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The Sharp Shooter
Essentially, there is nothing wrong with bond notes as long as they are printed in a country with gold reserves – enough to back them up.
While well-meaning citizens may be comfortable with measures that Government takes, the central bank is a hard sell after Dr Gideon Gono presided over hyperinflation and round-the-clock printing of Zimbabwean dollars.
Agreed the bottom-line of the squeeze that has resulted in the cash crisis are the sanctions that have been systematically and meticulously imposed by the United States, United Kingdom, Europe and Australia.
However, to try and find a solution in the printing of bond notes is rather, in my opinion and that of many others, ill-advised.
I remember Finance Minister Patrick Chinamasa once said we overcame the 2008 crisis by introducing a multi-currency system in which we used the enemies’ money, and this derailed the regime change agenda because we used the enemies weapon as our own.
During hyperinflation, the enemy attacked our currency to such an extent that it became worthless and no matter how much faith we had, were were disappointed as the months went by until we finally realised we just had to let it go.
Our currency had become a gun without bullets, a gun that could not shoot.
It was the enemies’ guns that we took up to defend ourself.
But it seems once again ammunition is fast running out.
Dr Mangudya should know that the enemy is waiting with bated breath for us to once again use our own ammunition because the enemy knows from experience how to destroy it.
The enemy mastered the art of destroying our currency and the moment we try to reintroduce it the enemy is going to have a field day.
In economics, or let’s say in fiscal and monetary studies, there is something called Gresham’s Law.
The essence of this monetary principle is that “bad money drives out good money”.
In currency valuation, Gresham’s Law states that if a new bond note (“bad money”) is assigned the same face value as an older hard currency note which is backed by a higher amount of precious metal (“good money”), then the new bond note will be used while the old hard currency will be hoarded and externalised until it disappears from circulation.
What this means is that very few will bank “good money” and banks will simply disperse “bad money”.
All the good money will find refuge in a parallel market and will be banked in external banks.
What is worse is that all the bad money is going to be withdrawn as good money through MasterCards and Visa cards in foreign countries and it will be consumed there.
We will import commodities using MasterCards in foreign lands and sell them locally for “bad money”.
And the cycle of withdrawing “bad money” as “good money” in foreign lands will continue.
Eventually, we will be forced to print more and more “bad money” to replenish the diminishing supplies withdrawn abroad.
There will be no production here, just consumption.
Let me give an example. Coins were first made with gold, silver and other precious metals, which gave them their value.
Over time, the amount of precious metals used to make coins decreased because the metals were worth more on their own than when minted.
If the value of the metal in the old coins was higher than the coin’s face value, people would melt the coins down and sell the metal.
Similarly, if low quality good money is passed off as high quality good money, then the market will drive down prices because consumers won’t be able to determine goods’ real value.
Likewise, how is this nation going to realise the value of an American dollar note if its value is equated to bond notes which we print here?
Soon we are going to have an acute shortage of hard currency.
Do not give our enemies leverage Dr Mangudya.
Make more bond coins if you will, but desist from printing bond notes because that is essentially bad money.
In his masterpiece titled “A Man of the People”, celebrated Nigerian author Chinua Achebe remarked: “Some political commentators have said that it was the supreme cynicism of these transactions that inflamed the people and brought down the government. That is sheer poppycock.
“The people themselves, as we have seen, had become even more cynical than their leaders and were apathetic into the bargain. ‘Let them eat,’ was the people’s opinion, ‘After all when white men used to do all the eating did we commit suicide?’
“Of course not. And where is the all-powerful white man today? He came, he ate and he went.
“But we are still around. The important thing then is to stay alive; if you do you will outlive your present annoyance.
“The great thing, as the old people have told us, is reminiscence; and only those who survive can have it. Besides, if you survive, who knows? It may be your turn to eat tomorrow. Your son may bring home your share.”
There is pessimism everywhere and it will persist and our enemies will ululate unless we do away with the idea of this bad money and let the good money be, little as it may be.
Dubulaizitha!
Online Reporter