“There are good reasons to think that the nature of money is not yet rightly understood.” John Law, 1720 (with the collapse of the Mississippi Bubble)
The above qoute is valid today, given Zimbabwe does not have its own currency. Money value disappears due to failures in the management of monetary fundamentals.
“Irredeemable paper money has almost invariably proved a curse to the country employing it.” Irving Fisher, 1911
This classical economics quote brings back nightmares of hyperinflationary suffering, with prices doubling every 24 hours for Zimbabweans, around November 2008. This was the second highest ever recorded rate of hyperinflation. The worst hyperinflation recorded by any country, in this century.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes, 1920.
In the 1990's, the Reserve Bank of Zimbabwe started printing large amounts of Zimbabwe dollars(qausi-fiscal activities). This ushered in the new age of quantitative easing, now being practised by the Federal Reserve, European Central Bank and other Central Banks around the world. Do the gurus at central banks know what they are doing?
“Since the time when President Richard Nixon broke the final tenuous link between the dollar and gold in 1971, no major currency, for the first time in history, has any connection to a commodity. Every currency is now a fiat currency…” Milton Friedman, 1991
The Reserve Bank of Rhodesia, which is now the Reserve Bank of Zimbabwe, managed to escape the fiat currency curse because of sanctions. One longstanding Rhodesian record is- it was the first country to be sanctioned by the United Nations, in 1966. This, very first, 'mandatory trade embargo on an autonomous state' forced the country to pursue protectionist import substitution industrialization. The value of the Rhodesian Dollar was preserved, as imports were kept low and the majority was not catered for by: health, social or educational services.
“We very much believe that, if you have a debased currency, that you will have a debased economy. The difficulty is in defining what part of our liquidity structure is truly money.” Alan Greenspan, 2000.-
Back to modern Zimbabwe, hyperinflation destroyed a struggling industrial base. Bringing in the US Dollar obliterated liquidity ensuring industry will struggle to recover. Quantitative easing, in the western part of the world, is destroying industrial potential, by subsidizing and inflating financial assets. The growth of derivative financialization has driven liquidity into opaque 'dark pools' leaving industry short of cash investment.
Friday 28 December 2012
Thursday 27 December 2012
The First Step
'A person without a smiling face cannot open a shop' is a popular Chinese saying. A neoliberal economist cannot discern market failure, just as socialism will not stop basic human greed plus corruption. These sayings apply to Zimbabwe, as will be investigated in this Steps Series on the Zimbabwe economy.
When Jongwe (Zanu PF) came into power in 1980 they had difficult issues to wrestle with. The liberation war had destroyed rural infrastructure, a coloured majority was living in abject poverty and the South African apartheid regime was working to derail the whole of independent Southern Africa.
The governing policy document in the early 80's cherished 'Growth with Equity' for young Zimbabwe. In these early years, policy execution was challenged by limited resources and a global recession. Regardless of the debilitating droughts and resistance from Zimbabwe's influential economic players, schools were built and health was made universally accessible. This helped reverse some of the historical imbalances of the colonial era.
In hindsight, between 1980 and 1982, Jongwe performed exceptionally well. Policy generated eqaulity, Aid flowed in, and Zanu PF smiled at all the customers. Walking on both roads at the same time- the Jongwe was both socialist and capitalist-it was too good to be true.
When Jongwe (Zanu PF) came into power in 1980 they had difficult issues to wrestle with. The liberation war had destroyed rural infrastructure, a coloured majority was living in abject poverty and the South African apartheid regime was working to derail the whole of independent Southern Africa.
The governing policy document in the early 80's cherished 'Growth with Equity' for young Zimbabwe. In these early years, policy execution was challenged by limited resources and a global recession. Regardless of the debilitating droughts and resistance from Zimbabwe's influential economic players, schools were built and health was made universally accessible. This helped reverse some of the historical imbalances of the colonial era.
In hindsight, between 1980 and 1982, Jongwe performed exceptionally well. Policy generated eqaulity, Aid flowed in, and Zanu PF smiled at all the customers. Walking on both roads at the same time- the Jongwe was both socialist and capitalist-it was too good to be true.
Tuesday 18 December 2012
Zimbabwe election 2013
Politicians will continue to make promises heading into electoral season. The focus of the election is the economy. Given real unemployment hovers above 90% and poverty is rife, Zimbabweans obviously deserve inprovements in livelihood.
These elections will have violent incidents and party infighting will be evident. Zimbabwe's poverty levels make politics the easier route to subsistence and riches-this desperation is the fuel for electoral violence.
One party will argue indigenisation is the policy that will benefit the masses. This is just empty posturing as indigenisation will only benefit the politically connected.
The othe main party will argue it has an economic plan that will attract investment and increase employment. More wishful rhetoric, as the Global economy reamins mired in recession. Europe needs over $60 Trillion(USA Dollars-not defunct Zim Dollars) to support it's financial system.The USA also needs Trillions to fund its Federal expenditure. Zimbabwe, on the other hand, remains one of the least attractive places to invest and this will not change within one election cycle.
Whichever way the elections go, right through the next four years, unemployment will hover around 90% and the majority will still lack opportunity.
These elections will have violent incidents and party infighting will be evident. Zimbabwe's poverty levels make politics the easier route to subsistence and riches-this desperation is the fuel for electoral violence.
One party will argue indigenisation is the policy that will benefit the masses. This is just empty posturing as indigenisation will only benefit the politically connected.
The othe main party will argue it has an economic plan that will attract investment and increase employment. More wishful rhetoric, as the Global economy reamins mired in recession. Europe needs over $60 Trillion(USA Dollars-not defunct Zim Dollars) to support it's financial system.The USA also needs Trillions to fund its Federal expenditure. Zimbabwe, on the other hand, remains one of the least attractive places to invest and this will not change within one election cycle.
Whichever way the elections go, right through the next four years, unemployment will hover around 90% and the majority will still lack opportunity.
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