Zimbabwe currency depreciating at fastest rate

Zimbabwe shops stop accepting local currency
Shops in Zimbabwe are refusing to accept the local currency after it depreciated at its fastest ever rate at the weekend.

By Peta Thornycroft in Harare and Sebastien Berger Last Updated: 9:30AM GMT 27 Oct 2008

Empty shelves in a supermarket in Harare Photo: EPA
While millions of Zimbabweans are already going hungry, the move by supermarket owners, who have few goods available for customers to buy, has added to the hardship experienced by the urban population.
Most do not have access to foreign currency, such as US dollars or the South African rand, now demanded by shopkeepers for payment.
A sign outside a supermarket in Harare's wealthy northern suburbs informed the public on Sunday that, like many other shops, it would not accept cheques or debit cards, because they take too long to clear while the Zimbabwe dollar plunges hourly.
Weeping with frustration, a well-dressed woman fled the shop in tears as she was left unable to buy anything, despite having amassed Z$14 billion for her weekly shop. But even cash was useless, and the shop manager told her he was only accepting US dollars.
"I felt really terrible telling her this, she is a good customer, a really nice person, but it is too difficult to sell in local currency," he said. "We don't know how to mark up goods as the Zimbabwe dollar is worthless now."
All his goods except meat and most vegetables were imported from South Africa and, with 75 per cent tax, payable in foreign currency to the government slapped on every item, many basic items cost four to five times as much as south of the border, even with a relatively low mark-up.
"I don't even know the rate for the Zim dollar as it changes by the hour," he said. "We have no alternative but to try and stay alive by charging in US. I am really feeling the strain and I can see customers, and many are old friends, are suffering. Some of them used to be quite well off."
The country's hyperinflation is driven by the central bank creating ever more money to fund the government's activities. Even though the authorities chopped 10 zeroes off the currency in August, its interventions and regulations have created a bewildering array of black-market exchange rates.
For cash notes, which the price rises mean are in appallingly short supply despite the printing presses working overtime, on Sunday £1 was worth around Z$110,000. But for cheque transfers, £1 brought anywhere from Z$8 billion to Z$32billion.
At independence in 1980, the Zimbabwe dollar was worth more than the US dollar, but Robert Mugabe's regime has destroyed the economy, with the slide accelerating in recent years, months and weeks.
John Robertson, an independent economist, said the Zimbabwe dollar's current plunge was unprecedented. "We had seen it losing value at about 25 per cent a day, now it is losing hundreds of per cent an hour. It is now a valueless currency."
A Zimbabwean businessman said: "The Reserve Bank is looting, that is what caused this end-of-game crash. The Zim dollar lost three zeroes in a week. Now you can fly from Harare to Victoria Falls for US 20 cents."
For ordinary Zimbabweans life has become almost impossible. Bank cash withdrawals are limited to a maximum Z$50,000 a day – enough to buy two bananas from street vendors, who are still selling in the local currency, but 0.000625p at the cheque rate.
Companies are only allowed Z$10,000, or half a banana in street value.
Shops have begun refusing to accept Zimbabwean dollars in any form.
A businessman said: "When supermarkets have to start paying their workers in US dollars they will have to close. When the civil servants demand foreign currency wages, then that will be the end of the road for Mugabe."
Southern African leaders meanwhile meet in Harare on Monday for an emergency summit on Zimbabwe's political stalemate. Mr Mugabe, the opposition leader Morgan Tsvangirai and the former South African president Thabo Mbeki will discuss implementing a power-sharing agreement, although hopes for progress are slim.

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/3264644/Zimbabwe-shops-stop-accepting-local-currency.html

Comment:

The goods and assets can still be bought using foreign currencies. The US dollar and the South African rands are accepted for exchange of goods and services. However, the Zimbabwe currency is depreciating at a very fast rate. It continues to lose its buying power. The Zimbabwe government is printing money at a fast rate to keep the country going. Soon, it will be worthless and even those who are now accepting this currency will refuse to accept this currency.

Approaches in a Crumbling Economy

Robert Kiyosaki Why the Rich Get Richer

How the Financial Crisis Was Built Into the System
by Robert Kiyosaki


Posted on Monday, November 24, 2008, 12:00AM
How did we get into the current financial mess? Great question.

Turmoil in the Making
In 1910, seven men held a secret meeting on Jekyll Island off the coast of Georgia. It's estimated that those seven men represented one-sixth of the world's wealth. Six were Americans representing J.P. Morgan, John D. Rockefeller, and the U.S. government. One was a European representing the Rothschilds and Warburgs.
In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting. Interestingly, the U.S. Federal Reserve Bank isn't federal, there are no reserves, and it's not a bank. Those seven men, some American and some European, created this new entity, commonly referred to as the Fed, to take control of the banking system and the money supply of the United States.
In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States.
In 1971, President Richard Nixon signed an executive order declaring that the United States no longer had to redeem its paper dollars for gold. With that, the first phase of the takeover of the world banking system and money supply was complete.
In 2008, the world is in economic turmoil. The rich are getting richer, but most people are becoming poorer. Much of this turmoil is directly related to those meetings that took place decades ago. In other words, much of this turmoil is by design.

Power and Domination
Some people say these events are part of a grand conspiracy, and that might well be. Some people say they represent the struggle between capitalists, communists and socialists, and that might be, too.
I personally don't participate in the debate over a possible global conspiracy; it's a waste of time. To me, the wider struggle is for power and domination. And while this struggle has done a lot of good — and a lot of bad — I just want to know how to avoid becoming its victim. I see no reason to be a mouse trying to stop a herd of elephants from fighting.
Currently, many people are suffering due to high oil price, the slowdown in the economy, loss of jobs, declines in home values, increased bankruptcies and businesses closings, savings being wiped out, the plummeting stock market, and rising inflation. These realities are all direct results of this financial power struggle, and millions of people are its victims today.

An Extreme Example
I was in South Africa in July of this year. During my television and radio interviews there, I was often asked my opinion on the world economy. Speaking bluntly, I said that South Africans had a better opportunity of comprehending the global turmoil because they're neighbors to Zimbabwe, a country run by Robert Mugabe.
In my interviews, I said, "What Mugabe has done to Zimbabwe, the Federal Reserve Bank and the IMF are doing to the world." Obviously, my statements disturbed many of the journalists. I did my best to comfort them and assure them I was not an anarchist. I explained, as best I could, that Zimbabwe was an extreme example of an out of control power struggle.
After they were assured I was only using Zimbabwe to illustrate my point, I said, "If you want to understand the world economy, take a refugee from Zimbabwe to lunch." I advised them to ask the refugee these questions:
1. How fast did the economy turn?
2. When did you know that you were in financial trouble?
3. When did you finally decide to leave Zimbabwe?
4. If you could do things differently, what would you have done?

Three Approaches to a Crumbling Economy
I spoke to three young couples from Zimbabwe while I was in South Africa. Two couples were recent refugees now living in South Africa, and one couple still lives in Zimbabwe. All three couples had interesting stories to tell.

One couple said that they would have quit their jobs earlier. Instead, they hung on, hoping the economy would change. Then, virtually overnight, the value of the Zimbabwean dollar dropped and inflation went through the roof. Even though they received pay raises, the couple couldn't survive and soon depleted their savings. They left Zimbabwe by car with almost nothing. If they could've done something differently, they told me, they would have started a business in Zimbabwe and began exporting products to South Africa, so that they would have had South African currency and a bank account there before they fled.

The second couple that fled the country said they saved money and paid off their house and other debts even as the Zimbabwean dollar fell in value. Looking back, they say they would've saved nothing and gotten deeply in debt in Zimbabwe, allowing them to pay off their debt with the cheaper dollars. Instead, they fled after they lost their jobs, leaving behind their house and owning $200,000 in nearly worthless Zimbabwean dollars.

The third couple still lives in Zimbabwe. When they saw the writing on the wall, they set up a business in South Africa and, with the profits, began acquiring tangible assets in Zimbabwe. Often, they'll buy an asset in Zimbabwe and pay the seller in South African currency. They believe that once Mugabe is gone and order is restored, they'll be in a strong financial position.

Many Problems, Few Solutions
There are three major problems with the events of 1913, 1944, and 1971.
The first is that the Fed, the World Bank, and the IMF are allowed to create money out of nothing. This is the primary cause of global inflation. Global inflation devalues our work and our savings by raising the prices of necessities.
For example, when gas prices soared, many people said that the price of oil was going up. In reality, the main cause of the high price of oil is the decreasing value of the dollar. The Fed, the World Bank, and the IMF, like Zimbabwe, are mass-producing funny money, thereby increasing prices and devaluing our quality of life.
The second problem is that our economic crises are getting bigger. In the 1970s, the Fed faced and solved million-dollar crises. In the 1980s, it was billion-dollar crises. Today, we have trillion-dollar crises. Unfortunately, these bigger crises mean more funny money entering the system.

Apocalypse Soon
The third problem is that in 1913, the Fed only protected the large commercial banks such as Bank of America. After 1944, the Fed, the World Bank, and the IMF began bailing out Third World nations such as Tanzania and Mexico. Then, in 2008, the Fed began bailing out investment banks such as Bear Sterns, and its role in the Fannie Mae and Freddie Mac debacle is well known. By 2020, the biggest of bailout of all will probably occur: Social Security and Medicare, which will cost at least a $100 trillion.
Even if we find more oil and produce more food, prices will continue to rise because the value of the dollar will continue to decline. The dollar has lost over 90 percent of its value since the Fed was created. The U.S. dollar will continue to decline because of those seven men on Jekyll Island in 1910.
Granted, the funny-money system has done a lot of good — it has improved the world and made a lot of people rich. But it's also done a lot of bad. I believe somewhere between today and 2020, the system will break. We're on the eve of financial destruction, and that's why it's in gold I trust. I'd rather be a victor than a victim.


http://finance.yahoo.com/expert/article/richricher/124339

Hyperinflation: Dollar is key to Zimbabwe survival

Page last updated at 14:31 GMT, Friday, 19 December 2008

Dollar is key to Zimbabwe survival


Many Zimbabweans do not have access to foreign currency

To get (US) dollars I have to do assignments abroad… there are not many Zimbabweans who can do that
Professor John Makombe, University of Zimbabwe

Zimbabweans queue for the new $500 million banknote in Harare

Hyperinflation renders Zimbabwean dollars valueless in days. This man's wife tried to buy maize with their last dollars. But they were worthless. He was forced to beg for food for his children.

By Karen Allen BBC News, Zimbabwe
Last week the reserve bank issued a new Zimbabwean banknote - a $500m bill. Its value changes by the day, but a rough estimate of its worth now is about US $50 (£33).
Its release was enough to see a surge of people flock onto the streets and form huge queues outside the banks. Harare's pavements were gridlocked for most of the day.
But increasingly it is only US dollars that are accepted in Zimbabwe's shops. Petrol stations are among those now turning away people who offer fistfuls of local currency.
Even water bills - for what little clean water there is - have to be paid in hard US cash. And bread is now a dollar commodity in many parts of the country.

'Dollarisation'
There has been a surge in cross-border trade in recent weeks with the lifting of restrictions on US dollar transactions.
Consumer goods, food and cars are being brought across from neighbouring South Africa.

To get (US) dollars I have to do assignments abroad… there are not many Zimbabweans who can do that
Professor John Makombe, University of Zimbabwe

Supermarkets are now stuffed with food, filling shelves that just a month or so ago were empty.
These supermarkets are for Zimbabwe's tiny dollar elite - the type that drive brand new cars into the car parks as others try to fend off starvation. They only accept US dollar bills in these swanky shops.
John Makombe, professor of political science at the University of Zimbabwe, estimates that 80% of the population here has no access to US dollar bills.
"Even I sometimes don't have foreign currency and I'm a university professor. To get dollars I have to do assignments abroad," he says. "There are not many Zimbabweans who can do that."
The value of Professor Makumbe's monthly salary, he reveals, is equivalent to US $30. That is just a little more than the price of a jar of instant coffee in the supermarkets which have become a refuge of the dollar rich.
The "dollarisation" of the Zimbabwean financial system is propping up a collapsed Zimbabwean economy.
But it has created an unwieldy free market where the government, unable to control basic prices, is merely a bystander.
A shortage of change and small US banknotes is now creating a new US dollar inflation.
"Zimbabwe is like a house of cards… one puff and it could come down," says a Zimbabwe-based Western diplomat with a depressed tone. "The problem is… there isn't the puff to blow it down."
It seems to be an accurate observation. Massive food shortages, hyperinflation, cholera and continued political turmoil are a heady cocktail.
In any other country in the world, this combination might have triggered a coup. But not here. People are simply too scared.

Critics vanished
Journalists, human rights activists and other critics of Robert Mugabe's presidency have recently vanished.

Many Zimbabweans do not have access to foreign currency
More than 20 people have disappeared in just the past few weeks - people are terrified.
Reporting the Zimbabwe story is risky for all concerned - not least those on the other side of the microphone.
Not surprisingly many are reluctant to speak out - yet thankfully, some still do. Like Elliot and Molly - a retired couple now living on a small farm, whose geographical details I dare not divulge for fear they are punished for speaking to me.
"Africa needs to be responsible for its own problems," says Elliot boldly. "It's about our own mismanagement… we can't blame former colonies like Britain."
It is a sentiment that runs deep here, though few will speak openly about it.
When I arrived tensions were high following the disappearance of Jestina Mukoko - a prominent human rights campaigner and former journalist, who had allegedly been abducted.
Her safety has been playing on the minds of so many here ever since. Yet Zimbabwe's neighbours continue to offer legitimacy to Robert Mugabe.
Despite a power-sharing deal back in September, he still holds all the cards. He is revered as a liberation hero by many influential figures on the continent, with just Botswana and Kenya breaking rank and speaking out.
One political campaigner for the opposition MDC described the present climate in Zimbabwe as "coerced control" - an environment where intimidation rules.
It means that ordinary Zimbabweans, already enduring so much, may still face the prospect of worse to come - resisting the instinct to revolt with a sense of fear.

http://news.bbc.co.uk/2/hi/africa/7791404.stm