War on Cash Zimbabwe Edition

If there should be on template as to what happens with, or the possible ramifications of, the war on cash (also "financial inclusion"), one just need to turn to Zimbabwe’s current dilemma.

Zimbabwe’s economy suffered from the second worst hyperinflation in the world in 2008 with the doubling of prices in about 24 hours. With access to credit shut, the country’s central bank Reserve Bank of Zimbabwe (RBZ) resorted to the financing of the cash strapped government’s boondoggles by destroying her currency (Zimbabwe dollar). The average Zimbabweans were compelled to dump the local currency and use foreign currencies such as US dollar, the euro and or South African rand instead. The Zimbabwean dollar was reduced to non currency uses.

Fast forward today. Once again, Zimbabwe’s central bank (RBZ) has reportedly been at war with cash. But this time with the limited ability to "print" money, the RBZ has resorted to different means: they implicitly accuse those who don't use banks for lack of patriotism and may even have forced banks to limit the public's access of bank ATMs!

From AllAfrica.com (bold mine)

AN exasperated Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has told Zimbabweans that it "a national responsibility for everyone" to use cards when transacting as the country's cash shortages deepened this week. 

Mangudya also hit out at business persons who don't bank their money, opting to keep daily takings at home as a recent order for tobacco farmers to be paid through banks failed to alleviate the liquidity crisis.

The RBZ chief blamed civil service salary and bonus payments for the cash shortages.

But but the opposition People's Democractic Party (PDP) recently insisted that the "cash crisis is because there is no production and real activity in the economy" with the key sectors having effectively "collapsed".

"I ... urge people to use point of sale when transacting," Mangudya was quoted as saying by State media Tuesday.

"It is a national responsibility for everyone; especially at a time we are not in a position to print money. There are local businesspeople that do not bank their daily takings, preferring to keep the money in safes at home, fuelling cash shortages."

Zimbabwe ditched its then virtually worthless local currency in 2009 opting, mainly, for the US dollar and, in the process, denying the RBZ the ability to 'print' - a key monetary policy instrument for boosting the amount of overall money in the banking system.

Local banks were this week reportedly limiting withdrawals and disabling ATMs and the ZimSwitch system.

Mangudya said he was aware depositors were struggling to access their funds.

Zimbabwe’s episode represents just another sign of how governments have become so desperate for them impudently confiscate people’s resources through a variety of means. 

For developed nations, such has been channeled through ZIRP and NIRP and now to the war on cash or the regulation of currency, thus transactions. Eventually, "financial inclusion" will morph into "financial exclusion" as Zimbabweans has exhibited.