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Could Zimbabwe show Africa how to find prosperity?

Section: Daily Dispatches

11:46p ET Wednesday, August 19, 2009

Dear Friend of GATA and Gold (and Silver):

The world is full of rich countries insisting on being poor -- the natural resource-endowed countries, especially the countries endowed with the monetary metals, gold and silver, countries that, like Mexico, Russia, and South Africa, allow their national patrimonies to be priced by the markets in New York and London that are rigged by the production of infinite U.S. dollars, the currency of empire.

Another such country is pathetic Zimbabwe, which is full of mineral wealth and agricultural potential, wealth and potential squandered for years under the corrupt and totalitarian regime that inflated the country's currency, the Zimbabwe dollar, into oblivion and then formal abandonment.

International pressure has forced that regime to start changing, and now the governor of the Reserve Bank of Zimbabwe, Gideon Gono, has proposed the opposite sort of currency management. In a treatise published this week in the Zimbabwean government newspaper, the Herald, headquartered in the capital, Harare, Gono noted his country's mineral wealth and recommended renewal of the Zimbabwe dollar on a fully asset-based and convertible basis -- the architecture of the old gold standard.

Gono wrote:

"It is also critical that stakeholders get it clearly that what this governor is calling for is not a blind return to the money printing press and then saying to the market, 'To hell with other currencies, here are new Zimbabwe dollars.' No, this is not what I am advocating. Rather, what I am calling for is the guarded reintroduction of the Zimbabwe dollar where such new currency will be fully backed by credible, tangible, and locally available assets, such as gold, diamonds, or platinum, among several other possibilities.

"The benefits of supporting the new currency with our own internally produced resources are that:

"-- Such a new currency will have real, tangible worth as embodied in the real assets backing it. This gives the new currency the characteristic of general acceptability as a fluent medium of exchange in goods and service markets.

"-- Given the country's proven reserves of gold, platinum, and diamonds, among several other minerals, a fully backed currency which can freely convert back to the real underlying assets at the insistence of the currency holder's wishes will have the desirable characteristic of being a legitimate store of value. In other words, the currency will have a stable value over time, given the direct link to the volume of tangible assets from the real sector."

Gono's treatise can be found at the Herald's Internet site here:

A Johannesburg (South Africa) Times story about Gono's idea is appended. The Times story is inclined to ridicule, given Gono's culpability in the ruin of Zimbabwe. And yet of course South Africa itself, struggling to rise above its history of colonial oppression and being even richer in natural resources, would be a lot richer still if it adopted an asset-backed currency system. Together democratic, rich, and self-sufficient South Africa and Zimbabwe could lead all of Africa toward prosperity and true independence.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Gono Wants Zim Dollar Back

By Moses Mudzwiti
The Times, Johannesburg
Wednesday, August 19, 2009

Zimbabweans have laughed off their central bank's proposal to bring back the local dollar as a means of dealing with the problem of "change" during transactions.

Controversial central bank governor Gideon Gono has differed with Finance Minister Tendai Biti, who last month declared he had put a "tombstone on the grave of the Zimbabwe dollar."

Gono wants to revive the dead currency and link it to gold reserves held in the country. He says bringing back the Zimbabwe dollar will make trading easier because people are struggling to find small change. "We anchor our Zim dollar to the gold available. It will not only be the Reserve Bank of Zimbabwe, but all stakeholders," Gono was quoted as saying in state media yesterday.

"We can even print gold coins. The Zim dollar can then gain, as it is anchored on gold. We need to think outside the box."

However, ordinary people and serious businesses brushed aside Gono's suggestions as retrogressive.

"Gono is mad. Can he not see how Zimbabweans have suffered under his experiments?," asked Letwine Domingo, a Harare housewife.

"We don't want the Zimbabwe dollar back. They will just print those worthless papers again," said Chino Nharo, a Harare worker.

The Zimbabwe dollar was the primary driver of record inflation experienced during the meltdown of the economy. Inflation reached a record 230,000,000 percent before the multi-currency system was adopted six months ago.

Industry Minister Welshman Ncube told Business Times this week that the multi-currency regime was up for review at the end of the year.

President Robert Mugabe is keen to see the return of the Zimbabwe dollar.

The unity government has no money, a situation that can only be remedied by increased production.

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