We frequently cite Zimbabwe because it has been a living example and the epitome of how government policies can, out of political motivations, deliberately cause the destruction of a nation’s currency and its aftereffects to its markets and economy.
Bizarrely, just last April, Dr. G. Gono, Governor of the Reserve Bank of Zimbabwe, or Zimbabwe’s central bank lauded the US and UK in his Zimbabwe’s Monetary Policy Statement (HT: FT Alphaville) for following his footstep.
Quoting Dr. G. Gono (all bold highlights his)
``As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.
``That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide.
``Yet there are telling examples of the path we have taken from key economies around the world. For instance, when the USA economy was recently confronted by the devastating effects of Hurricanes Katrina and Rita, as well as the Iraq war, their Central Bank stepped in and injected life-boat schemes in the form of billions of dollars that were printed and pumped into the American economy.
``A few months ago, the USA economy confronted a severe mortgage crisis, which threatened to spark an economy-wide recession. The USA Central Bank again responded by injecting over US$160 billion between December, 2007 and March, 2008, to provide impetus to the American economy and prevent a worse crisis from happening.
``A look at the recent developments in the UK equally reveals how increasingly, leading central banks in the global economy are bailing out troubled economic sectors to achieve macroeconomic and financial stability.
``Faced with a yawning threat of systemic bank failures on the back of the aftermaths of that country’s mortgage crisis, the Bank of England was directed by its Government to intervene by providing a £50 billion lifeline to the UK’s banking sector.
``Here in Zimbabwe we had our near-bank failures a few years ago and we responded by providing the affected Banks with the Troubled Bank Fund (TBF) for which we were heavily criticized even by some multi-lateral institutions who today are silent when the Central Banks of UK and USA are going the same way and doing the same thing under very similar circumstances thereby continuing the unfortunate hypocrisy [italics-mine] that what’s good for goose is not good for the gander.
``Those who yesterday did not see the interconnection between sanctions and the politics of this country as they sought conventional and dogmatic textbook methods of moving this economy now have good cause to reflect on these examples of quasi-fiscal interventions by the central banks in the USA and the UK and review their dogmas in the interest of adopting more flexible and dynamic approaches [italics mine] informed by the exigencies of the economic situation on the ground.
``Our economy is and has been in trouble for over ten years and our extraordinary interventions by whatever name have helped to keep the wheels of this economy moving.
``Even though our efforts have been criticized and derided clearly for undisguised political reasons, we are proud that we had the courage to do something that made a positive difference when it would have been far too easy for us to appear reasonable by doing nothing and thereby make the situation worse.
``As Monetary Authorities, we commend those of our peers, the world over, who have now seen the light on the need for the adoption of flexible and practical interventions and support to key sectors of the economy when faced with unusual circumstances.
``Of course, in the short-term such interventions are without doubt inflationary but in the medium to long-term they trigger and propel economic growth and development that everyone craves for.”
Our comment:
Well, Dr. Gono should be exceptionally pleased to know that his peers have since been gradually and methodically assimilating his paradigm, albeit in a developed economy version and as showcase of the manifold tools available to the modern banking system.
Where Dr. Gono gloats, ``we are proud that we had the courage to do something that made a positive difference when it would have been far too easy for us to appear reasonable by doing nothing and thereby make the situation worse.”
Making a positive difference?
We refer to this top-10 “worst list” article where Zimbabwe is ranked the worst currency of the world.
Why?
Because $1 USD = 642,371,437,695,221,000 Zimbabwean Dollars!
According to top10-list.com, ``It's hard to keep track of just how fast the Zimbabwean dollar has fallen since the government reinstated electronic parallel market transfers on Nov. 13, but even before that the currency of Zimbabwe was the most worthless in the world.``While the official rate on Monday was 19,393.94 Zimbabwean dollars to the $1 USD, the old mutual implied rate, generated from comparing the Zimbabwe and London stock exchanges, valued the currency at more than 642 quadrillion to one.
``When the currency was revalued this summer, an egg cost about $35 billion Zimbabwean dollars.”
Zimbabwe’s currency is losing value almost every minute, and that’s the positive and speediest difference!
Well for the list of the other worst currencies…
2nd worst currency $1 USD = 35,000 Shillings
3rd worst: Turkmenistan $1 USD = 24,000 Manat
4th worst, Vietnam $1 UDS = 16,975.00 Dong
5th Sao Tome and Principe $1 USD = 14,350 Dobra
6th Indonesia $1 USD = 11,198.40 Rupiah
7th Iranian Rial $1 USD = 10,179 Rial
8th Laos $1 USD = 8,640.75 Kip
9th Guinea Franc $1 USD = 5,115.00
10th Paraguay $1 USD = 4,615.00 Guarani
Read the details here
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