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Generational Dynamics Web Log for 7-Oct-2018
7-Oct-18 World View -- Zimbabweans on panic buying spree as 'bond notes' crash

Web Log - October, 2018

7-Oct-18 World View -- Zimbabweans on panic buying spree as 'bond notes' crash

Bond note currently on the path to inflation or hyperinflation

by John J. Xenakis

This morning's key headlines from GenerationalDynamics.com

Shops in Zimbabwe have bare shelves after panic buying
Bond note currently on the path to inflation or hyperinflation

Shops in Zimbabwe have bare shelves after panic buying

Zimbabwe Bond Note

Zimbabwe Bond Note

Shops in Zimbabwe have bare shelves as people, fearing a new round of hyperinflation like the one in the 2000s decade, are panic buying beer, bread, cooking oil, and other essentials.

Pharmacies have run out of medication for diabetic patients, high blood pressure patients. There are long queues of cars at petrol stations, with drivers hoping to get petrol before the station runs out.

The panic was triggered when Zimbabwe's "bond note" currency crashed to 2.5 bond notes to the dollar, at the end of a week when the government imposed a new 2% tax on all electronic transactions. The result all week was protests and panic over the price increases and shortages of goods.

Zimbabwe's central bank governor on Saturday John Mangudya blamed himself for the panic:

"The problem is that we did not explain things. This economy is a sentiment driven economy so we need to communicate more with the society."

Mangudya, told reporters that people should not be worried and that he expected an improvement in the next 48 hours.

At the same time, there is a new cholera epidemic in Zimbabwe, and 49 people have died so far. Independent Online (South Africa) and Reuters and Eyewitness News (South Africa

Bond note currently on the path to inflation or hyperinflation

Readers may recall that in 2016 then-president Robert Mugabe introduced a new currency called the "bond note." Each bond note would be worth exactly one US dollar. This was necessary because Zimbabwe's banks were running out of US dollars with with to purchase imports.

In the 1990s, Zimbabwe used to be the breadbasket of southern Africa, growing much more food than the country needed and exporting the rest. Then in 1999 Robert Mugabe instituted a "land reform" plan just like the one that South Africa and Namibia are planning are now planning confiscating white-owned farms and giving them to his cronies in the Shona tribe who knew nothing about farming. Within ten years, Zimbabwe was an economic disaster, with mass starvation, a worthless currency, and massive million percent inflation.

By 2009 the Zimbabwe currency was more worthless than toilet paper, and so the US dollar became the official currency. But Mugabe continued with his destructive racist policies, and by December 2016, Zimbabwe was running out of US dollars. So Mugabe introduced the bond note, with each bond note worth $1.00.

This cause large street demonstrations by Zimbabwe's public, because they knew that the bond notes would suffer the same inflation or hyperinflation that Zimbabwe's original currency did. But Mugabe promised that wouldn't happen, since no more than $200 million in bond notes would ever be printed, so hyperinflation was impossible.

During 2017, Zimbabwe's central bank printed more and more bond notes, and by August 2017, the value of the bond note fell 50% compared to the US dollar. The central bank announced that it would print another $300 million in bond notes, bringing the bond note total up to $500 million, or half a billion.

Since then, Robert Mugabe has been ousted, and has been sent to his palatial farm, where he has plenty of money at his disposal. Zimbabwe now has a new president, Emmerson Mnangagwa, who is left to clean up the 40-year mess that Mugabe left behind. So far, things have only gotten worse. Maybe the Chinese will give him some money if he sells them a part of the country. Daily News (Zimbabwe) and Bulawayo24 (Zimbabwe) and News24 (South Africa, 3-Aug-2017) and eNews Channel Africa

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(Comments: For reader comments, questions and discussion, see the 7-Oct-18 World View -- Zimbabweans on panic buying spree as 'bond notes' crash thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Oct-2018) Permanent Link
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Shops in Zimbabwe have bare shelves after panic buying

Bond note currently on the path to inflation or hyperinflation

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Generational Dynamics Web Log for 7-Oct-2018
7-Oct-18 World View -- Zimbabweans on panic buying spree as 'bond notes' crash