Ok, The Reserve Bank Of Zimbabwe has introduced the 10 and 20 Zim Dollar notes into the market and this isn't a surprise because such a move was inevitable given the weak monetary system in Zimbabwe. In 2016 the bond note was introduced and at that time people embraced it as it was working alongside the US dollar. The supply of Bond notes was backed by the 200 million dollar loan from African Import-Export Bank. Before I go any further I have to stress on the fact that the US dollar was imposed by the IMF as the universal currency after it was taken off the gold standard by the then President Richard Nixon so this means that nations can use the US dollar to back their currencies instead of natural resources like gold or silver.
This means that the US dollar would be just as worthless as the bearer's cheque if people around the world decided to lose faith in it, meaning that the US dollar is backed by propaganda that has been sold to all of us. But either way even if the United States prints as much fiat currency as Zimbabwe, they still have a highly productive economy compared to Zim and their currency is in demand as they are currently the 2nd largest exporting nation.
Examples of clipped coins from the Ancient Roman Times. Clipping the edge of the coin was a method of trying to create more coins with a limited supply of gold in order to increase the amount of money in circulation e.g During wars, or funding public works
So the Bond note was backed by the limited supply of US dollars reserved by the government. With time people grow skeptical, it's always happened through the ages when governments try to flood the currency supply by introducing "funny money" as Robert Kiyosaki always puts it and in Zimbabwe, people started keeping their US dollar or spent it outside the country and this meant that there wasn't a balance between the US dollar and the Bond anymore. It doesn't end there, the illegal forex dealers started flooding the streets again and they were luring people by selling off their Bond at a cheaper price. I remember ignorant me selling off US$10 dollars for 12 Bond and getting excited because I had "more money".
That was greed and it's the reason why many others like me were robbed of their money by 3rd parties until the market was flooded with more of this Bond that people have since not trusted, greed is also the reason why citizens buy into politics when promised free stuff and entitlements. Anyway, the scam went on and prices rarely went up but the bond became cheaper and cheaper so you just had to buy it on the streets then go purchase your goods with the bond, "Value for your money" you know as they always say in those supermarket commercials.
The government, just like any other government became over-ambitious and started printing more and more fiat currency until the whole game could not be sustained any longer. Finance Minister Mthuli Ncube finally admitted in October 2019 that the "Bond notes are not equal to the US dollar". The currency has gradually lost value and today the Reserve Bank launched the $10 and $20 notes to ease cash shortages and raised the withdrawal limit to $1000. Simple economics will show you that this is economic suicide because the businesses will simply raise the prices too. Haven't we seen this before, or we are just assuming that things will be a bit different this time around? We are heading to the possibility of another hyperinflation in less than 2 decades unless some miracle happens. This is the fate of all fiat currencies like the one we have in Zimbabwe.
Since the government has been able to sell the idea of money as a simple paper, all that it has to do is print more papers so that you assume that there's more "money". This is similar to the case of ancient Romans clipping the edge of the coin, "debasement".
But if there's one thing, we should give due credit to the man who invented this monetary system. Money is the most successful story that all humans believe. If I give you the brightly colored paper you give me goods and services. We don't have to know each other but when it comes to the paper we both have mutual belief. All this illustration on that paper just to play with people's minds and get them to believe that it's something precious, it's sad that financial literacy is not even taught at university. Did you know that you can create your own version of the bible then preach using it and no one will arrest you but try and print your own money and see what happens!
The difference between money and currency presented by Mike Maloney.
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