Economic Holy Trinity

Economic success is an outcome of team-play. It is common knowledge: a house divided against itself cannot stand. The triad of economic success is comprised of government, banks and firms. Like The HolyTrinity, these three have to follow one principle.

Economic growth is a dynamic process. Growth depends on: the willingness of firms to invest, banks credit creation capacities and government efficiency ensuring macro-economic stability. The Central Bank is the government supervised bank that ensures private banks treat customers fairly and work honestly. Backed by government, all the time, the Central Bank holds reserves and bills as assets.

When government fails completely, macro-economic instability becomes rampant. This lowers investor confidence and firms stop investing. When firms stop investing, long term cash flow is compromised and banks become less willing to lend worsening a crisis.

To counter such an occurrence, government needs to engage economic actors as partners and develop policy that benefits the trinity. The goal is win-win-win. Firms want profit, government needs tax revenue from these profits and banks see asset growth as firms stay profitable.When all is going well the Central Bank also gets higher reserves from banks and bills are honoured.

No part of the trinity is more important than the other. If one part of the triune collapses, the other two can provide support. If all parts collapse, they need to sit down and work out how to get into business. All this requires compromise and remembering the principle of economic unity:an economy works well, when all actors contribute to growth and development.

Zimbabwe Money

Reserve Bank  Of Zimbabwe

Money has a significant role in economic growth. 
Zimbabwe's recession is worsened by an absence of local money and credit. Instead of developing practical solutions to resolve the money crisis, politicians and analysts are locked in an existential power struggle.

Credit is economic money. Failing to understand this, The Reserve Bank of Zimbabwe(RBZ) printed fuelling hyperinflation. Without factories to stimulate employment and money flow, money flowed direct into pockets driving up prices.

Money prospers, when it is given as credit to firms for productive activities. RBZ hyper-inflationary printing crowded out productive investment and encouraged speculation.

Currently RBZ cannot create base money. Also, banks cannot lend given high loan delinquency levels and dismal economic performances. Lacking credit,  Zimbabwe's economy lacks the stimulus it needs to recover.

RBZ needs an operational framework to rebuild a balance sheet. This is  not permission to print base money, the bank's ineptitude would bring back super inflation. A well funded balance sheet is  needed to support banks that feed  the Zimbabwe's economy.

RBZ owes banks foreign currency and this weakens the liquidity of owed banks- meaning less funds for credit. These two predicaments indicate RBZ cannot achieve outcomes in this environment of repeating political failures. Politicians and analysts identify they is a problem, they do need to work together and resolve the crisis.