Zimbabwe’s Gideon Gono Hearts the Chinese Yuan

Below is an interesting article about the eccentric Gideon Gono of Zimbabwe.

From New Zimbabwe (bold emphasis mine)

RESERVE Bank governor Gideon Gono has warned that Zimbabwe’s nascent economic recovery is at the mercy of the United States dollar, which is facing new pressures from the Euro-zone debt crisis.

Gono says Zimbabwe should in fact be looking to the Chinese yuan as its main currency, while urgently seeking to restore its own currency which was abandoned in 2009 after a dramatic loss of its value.

Speaking in Gweru last Saturday, Gono said: “The extraordinary happenings in Europe where economic power houses in the Euro-zone have been hit by a debt crisis deserves extraordinary measures, especially here in Zimbabwe where we have adopted the U dollar as the major currency in our multi-currency regime.

"With the continuous firming of the Chinese yuan, the US dollar is fast ceasing to be the world's reserve currency and the Euro-Zone debt crisis has made things even worse.

“As a country, we still have the opportunity to avoid being caught napping by adopting the Chinese yuan as part of consolidating the country's look East policy.”

China is now Zimbabwe’s biggest trading partner, with the Asian giant absorbing most of the country’s mineral and agricultural produce.

Vice President Joice Mujuru first raised the possibility of adopting the yuan in September last year, saying it would be a “logical step” and could help solve some of the country’s liquidity constraints.

The multiple currency regime announced in January 2009 has been fraught with difficulties. Retailers are supposed to accept the Euro and the British pound but those two currencies have never caught on, with most transactions being conducted in United States dollars, the South African rand and the Botswana pula.

This serves as a noteworthy example of the pot calling the kettle black.

Mr. Gono, who ironically engineered the death of Zimbabwe’s currency, the Zimbabwe dollar, has not given up on his conceit of supposedly knowing what is best for their country, yet has the chutzpah to bash the US dollar when Ben Bernanke has simply been mimicking Mr. Gono's policies.

Zimbabweans rejected Mr. Gono’s hyperflated dollar following years of hyperinflationary depression which eventually led to its ‘abandonment’.

Yet Zimbabwe’s post hyperinflation transition exhibits a socio-economic phenomenon of spontaneous order from politically induced chaos.

One would note that following the demise of the Zimbabwe dollar, the market CHOSE or expressed preference for the US dollar, the South African rand and the Bostwana pula over the Euro and the British pound as alternative replacements for medium of exchange.

And another interesting facet is that this serves as evidence that markets are dominant over politics or that people will adjust to the conditions even outside of government’s influence.

China’s increasing trade with Zimbabwe may possibly lead to more use of the yuan, but this would depend on Zimbabweans than from Mr. Gono. The hyperinflationary episode has eroded much of the political capital of Zimbabwean government which will need to rebuilt before the marketplace will regain their trust on them.

For now, spontaneous order governs the Zimbabwean marketplace, which has impelled for a "nascent recovery" of the ravaged economy of Zimbabwe.

Mr. Gono can keep talking, but little of what he says will be taken seriously.