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Gold coins: Broadening and cementing economic confusion

01 Jul 2022 at 07:24hrs | Views
THE Reserve Bank of Zimbabwe really loves to lie to the people and then start believing its own lies.

This thing of gold coins to preserve value does not make any economic logic and I will say why.

First, Zimbabwe is already using its gold to import critical supplies and paying local needs.

It is not exactly feasible that the authorities have excess to just make it float around to use it to cause savings and preserve value.

Second, our challenge is forex. Why would a central bank make money float around instead of acquiring forex by selling the gold? I believe it will be a very irrational analysis of opportunity cost.

Third, Zimbabwean workers are earning peanuts and the unemployed have challenges with investment alternatives.

The real challenge for most is that their incomes are so paltry to even feed themselves adequately to even think of saving using coins.

This product is not for the generality of the people, neither is it for corporates.

Fourth, no company will survive in a 200% inflation environment by keeping its money in coins that have an annual return of 30%.

Money must sweat, yet these coins are to preserve value. Companies desire to increase value not preserve it.

Zimbabweans really love complex things. We just need decent policies and people to do just what every country in the world is doing.

Gold coins, United States dollars and Zimbabwe dollars in just one economy for what?

The country needs to have a currency that works, not to have an additional currency called gold coins.

While gold coins are expected to be a medium to save and preserve value as an alternative to the US dollar, and not a currency, no corporate or individual at the moment and in this environment has pleasure to preserve value instead of growing it above inflation in hundreds.

The challenge for the majority of workers earning peanuts and the unemployed is not lack of saving alternatives, but that they do not have enough income to even feed themselves.

For corporates, I see limited value in these gold coins. A finance director who keeps gold coins which may yield 30% per annum in a country with inflation of 191% will not be quite good at treasury since this is Zimdollar denominated. In any case, money must be made to sweat, not to be kept in safes.

It would help if it was a medium of exchange which will make our country have three currencies such as gold coins, US$ and Zimdollar with multiple exchange rates like forex auction, interbank, parallel, EcoCash, cash, transfer, etc.

There is a lot of confusion to it to comprehend anything. It is far better to do the basic like everyone else: To just have a currency.

The Kruger rand concept, which these gold coins intend to imitate were based on trust, which is non-existent in the Zimbabwean scenario.

This lack of trust is so because depending on outcome of this experiment gold coin, investors will face a plethora of new rules and statutory instruments.

No one trusts the Reserve Bank and it is imperative to start from there by answering the question of how we can make people trust the central bank.

Who can trust a person who did not resign after they said they would make the Zimbabwe dollar equivalent to the US dollar? Who trusts a liar to superintendent over a central bank?

Everywhere in the world, people go to bank their money, get interest, withdraw it, invest it, obtain credit cards, transfer it, borrow and so forth.

Is it not the Zimbabwe we must have? We do not need all these complexities. One must measure success just on this basic.

Why Zimbabwe cannot be a normal economy is because besides our politics not being right, we attempt to solve simple problems using complex solutions.

Anyone who uses common sense will tell you that we need just one currency, floating exchange rate, financing long-term projects with long-term finance; and not print money.

We should disabuse ourselves of the notion that money will come without growing the economy.

Productive sectors should be funded, there is a need for a new breed of investors.

Zimbabwe should reject over reliance on primary industry, have proper innovation and funding hubs and leapfrog regional peers on fourth industrial revolution.

As long as we are a net importer and demand for US dollars will not recede; and as long as we have three currencies, the bad money will die.

Where is this gold when it is already used to import critical supplies and the balance is being smuggled out? There is no gold to just use as store of value.

The world over has moved to fiat currency, that is based on trust and we are attempting to move back to gold standard.

We need to grow our minds to think simple ideas. If I cannot explain money to my grandmother or child, then it is not money.

Money must be simple to anyone, not having Zimbabwe dollar, United States dollar, gold coins then EcoCash rate, bank transfer rate, cash exchange rate, interbank rate, auction rate, gold coin rate and so forth. It shows failure.

Let us have a broad economic discussion with industry, government, workers, peasants and unemployed for a new social contract.

Source - NewsDay Zimbabwe
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