vendors we can have them. Scrap the bond note instead."
Opposition Movement for Democratic Change (MDC) lawmaker David Coltart called the move "sheer madness".
"The market has been re-dollarising because of lack of confidence in the RTGS dollar. You can't force people to love a currency... This will exacerbate the chaos," he said on Twitter .
Will These Objections Make Any Difference?
The trade unions have threatened "mass action" if the policy is not reversed.
Image caption Unrest broke out after a fuel price hike in January
The Zimbabwe Congress of Trade Unions (ZCTU) wants workers to be paid in US dollars again.
In January, it led nationwide protests against a 150% fuel price increase, triggering a violent crackdown by the army and police that rights groups say left at least 12 people dead.
On the streets of the capital, black market traders are still exchanging and accepting US dollars.
The value on the black market has remained unchanged - one US dollar is worth 11 Zimbabwe dollars, compared with the official rate of 6.2.
Ultimately Zimbabweans have proved good at adapting over the years to one economic crisis after another.
Why Do Zimbabweans Prefer Foreign Currencies?
They are scarred by the mismanagement of the economy by the government of then-President Robert Mugabe. The central bank was forced to print banknotes of ever higher values to keep up with surging inflation.
Image copyright: AFP A person holding US dollars in Zimbabwe | Image caption: US dollars are the most highly prized currency in Zimbabwe
Annual inflation reached 231 million per cent in July 2008. Officials gave up reporting monthly statistics when it peaked at just under 80 billion per cent in mid-November 2008.
The prices of goods multiplied several times a day. Though it was illegal at the time, many people opted to keep US dollars, which they bought on the black market.
Businesses began demanding foreign currency. Eventually authorities were forced to catch up, scrapping the Zimbabwe dollar and sanctioning the use of several currencies, including the Chinese yuan and Indian rupee.
You could purchase something with one currency, and get change in another currency .
But in reality Zimbabwe ran out of all these currencies because it was importing far more than exporting - and has become a cashless society.
Zimbabwe Country Profile
https://www.bbc.com/news/world-africa-14113249
Zimbabwe Currency Crisis: No Cash, No Bread, No KFC
By Andrew Harding BBC News, Harare
https://www.bbc.com/news/world-africa-45822166
How Do You Solve Catastrophic Hyperinflation?
By Pablo Uchoa BBC World Service
https://www.bbc.com/news/business-45523636
https://www-bbc-com.cdn.ampproject.org/v/s/www.bbc.com/news/amp/world-africa-48757080?amp_js_v=0.1#referrer=https%3A%2F%2Fwww.google.com&_tf=From%20%251$s&share=https%3A%2F%2Fwww.bbc.com%2Fnews%2Fworld-africa-48757080
Until tomorrow,
To your freedom and prosperity, Simon Black, Founder, SovereignMan.com
______________________________________________________
If you wish to contact the author of any reader submitted guest post, you can give us an email at UniversalOm432Hz@gmail.com and we'll forward your request to the author.
______________________________________________________
All articles, videos, and images posted on Dinar Chronicles were submitted by readers and/or handpicked by the site itself for informational and/or entertainment purposes.
Dinar Chronicles is not a registered investment adviser, broker dealer, banker or currency dealer and as such, no information on the website should be construed as investment advice. We do not support, represent or guarantee the completeness, truthfulness, accuracy, or reliability of any content or communications posted on this site. Information posted on this site may or may not be fictitious. We do not intend to and are not providing financial, legal, tax, political or any other advice to readers of this website.
Copyright © 2019 Dinar Chronicles
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