Now Zimbabwe talks of a gold standard while warning of U.S. dollar devaluation
Zimbabwe’s Central Bank governor has gone on record as warning about the
fall in value of the U.S. dollar while suggesting that his country should
move towards a gold backing for its own currency.
Author: Lawrence Williams
Posted: Monday , 16 May 2011
LONDON –
The southern African state of Zimbabwe, where President Robert Mugabe’s
dogmatic pursuit of white controlled farms, and now the mining industry,
coupled perhaps with a serious degree of ineptitude and corruption, brought
the country’s economy to its knees, is now doubting the future value of the
U.S. dollar – a currency which it has relied upon to end its disastrous
hyperinflationary episode.
According to New Zimbabwe.com – a U.K.-based Zimbabwe news portal – the
Reserve Bank of Zimbabwe’s Governor, Gideon Gono, is reported as saying:
“There is a need for us to begin thinking seriously and urgently about
introducing a gold-backed Zimbabwe currency that will not only be stable but
internationally acceptable,” Gono said in an interview with state media. “We
need to rethink our gold-mining strategy, our gold-liberalisation and
marketing strategies as a country. The world needs to and will most
certainly move to a gold standard and Zimbabwe must lead the way.”
Gono reportedly said the inflationary effects of United States’ deficit
financing of its budget were likely to impact other countries, leading to
resistance of the greenback as a base currency.
“The events of the 2008 global financial crisis demand a new approach to
self-reliance and a stable mineral-backed currency, and to me gold has
proven over the years that it is a stable and most desired precious metal,”
Gono said. “Zimbabwe is sitting on trillions worth of gold reserves and it
is time we start thinking outside the box, for our survival and prosperity.”
When a country like Zimbabwe, which has experienced one of the worst
hyperinflationary episodes ever with multi-billion Zimbabwe dollar notes
being virtually worthless (the country even printed a 100 trillion dollar
note at its inflationary peak), starts casting doubts on U.S. dollar
inflation, perhaps we should start to worry a little, although one has to
say Gono’s financial credentials are shaky, to say the least. He presided
over an inflationary period when at one time Zimbabwean inflation was said
to be running at over a billion percent a month!
But he may have a point. Zimbabwe does have excellent gold reserves,
although the country has seen its annual production decimated due to its
financial policies and, at one time, withholding payment to its gold mines
which have to sell to the Central Bank. As a consequence Zimbabwe’s gold
production dropped over a period of years to a low of 4 tonnes in 2008. At
peak the country’s gold output neared 30 tonnes. Since 2008, a relaxation
on gold sales allowing mines to sell at global market prices has led to a
revival, but still remains at less than half peak production levels.
Gono and Mugabe’s money printing policy in Zimbabwe is the prime cause of
the country’s descent into the world’s second worst ever hyperinflationary
episode, so he has a strong personal knowledge of what can happen to a
currency if the Central Bank keeps on churning out more and more paper
money. Maybe he recognises in Ben Bernanke a man after his own heart!