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 Replies: 15 / Views: 1,721 |
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Valued Member
United States
416 Posts |
I was in Zimbabwe some years ago, and as is well known the inflation was just insane. The dinner check would come, $68 million or something, and we would lay down bundled stacks of colorful bills, no one even counted them, the stack itself was the unit, and tomorrow would probably be worth even less. People were desperate for US dollars, something that would hold its value, but it was illegal to exchange them at anything other than the official rate, which meant $80 hamburgers. It was just awful. And apparently it is happening again, so now they are going to issue a gold coin, which people know will keep (most?) of its value in the future. No details on the actual coin, I wonder how small or low gold % it will have to be to be useful in regular transactions.. anyway: https://www.aljazeera.com/features/...rb-inflationEdited by TimNH
06/28/2022 9:49 pm
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Pillar of the Community
Canada
5241 Posts |
I don't see how that is going to help the average person with day to day purchases. The article talks about it being "for investors". Still it is interesting that it is being talked about. I think that coin collectors from wealthy countries would be quite interested in it.
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Moderator
 Australia
16830 Posts |
Trying to put precious metal into coins as a means of controlling inflation, simply doesn't work. The modern money market is too remote an disconnected from actual coinage for it to make any difference.
Just ask the Mexicans. They've been trying for decades to use gold and silver coins to curb inflation, hasn't worked. And the Mexican inflation problem is nowhere near as bad as Zimbabwe's.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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Valued Member
 United States
416 Posts |
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Trying to put precious metal into coins as a means of controlling inflation, simply doesn't work. Why is this? Lots of people in the US are hoarding up pre-64 silver, so that if/when hyperinflation hits, these coins will hold steady value. Seems gold & silver are global commodities with stable reliable prices, why wouldn't this work? |
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Bedrock of the Community
Australia
21788 Posts |
If silver coins are issued into circulation, as timNH has suggested, they will just be hoarded.
Mexico tried this with the 10 and 20 Neuvo Pesos (KM#553 and KM#561) in the years 1992 to 1995.
They were bi metallic, with a gold colored aluminum bronze ring and a .925 silver core.
Despite the huge numbers issued, they all soon disappeared from circulation with hoarding, and thus whole the issue was an expensive failure.
Numismatically, they are interesting, because they were the World's last coins with some silver value, to be issued into circulation.
No country has attempted anything similar since that time.
As far as Zimbabwe is concerned I expect that the gold coins, whatever their face value, would be sold through the banks at a premium over their gold value, and that some reserve World currency (such as US Dollars), would be needed to buy them
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Pillar of the Community
Australia
3831 Posts |
Precious metal in coins for circulation is something that is long gone since 1960s The problem is when metal prices shoot up more than the melt value, coins will disappear from circulation which defeats the purpose. The second is probably the more serious one - counterfeits. If you can't sort out issues with gold plated bars and fakes on ebay - you reckon common folks can tell or have scales with them? |
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Moderator
United States
188626 Posts |
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Why is this? Lots of people in the US are hoarding up pre-64 silver, so that if/when hyperinflation hits, these coins will hold steady value. Quote:
If silver coins are issued into circulation, as timNH has suggested, they will just be hoarded. Please see Gresham's law. |
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Pillar of the Community
4628 Posts |
That is hilarious, how would Zimbabwe pay for the gold? The country is on its knees, it has practically no precious metal or cash reserves.
With their inflation, the gold piece would be a silver piece in 3 weeks, then a aluminium bronze one, then steel and finally worthless aluminium in a year!
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Valued Member
United States
416 Posts |
Certainly this new coin would need to be the only currency circulated, all the old Zim dollars would need to be removed, no way they could co-exist and maintain any kind of exchange rate. Also as Princetane observes, where is the Zim government going to get the money (real money, not Zim dollars) to buy the gold needed to support an entire country's economy? I doubt they just have all this wealth lying around. Will be interesting to see where this goes.
Edited by TimNH
06/29/2022 1:28 pm
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Pillar of the Community
United States
1801 Posts |
I should have cashed in my Zimbabwe notes before the inflation got out of control  |
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Moderator
United States
188626 Posts |
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I should have cashed in my Zimbabwe notes before the inflation got out of control  |
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Valued Member
United States
416 Posts |
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I should have cashed in my Zimbabwe notes before the inflation got out of control Pauper   |
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Moderator
United States
188626 Posts |
Quote:Pauper  |
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Moderator
Australia
16830 Posts |
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Why is this? Lots of people in the US are hoarding up pre-64 silver, so that if/when hyperinflation hits, these coins will hold steady value. Seems gold & silver are global commodities with stable reliable prices, why wouldn't this work? You're talking about individual avoidance of inflation through acquiring high-value liquid commodities like bullion. The article is specifying inflation control by a government through coinage issue, to try to stop that inflation from happening in the first place. In effect, they are claiming to be trying to back their currency with physical gold. And it doesn't work, because even though they are a gold-mining country, they simply don't have enough gold to back their entire economy. Nobody does, which is why it never works any more. Zimbabwe is a resource-rich country and resource prices are booming. It shouldn't have a basket-case economy. It has a basket-case economy thanks to decades of kleptocratic rule, causing people to totally mistrust the government. Specifically, they don't trust their government to not simply turn on the printing presses and keep churning out more and more worthless money to try to pay its debts. A mistrust that is well-founded, because that indeed is what the Zimbabwe government keeps doing. Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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Valued Member
United States
416 Posts |
Thought I'd post a followup to this, the Zim gold coin has come out, 1 ounce of 22K gold, market price + 5%, so currently a $1824 coin. Not sure how this is going to help any regular folks in that country, seems they will get hoarded by rich folks and rarely traded for Zim dollars. Why not smaller denominations, or silver coins or something? Anyway - https://abcnews.go.com/Internationa...ion-87359970 |
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Pillar of the Community
Russian Federation
1557 Posts |
What? I thought they coped with their inflation by introducing US dollars into circulation.
A gold coin will not help them, and where will an ordinary worker take $1800? I think this is their earnings not for a year, but immediately for 10 years of work.
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Replies: 15 / Views: 1,721 |
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Posted 06/28/2022 8:32 pm
