Talk about throwing money at child poverty. When a child needs to cart around their own body weight in banknotes just for a 50c mix it is quite clear that Mugabe's economic policies are in the basket of print 'n' pray. The Reserve Bank of Mugabe has made everyone multi-billionaires in a country where you can't buy anything. You'd have to give him -10 out of 10.
Graph from mises.org with a commentary on those regimes and why it signalled there time was up.
As for Yugoslavia, the Montenegro bit started using Euros as soon as they could. During Indonesia's 1998 meltdown when the Rupiah rate to the US dollar could swing almost 50% in one day, many retailers would only deal in US dollars. So too with Zimbabwe. To retain value and certainty people will switch to the Rand - despite the regulations the regime has against it. As noted in an earlier post, it is widely suspected that the RBZ has been looted by the regime.
I mean the Reserve Bank of Zimbabwe is a joke. The key rates:
INTEREST RATES 03/07/08
TB - 91 Days 66.33%
INFLATION RATE January 2008
CPI 974 925 192.9
Y-O-Y 100 580.2%So that's an official inflation rate (as at January!) of over 100,000% pa. So if we look at their goals:It seems as though they have failed spectacularly.
Interbank Exchange Rate
ZWD 15 183 703 996.98per US$1
At first I thought it was a typo or the page hadn't loaded correctly. But no, the official exchange rate means to buy one US dollar you need 15.2 billion Zimbabwe dollars. Now look at the graph above and plot it. Yikes!
From the RBZ's forex statement of 19 June 2008:
1. It has come to the Central Bank’s attention that some stakeholders are peddling falsehoods that the recent policy changes on the exchange rate and foreign currency trading in general have been reversed.
2. As Monetary Authorities, we wish to set the record straight and underscore that the Reserve Bank has NOT reversed the willing-buyer, willing seller arrangement nor is it contemplating doing so.
5. As Monetary Authorities, we are also aware of the insidious forces that are seeking to cause policy reversals through spurious upwards pushes on prices and the exchange rate itself.
6. Our resolve remains that of stabilizing the economy through policy interventions that stimulate the supply side, whilst at the same time, complementary structural reforms are instituted.
DR. G. GONO
Dr of Vodoo economics, or actual vodoo? It's hard to tell. It's like one of those preposterous email scams from Nigeria. Only the scam is on the people of Zimbabwe - by their own government.
That's Dr G Gono bolding the NOT by the way. His perspective, like the entire regime, is distinctly paranoid. And he is so very much part of the regime:
He started his career with government owned ZimBank, before moving to the Commercial Bank of Zimbabwe. He was appointed by Professor Jonathan Moyo to head the University of Zimbabwe Council where he quickly awarded himself with an honorary degree. During this time, he was the personal banker of Robert Mugabe, up until he was appointed as governor of the Reserve Bank of Zimbabwe. [W]
So an honorary vodoo doctorate. And while hands on public interaction would usually be greeted with enthusiasm in most countries, Dr G Gono takes it so many steps further:
He has sent in the police to arrest businessmen for failing to reduce their prices. On one occasion, he roamed the streets of Harare personally threatening shop owners.
And he bolds the following passage in his latest quarterly monetary report just so he can show us - or his boss - his commitment to ZANU PF:
11.5 We have seen in recent weeks following the historic “harmonized” general election how it is easy to generate disharmony and needlessly engender tension and anxieties which can assume a momentum of their own with the result of leaving our Nation at risk of serious divisions, violence and conflict at time when we need National Unity and Cohesion the most.
11.6 Our national leadership from across the political divide has enough lessons from our recent history as an independent nation to understand that violence of any kind has never ever paid and will never pay because it does not pay. Indeed, violence never solves anything, quite the contrary it always makes a bad situation worse.
And the whole report is as poorly written and meandering and laced with improbable spin attempts, such as:
transforming the Zimbabwean economy towards greater heights.
If these are heights, I'd hate to see what a recession looks like. And on the worn rhetoric grinds to its inevitable Christian finale:
11.15 In conclusion, Ladies and Gentlemen, let our economic history of tomorrow, just like our Liberation War History of yesterday, record that, at her greatest hour of need, when she was at her most vulnerable moment and at the stage when it was easier to give in and give up than to toil and sweat, Zimbabwe found herself lucky to have men and women who could stand up to defend her, who could sacrifice all they have for her till she was able to stand on her own...
11.16 Let our future history record that such men and women were You and Me, and not the other way round.
11.17 In God’s hands I submit this Monetary Policy Statement.
DR G GONO
30 April, 2008
Where do we start? It's these damn "insidious forces" again (like democracy, freedom and survival itself?) that keep getting in the way of stabalisation. It wouldn't, by any chance, have any relation to a "supply side" solution that involves blowing out the money supply and issuing currency in denominations in the tens of millions to pay the government's bills - would it?
A regime fails when it cannot pay the security forces' wages. Their loyalty suddenly changes. Since they are the instrument of oppression and power the regime relies on, when they fail to meet their salaries and they start going broke and their families go hungry that signals the critical threshold for unavoidable regime change. This has happened in Africa many times.
Why should Zimbabwe be any different?
If the rank and file demand to be paid in Rand - the show is over. At the moment it's the elite group that has maintained their standard of living through exchange rate rorts operated by the RBZ.
I note the main Frequently Asked Questions on the Zim police site are all related to how suppliers get paid, which is telling. It's when the cops don't get paid either that things will change.
Hang on:I reported a 50 million dollar note as the highest the other day - that might be 50 billion now.