Gononomics 101.1

In July I profiled the self-appointed "Doctor" Gono, Governor of the Reserve Bank of Zimbabwe and his insane monetary policies:
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.
[...]
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.

Talk about your heavy hand of regulation.

It's taken six months since then but the regime has finally buckled in the face of reality and eased currency restrictions. BBC:
Zimbabweans will be allowed to conduct business in other currencies, alongside the Zimbabwe dollar, in an effort to stem the country's runaway inflation.The announcement was made by acting Finance Minister Patrick Chinamasa.
BBC southern Africa correspondent Peter Biles says the Zimbabwean dollar has become a laughing stock. A Z$100 trillion note was recently introduced.
Until now only licensed businesses could accept foreign currencies, although it was common practice.

I noted at the time what a currency abandonment may mean:

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.

RBZ website is down... unlike the inflation rate - now in the gonillions.

BBC again:
A Harare resident said even street vendors were refusing to accept Zimbabwean notes.
Last year, the Central Bank was forced to slash 10 zeros from the local unit in an effort to make the currency more manageable.
Correspondents say that although the local currency will still be printed, all prices will be set in US dollars, making the Zimbabwe dollar irrelevant.

And the troops and security forces - the lower ranks - will be paid in what? If they can't buy anything with Zim dollars they will demand Rand (or any other currency than the Zim dollar) and this will put even more pressure on the Zanu-PF government to find foreign currency.

Newsweek interviewed "Dr" Gono:

Q. In November you shut down Zimbabwe's stock exchange. Will you open it again?
A. The stockbrokers were creating a money supply that wasn't there. I printed Z$1.5 quadrillion, but the exchange was operating with Z$100 sextillion. So I said, "Who is doing my job?" Unless there is more discipline and honor, the exchange will stay closed. I can't be bothered. I don't know when it'll open. It's a free market, a business which must be allowed to succeed or fail.

Q.So will 2009 be a year of improvement or disaster?
A. It's got to be a good year. What keeps me bright and looking forward to every day is that it can't be any worse. And those who have studied the history of economies know that we are down, but that the only thing that can happen is we will move up. That is a certainty.

Q. Do you view your term as a success?
A. It's a mystery to many how I have survived. I am modestly credited with the survival strategy of my country. The issue is if you want to break Zimbabwe and want it to fall, just deal with one man. You deal with Gideon Gono.

All Africa:
The decision making body of the MDC, the National Council, is widely expected to agree in favour of joining a unity government, as outlined by Monday's SADC summit on Zimbabwe.
MDC leader Morgan Tsvangirai has reportedly agreed in principle to join the inclusive government, subject to the resolution of outstanding issues that he described as 'work in progress.' Negotiators from the three parties were expected to meet late Thursday to resolve some of these issues.

The coalition power-sharing scenario has been in limbo so long it's surprising the pole isn't covered in vines. Mugabe and his Zanu-PF network has played the MDC like a violin and kept them out of power through intimidation and murder during the elections and now through endless negotiations. If Mugabe and his henchmen - like "Dr" Gono - put as much thought and skill and effort into improving the economy as they have in destroying the MDC Zimbabwe would be in clover again.

'Tsvangirai could be asking himself, will these people throw away their 28 year-old culture of flouting the rule of law, of abusing human rights or disregarding the constitution,'

Basildon Peta, a Zimbabwean journalist based in South Africa, told us Tsvangirai said the three issues on which Mugabe had conceded ground were the appointments of provincial governors, national security legislation and passage of constitutional amendment 19, giving legal effect to the September 15 unity agreement. There are reports the appointments that have already been made of the Reserve Bank Governor and the Attorney General will be reversed, and then dealt with by the inclusive government after its formation.

[UPDATE--