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.

　

Zim Banks 101

We are all at risk. Academic economics literally ignores the real-world role of banks, money and credit. We have all heard the abstract mumbo-jumbo about a money multiplier, demand for money and other assumption based fictions, only useful for passing economic exams. 
Events like the  Great Crash of 2008 and Zimbabwe's 20 year recession demonstrate you cannot trust academic economics when it comes to money and banking.

Private banks hold the key to growth in business activity. As private banks stopped lending in 2008, the world economy stalled; in the 1990s, when Zim banks slowed lending, industrial sectors startered declining.

Banks hold two major assets: reserves at the Central Bank and loans. When the Central Bank cannot honour its 'lender of the last resort' position, high loan delinquency means private banks become operationally insolvent.

It is no surprise Zim Banks are always in trouble. Outright fraud, deliberate fund misuse  and poor lending practices have left smaller banks bankrupt. With the lender of the last resort failing to honour deposites made by larger banks,small and large banks lack the funding to support economic transformation.