In Gold We Trust
The ability of having a stable price, has great value. Today the US Dollar is entirely based on its reputation and the threat of harsh and the certainty of punishment for those who refuse to use it.Today the US Dollar dominates as the standard in the financial sphere. If your country can not get US Dollars it will not run well. The US Dollar got its dominance when it was convertible to gold. The Korean War and Vietnam War lead to the Federal Reserve printing many more Dollars than the gold to back them up. Richard Nixon ended the gold standard on 15 of August 1971 because of the pressure on the US gold reserves. In 1974 the US was the number one buyer of oil. The US and Saudi Arabia agreed all oil transactions should be in US Dollars, including reserves of the US dollars made having to go through North American financial systems that run on US Dollars. That is how black became the new gold and the Petrodollar was born. In 1975 The Organisation of the Petroleum Exporting Countries OPEC was taken hostage by the Petrodollar. This world wide demand for US Dollars allows the US over print Dollars to fund the government spending without the discipline imposed by the gold standard.
We are in an economic revolution. The Chinese invented paper money in the seventh century today China is the number one buyer of oil. The Petroyuan is coming, mid 2017 China and Russia agreed to oil purchases to be made in Yuan. Iran, Angola and Venezuela now use the Petroyuan. In 2018 the Chinese assured the sellers that the futures are backed by gold. The sellers can exchange their yuan denominated futures in to gold whenever they want.
The Maddening Punishment
Sisyphus was punished by Zeus to roll an immense boulder up a hill only for it to roll down when it nears the top, repeating this action for eternity. Zimbabweans have been heavily pressured to hustle up hill for Zim Dollars and overly stressed once they find them. Inflation squanders The Zim dollar consigning Zimbabweans to an eternity of useless efforts and unending frustration. The awful story of inflation is unfolding once again. Zimbabweans may not know Gresham’s law by name but they understand the concept of good money versus bad money. The law holds that bad money drives out good money. Logically consumers will choose to use bad money over good money because good money has the potential to be worth more than its face value. Zimbabweans understand it as Mugabenomics, you can not create money out of thin air endlessly and think it will maintain value. Also known as the rate at which the cost of living goes up.
Inflation Immune Deficiency Syndrome
I.I.D.S is a disease that can afflict any currency by Self-replication becoming a victim of over abundance. The self inflicted abuse weakens the currency so much that it is no longer performant and destabilises values. This disease deactivate the attitude of saving money, prudence and trust when you have I.I.D.S. Making lending, depositing and borrowing money very very difficult and dangerous. This is unattractive for investment. As a result other currencies replace your own. If these currencies are artificially regulated by government, currency opportunists infect the streets. You may think it is lack of courage and discipline to preserve monetary stability that causes Inflation. You need more courage and discipline to pretend not to know how and why you have it. Today inflation is well understood by all governments and it is not a mistake when you have it. The job of the reserve bank of Zimbabwe is to control the money supply. It should be independent of the government. Fiscal policy pressures the reserve bank to finance government deficits and spending by over printing money.
This disorder even affects the social fabric of Zimbabwean society. Labour unions often get the blame for inflation by pushing up wages. Workers unions are slow to react to inflation they are not the cause of inflation. Their wages try to catch up but fail to even maintain the cost of living caused by inflation. The exchange rates on the streets are also blamed as the cause of inflation, but only reflect inflation. Price control and the use of force by government to limit fluctuations creates the black market. The political answer is not to say why the exchange rates and prices are so high but it is to control the prices. Price control has a standard pattern, the reduction of whatever is being controlled. People work harder when their work seems more meaningful. With price control you do less when paid less and reduce the quality of what is being produced. The price limit for maize by the GMB limits maize growing for profit. The law only permits farmers to sell their grains to the government. That is one thing government can not centrally plan for. They is no human or computer capable of setting the millions of prices properly in relation to the other prices in any economy.
The citizens unable to escape this poverty trap have demonstrated in anger. We can see their loss transforms into dehumanising others in looting. The looters attribute the pain of inflation as the evil actions of business. Their rage can not draw distinction between government and businesses. The looting is an effort to level the playground. The citizens become the aggressors targeting local businesses. In the struggle to survive businesses increase prices and rise tempers. Businesses are perceived as part of the problem and government side steps blame and deliberately exploit this warped view. Business in the minds of citizens is connected to them losing value driving them to want vengeance. This cycle makes it more expensive to operate a business in Zimbabwe. Considering the probability of risks and impact of the risks of both the inflation and vandals. Where once the market had a low economic risk and thus low supply costs. Now with higher risks, the costs of supplying the market increase. In the West high crime neighbourhoods goods cost more because of higher security costs and higher insurance costs. This has changed the economic composition of Zimbabwe making it hard to invest in capital intensive businesses or engage in long-term investments. Without a stable currency capital intensive any business maturity is hard to plan for.
Rise Of The Street Vendors
With the lack of jobs most citizens try to find opportunities with low barriers to entry. The perishable vegetables the merchants sell have more a stable value than the local currency. They are knocked down again and again by regulation and vandals. They get up every single time and try to compete again. Even if you get a job the wage can not keep up with inflation. With so much competition the innovative gears kick into a higher value chain, street foods. If only Zimbabwe was truly open economically some of these street food merchants could be better competitors for KFC etc. Zimbabwean Vendors are superstitious, about The Notorious Zim Dollar because bad things always happen when it is around.
Medication for I.I.D.S
In 2008 the US Dollar worked in Zimbabwe like a charm within days the shops were filled full of goods. The printing press was stopped because the money supply was not in the hands of the Zimbabwean government. Adam Smith the farther of economics warned of the danger government control of money has, it leads to inflation and business booms and bust. Inflation can be cured only when government demonstrates its determination to keep money supply in check. The strong temptation to overspend by the Zimbabwean government and print it’s way out is too much for the cure to work. Basing our currency to the gold standard is the Anti-replicate that will force our money supply to be stable.
In 2017 the government reverted to bartering goats for school fees for those who could not get US Dollars a good idea with limits. The Krugerrand is a gold coin, which was minted under the apartheid government of South Africa. It was used to break sanctions, by1980 the Krugerrand accounted for 90% of the global gold coin market. The Krugerrand is a example of the type of solution Zimbabwe can use to break the sanctions. The shameful thing is African kingdoms valued gold before. Today African countries have the lowest gold reserves.
Richard Nixon took the US Dollar of the gold standard and created the Petrodollar. If Zimbabwean institutions including the religious have lost dependability we can not have overnight trust for them with the gold standard. Discipline is not something this government wants imposed upon it particularly when they have enjoyed themselves for so long.The Zimbabwe reserve bank under pressure of having the gold standard will just remove it and move on. It will be another overnight opportunity for them to exploit. Zimbabweans have been short-changed burying our faith underneath unhonoured receipts. Zimbabweans misplaced their beautiful faith in the economy’s new clothes before. The resurrection of their faith will only come from seeing the fruits of their labour honoured in full. To get people and investors enthusiastic about investing in Zimbabwe, the quickest way is to denationalise money. The road map is in the book The Denationalisation of Money 1976 by Friedrich Hayek. F.A Hayek advocated the establishment of competitively issued private money. This is the ultimate solution for the problem. This may sound politically impossible but it is practically possible today. There is no good reason why government has to be the creator of currency, the private sector can create their own currencies. Governments does not put options to forward citizens, but entrepreneurs would give us menus to choose from and jobs. Today the digital age has stepped up to what he was talking about now we have digital currencies. We can try both gold coins and digital currencies and they can actually work now. Both gold standard and cryptocurrency are global currencies that increase rather than constantly decrease in value. Modern financial tools can obtain and retain their value. Even if the government and the financial establishment does not listen we need entrepreneurs to think about it. Intellectuals never out think the market, they are not solving any real problems. We the society can give entrepreneurs a chance to solve this money problem.
How To Pay For Power By Vladimir Lenin
What is a mistake without the lesson. Zimbabwe’s best teacher of Leninism was Mugabe. Once you are in office you want to remain in office. The strategy is to keep the ones who put you in office happy. You do not rule alone he can not police the country alone, can not defend the nation or build roads alone. Your power comes from paying others to act on your behalf. You need to take care of the army, take care of the police and whoever’s collecting the money. The people you should keep happy to stay in power are people involved in leadership selection, they are called the Influentials or the Selectorate. Influentials can be bureaucrats and regional leaders, you just buy them cars every election. The other group essential for political survival are called the Essentials or Winning coalition. The Essentials are the army generals, displease them and like Grace you will fall. The citizen voters or interchangeables, do not worry about their happiness is not essential to say in office. This theory applies to all governments and organisations. Depending on the nature of the system the number of constraints they face changes the way the system operates for greater or lesser effect.The less people a leader depends on to keep them in power the more powerful they are. These few people have to be drawn from a large pool of people making them easy to replace. To pay the Influentials and Essentials properly to keep them from defecting elsewhere. If you are the leader of government you rase funds by taxing the citizens as much as you can. And distribute it to Influentials and Essentials. Government Marketing Boards like the Grain Marketing Board job is to defraud farmers grain for a low price you set. For you to sell the same grain on the open market for profit higher than the tax rate. Inflation is the other way you confiscate wealth, the gold standard stands in the way of this. Buying the loyalty from a few people is easier. The loyalty of 14 million Zimbabweans, means that you need to put forward economic policies that create conditions that will lead to a high and rising standard of living. That includes a sound monetary policy to grow the economy and that is not so easy. Spending money on citizens needs is wrong if you want to stay in the job. Your rivals can promise that money to the Influentials and Essentials to replace you. In Africa it is easier to reproduce durable dictatorships and juntas. African governments never evolved from Minority rule, you are in power it is easy to stay in power. Control of violence and using violence without hesitation is political power in most of Africa. That is why Chamisa attracts the most ruthless youths willing to use violence. In this system angels that do not want to use violence like Nkosana Moyo will lose to devils that can. Buying the right people is the key to ruling. To win this devilish business your heart should match the devils. Balancing the wants of Influentials and Essentials is the priority not balancing the budget. The goal is to pay your supporters using taxation, marketing boards and inflation. The cycle goes on and on like Sisyphus. The citizens roll the RTGS up the hill only for it to roll down again the next day. You take the foreign currencies and short-change locals with the metaphorical money. That is the business, the ceasing of hard earned US Dollars by enforcing all payments to be made in RTGS. In the absence of the gold standard or any standards. Forcing the exchange of US Dollars into the metaphorical money you have printed. After hoarding the US Dollars you have not earned you pay your Influentials and Essentials. You can only get taxation and the use of RTGS through the threat of violence. After paying your Influentials and Essentials with some of the the US Dollars now you can buy your Lamborghinis, Ferrari’s and Mercedes-Benz with the change. Most International bankers do not care if those US Dollars came from the proceeds of immoral acts, the US Dollar is in demand. They are in business just like the churches.