Opinion / Columnist
Is production a pre-requisite for Rand usage in Zimbabwe?
29 Dec 2018 at 09:42hrs | Views
Firstly the bond note needs to be abolished or removed from the multicurrency system.
Once you have removed the bond note, you have restored credibility in the currency (that is US$s, Rands, etc) simply because the remaining currencies enjoy people's confidence and trust. Remember the trust and confidence enjoyed by these currencies is not limited to Zim but the whole world has confidence in them as well.
Now, having restored confidence in the currency simply by removing the much-maligned bond note, then among the remaining currencies you then decide to use the rand as the pricing currency (all goods and services priced in Rands).
Remember the rand is already an approved and adopted currency in Zim. So what you are merely doing is to use it as a transactional currency and a reference currency for pricing of goods and services.
All the above has nothing to do with whether there is no production or not. In any event, production is a function of a good and a credible currency. In other words, production can increase 10 folds so long as you have put the right currency in place.
At the moment what causes Zim to produce nothing is the fact that it has no credible currency because of the distorting effects of the bond note. So production is a function of a good currency. Hence if you use the rand then production will shoot up.
The usage of the rand should be fairly simple because most Zimbabweans work in SA and they are familiar with it. There is this fallacious conventional wisdom in Zimbabwe that production is what is necessary before you have a strong and credible currency. This is a fatalistic view because the exact opposite of it is the truth. You need a strong and credible currency that people have faith and confidence in first then production follows thereafter. The value of a currency has nothing to do with production and such value is not dependent on production. Rather production is the one which is dependent on the presence of a strong and credible currency that enjoys people's confidence.
Why do you think the Bitcoin carries such a huge value? There is no production of whatsoever nature that is associated with the Bitcoin. The Bitcoin merely derives its value from the confidence and trust it receives from ordinary folks out there.
Ndlovu is an award winning economist. He writes in his personal capacity and can be contacted on collsndlovu@gmail.com
Once you have removed the bond note, you have restored credibility in the currency (that is US$s, Rands, etc) simply because the remaining currencies enjoy people's confidence and trust. Remember the trust and confidence enjoyed by these currencies is not limited to Zim but the whole world has confidence in them as well.
Now, having restored confidence in the currency simply by removing the much-maligned bond note, then among the remaining currencies you then decide to use the rand as the pricing currency (all goods and services priced in Rands).
Remember the rand is already an approved and adopted currency in Zim. So what you are merely doing is to use it as a transactional currency and a reference currency for pricing of goods and services.
All the above has nothing to do with whether there is no production or not. In any event, production is a function of a good and a credible currency. In other words, production can increase 10 folds so long as you have put the right currency in place.
At the moment what causes Zim to produce nothing is the fact that it has no credible currency because of the distorting effects of the bond note. So production is a function of a good currency. Hence if you use the rand then production will shoot up.
The usage of the rand should be fairly simple because most Zimbabweans work in SA and they are familiar with it. There is this fallacious conventional wisdom in Zimbabwe that production is what is necessary before you have a strong and credible currency. This is a fatalistic view because the exact opposite of it is the truth. You need a strong and credible currency that people have faith and confidence in first then production follows thereafter. The value of a currency has nothing to do with production and such value is not dependent on production. Rather production is the one which is dependent on the presence of a strong and credible currency that enjoys people's confidence.
Why do you think the Bitcoin carries such a huge value? There is no production of whatsoever nature that is associated with the Bitcoin. The Bitcoin merely derives its value from the confidence and trust it receives from ordinary folks out there.
Ndlovu is an award winning economist. He writes in his personal capacity and can be contacted on collsndlovu@gmail.com
Source - Colls Ndlovu
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