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Zimbabwe’s dollars triumphant return

It seems we have another un-thought out policy based on the Zimbabwean Government’s total belief that you can fool all the people all of the time.

The dollar, all be it an ethereal entity has, it seems, made a non triumphant return and is backed by… well nothing really.

It was the last regime’s idea to back the currency with Gold and Diamonds and this not surprisingly was further endorsed in January 2018 by the new  clone regime as stated by the then self imposed president.

“Zimbabwe’s new president, Emmerson Mnangagwa, said his government is considering building reserves of gold and diamonds to back the eventual relaunch of the country’s own currency.”

Let’s assume that there is actually some gold and a scattering of diamonds that isn’t where all the other gold and diamonds are and is indeed in the reserve bank vaults? What is this meant to achieve other than fool the electorate long enough to pay for the many many people and organisations that those clinging to power are beholden too?
Mugabe’s stated policy to “kick them and give them a punishment they deserve” whilst being typically barbaric was a cheaper option which did not use up too much of the coffers which is quite fortunate as the certainly do not runneth over.
Corruption, nepotism, cronyism, any “ism” really comes at a price, unfortunately for the “non isms”  an unsustainable price
Why unsustainable if the returned dollar is backed by Gold?
So for the sake of the ongoing fairy tale it is assumed here that the vaults are looking like Aladdin’s from room which considering the mineral wealth of the country would not be an unrealistic expectation given realistic Governance.

So we have gold and diamonds to bolster the returning prodigal dollar. Why is this not working or would not work anyway.

Backing your currency with gold puts you in an elite club of none. The last country to tie its currency into gold was Switzerland with the Franc back in 2000.

Backing your currency against gold in many economists view makes it harder to achieve growth via limited money supply (if it is based on precious metal).  Zimbabwe has a limited supply of money generated from sound economic principles which will likely not change with the next round of printing or non printing as is the case with the current currency.

I assume the aim is to create a plentiful money supply which would facilitate lending, and lending at a lower costs which would stimulate investment?

The one reason in the past to back your money to a gold reserve was to ensure that governments do not print (infinite) more than necessary amounts of paper money. Now would our Government do that?

Be that as it may this would be an admiral policy, if it was indeed a policy, as the country is badly in need of some stimulation and investment, sound investment has to happen before any meaningful change. Fiscal change not necessarily political change though unfortunately in Zimbabwe these two are not exactly divergent.

It does appear though that even should you be able to take your pristine pile of brand new Zimbabwe dollar notes to the bank and exchange them for an internationally predetermined quantity of gold in order to facilitate your planned investment the many other stumbling blocks and pitfalls blocking the way forward may still prove to much for those supposedly gnashing their teeth at the borders waiting for just such a fiscal policy change in order to come in with their wagons loads of non gold backed money.

So the people have realised that they are not going to get shiny diamonds and pieces of gold for their new money which has again been made fairly worthless but to add to the inflationary spiral this time around the Government does not even need to bother with the worn out old printing presses to fill the coffers with ever more worthless “Money” and once again the only beneficiaries are the incompetent un-elected.

Strangely there are some similarities with the EU here?!

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