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Presenting The Latest Country To Lose Confidence In The Dollar...

Tyler Durden's picture




 

Submitted by Simon Black of Sovereign Man blog,

Zimbabwe. You remember those guys, right?

The country’s plight with its currency became world famous, the butt of untold jokes in economic circles. At its height, hyperinflation in Zimbabwe reached nearly 90 sextillion in 2008.

That’s a 9 with 22 zeros.

To put it in context, if you had 90 sextillion grains of sand, you could cover the entire surface of the earth all the way to the outmost layers of the atmosphere.

Then, in April 2009, the government effectively abandoned the Zimbabwe dollar. The US dollar became the official currency for all government transactions, and US dollars, British pounds sterling, euros, and South African rand became the most widely used tender in circulation.

I’ve traveled to Zimbabwe frequently; they have some of the best stories you could ever hear about standing in line at the banks with wheelbarrows, and using stacks of paper currency at home for toilet paper or furniture.

Given that Zimbabwe is literally THE poster child for hyperinflation over the last half-century, one cannot understate the irony of their latest announcement.

Just yesterday, the government there announced that the Chinese renminbi (among other currencies) will become legal tender in Zimbabwe.

This is big news. As we have discussed so many times in the past, the current fiscal and monetary antics in the United States are absolutely no different than what Zimbabwe employed several years ago.

Zimbabwe printed its currency in nearly infinite quantities. So has the United States. The only difference is that the US dollar is readily accepted around the world thanks to good ole’ American credibility that was built by previous generations.

But that credibility is rapidly deteriorating. And everywhere you look, there are obvious signs that the rest of the world is quickly moving on from the dollar.

Central banks around the world are stocking up on gold. Major powers like China and Russia are calling for a new reserve currency. And a number of nations (Zimbabwe is the latest) have already begun to use other currencies like the renminbi for international trade and central bank reserves.

It’s happening. And it’s one of those things that will play out like what Hemingway wrote about going bankrupt: gradually, then suddenly.

The dollar’s share of global reserves has slowly fallen from roughly 75% in 2001, to just over 60% today.

But the world will eventually reach a bifurcation point where investors, foreign governments, central banks, etc. panic and start rushing for the exits.

It’s something that could happen tomorrow. Or five years from now. No one knows. But rational, intelligent people shouldn’t be waiting around for it to happen.

I very strongly recommend that you take a portion of your savings and move them into real assets– precious metals and productive land are the most obvious. But even things like collectibles or nonperishable goods (like ammunition) would be preferable to US dollars.

Then there’s other currencies that you can hold. Right now, the Norwegian krone has the strongest fundamentals in the world as it is backed by the most solvent central bank on the planet.

The Hong Kong dollar is also an interesting option because it minimizes your downside currency risk while providing protection against the US dollar’s deterioration.

 

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Thu, 01/30/2014 - 15:29 | 4384948 Theta_Burn
Theta_Burn's picture

Who Cares?

 

Thu, 01/30/2014 - 15:29 | 4384950 fonestar
fonestar's picture

If Zimbabwe adopts the Bitcoin they will be the richest nation on Earth.  Either way, the world is going on a bitstandard.

Thu, 01/30/2014 - 15:31 | 4384957 Say What Again
Say What Again's picture

Hmmm is the US dollar worth less than cardboard?

Thu, 01/30/2014 - 15:33 | 4384967 nuclearsquid
nuclearsquid's picture

Call me crazy, but for some reason I think Zimbabwe will never be the richest nation on earth...  I downvote you, fone.

 

Thu, 01/30/2014 - 15:34 | 4384975 fonestar
fonestar's picture

Satoshi said, "and the last shall be first!"

Thu, 01/30/2014 - 15:45 | 4385011 hedgeless_horseman
hedgeless_horseman's picture

 

 

The Hong Kong dollar is also an interesting option because it minimizes your downside currency risk while providing protection against the US dollar’s deterioration.

Simon, are you high?  If the USD goes down, the HKD will get killed versus the Renminbi.

Thu, 01/30/2014 - 15:46 | 4385025 fonestar
fonestar's picture

fonestar hopes you guys know he's been collecting all the junk you've been giving him, melting it down and using it to construct a statue of Satoshi at 8 Broadway.

Thu, 01/30/2014 - 15:51 | 4385056 TruthInSunshine
TruthInSunshine's picture

Simon Black is an idiot, and every time ZH hosts one of his essays, it takes a hit to its status.

Nowhere does it state Zimbabwe is not taking USD. In fact, I'd be willing to net that USD are preferred in their black market vs the Yuan, especially since I have a client who in the lumber business who is IN AFRICA at the moment.

As a comedic kicker, the sign in the picture captioned specifically says "No ZIM dollars"

Thu, 01/30/2014 - 15:58 | 4385071 Levadiakos
Levadiakos's picture

Got me a wad of them counterfit hundos and spreading more of them around east Africa than flies in a Turkish meat market

Thu, 01/30/2014 - 15:59 | 4385106 TruthInSunshine
TruthInSunshine's picture

Simon Black is living the high life in his Emerging Market "Safe Havens."

Thu, 01/30/2014 - 16:10 | 4385140 Levadiakos
Levadiakos's picture

They love Mr. dollar Bill in blackest Africa. Any kind. Photocopies accepted no problem. Life is good yes sir

Thu, 01/30/2014 - 16:18 | 4385191 kito
kito's picture

guys like simon can miraculously cure the effects of the red pill. i have big problems with the fact that i agree with this clown in any way shape or form. shit man, id almost rather go back in time and listen to ol grandpa warren. at least my stock portfolio wouldve been improved over the last 4 years. 

Fri, 01/31/2014 - 02:55 | 4386990 mclant004
mclant004's picture

I work with 15 Zimbabwe ns and just did a quick mini poll.  Concensus is the dollar is king and rand second. No other currency is used commonly.  Of course this could change, but thats where it stands at the moment

Thu, 01/30/2014 - 15:52 | 4385061 Skateboarder
Skateboarder's picture

I can virtually see the constuction from my window.

Thu, 01/30/2014 - 15:57 | 4385064 Levadiakos
Levadiakos's picture

Got cardboard suitcase jammed with photocopied hunders and wiping the face of Dar es City with them got me busier than a chigger at an Alabama picnic

Thu, 01/30/2014 - 17:02 | 4385425 SAT 800
SAT 800's picture

busier than a chigger at an Alabama picnic ? Whoo, boy, you one redbone hound dog alright. Your'e slippery'r than deer guts on a doorknob.

Thu, 01/30/2014 - 16:46 | 4385350 whatthecurtains
whatthecurtains's picture

You mean a statue of James Clapper?

Thu, 01/30/2014 - 17:28 | 4385535 SAT 800
SAT 800's picture

good, good; that's fine. run along and work on your statue now, and don't bother us anymore K? Thanks.

Thu, 01/30/2014 - 16:49 | 4385370 realWhiteNight123129
realWhiteNight123129's picture

Hi Hedgeless_horseman,

First we could get teh Chinese to botch their currency if there are some problems of credit to tough, but politically it is unlikely, in that case the flow would reverse from China to HKD to USD so interest rates in China would jump (HKD works like a gold standard but pegged with the wrong thing).

 

IF the Chinese do not gut the Yuan and let the bankruptcies happen, then it is a different story. If the US goes down bad, the HKD has the option of doing what they did between 1968, and Simon is correct, that results in HKD appreciation.

There were a couple of changes between 1968 de-peg from Sterling (yet it was pegged to sterling very late), than back in 1971 repeg to USD, then depeg from the USD in 1973 and then repegged in 1983.

 

So if the USD goes down the crapper, the HKD can do what it did back in 1968 and 1973 no problemo.

 

Sat, 02/01/2014 - 21:32 | 4392411 MeelionDollerBogus
MeelionDollerBogus's picture

how's that?
Do you think the HKD will remain pegged to the USD when the Renminbi isn't?

We all know past performance is the strongest indicator of future performance, right?

... oh wait...

Thu, 01/30/2014 - 15:58 | 4385095 bluskyes
bluskyes's picture

The world is full of false prophets.

Time reveals all.

Thu, 01/30/2014 - 17:09 | 4385452 SAT 800
SAT 800's picture

Boy you ain't said nothin,  that time. Time sure as hell does reveal all. And reality is a bitch; a tiny problem for day-dreamers of all types.

Thu, 01/30/2014 - 16:30 | 4385229 BLOTTO
BLOTTO's picture

'Now consider bitcoin. Bitcoin is not a fiat currency. No government forces anyone in any way to use it. However, bitcoin is irredeemable. That is, there is no agreement by anyone to redeem bitcoin in exchange for a defined quantity of gold, silver, or any real good. With its fixed quantity, there are no arbitrages regarding the value of bitcoin. So what does this mean? What will happen?

The value of bitcoin will be set entirely by speculators. In gold, there are numerous forces in reality—i.e. numerous arbitrages—that will keep the value of gold tied to the values of every other thing in the economic universe. The value of gold in a free market is the exact opposite of untethered and arbitrary.'

http://www.kitco.com/ind/Weiner/2014-01-28-Bitcoin-Gold-and-the-Quantity...

'Satoshi Nakamoto ignored these forces, and his design does not provide for them. The value of bitcoin is not tethered by the value of labor and capital. It was assumed to be sufficient that its quantity is fixed. It is the exact opposite of sufficient—a fatal flaw based on the Quantity Theory of Money, which is flawed to its core.

The speculators will use bitcoin as a toy to generate profits (as they already do). When the value of bitcoin is rising, it will be obvious. Everyone has a chart, and they can pile on. The value can rise much farther than anyone would expect. Eventually, the chart will show a topping pattern. Momentum will dry up. The speculators can see this too, and thus will begin a collapsing wave of bitcoin.'

.

Yes, the good people of the world are winning with bitcoins.../sarc

 

Thu, 01/30/2014 - 16:38 | 4385293 tmosley
tmosley's picture

Are you seriously implying that arbitrage isn't speculation?

Thu, 01/30/2014 - 16:50 | 4385358 BLOTTO
BLOTTO's picture

Im implying more that this article is 'information for consideration.'

.

Was just catching up on some Kitco contributors (who are mostly PM bullish) and happened to be reading this particular article...

Also, their are other interesting and/or debatable points made.

 

Thu, 01/30/2014 - 17:10 | 4385460 SAT 800
SAT 800's picture

Arbitrage is not speculation. Arbitrage is taking advantage of the difference in pricing in two different markets; it operates in the present, known reality, not in the future; hence is the logical opposite of speculation; which operates in the unknown future. So now, you know.

Thu, 01/30/2014 - 15:34 | 4384973 zerozulu
zerozulu's picture

humm, they need to buy computer first.

Thu, 01/30/2014 - 15:39 | 4385003 unplugged
unplugged's picture

what came first?  the bit or the computer ?

Thu, 01/30/2014 - 16:09 | 4385120 Levadiakos
Levadiakos's picture

The Xerox machine

Thu, 01/30/2014 - 16:39 | 4385297 hedgeless_horseman
hedgeless_horseman's picture

 

 

...named after Xerox, the Greek god of obsolescence.

Thu, 01/30/2014 - 17:05 | 4385437 SAT 800
SAT 800's picture

hmm. Can I have extra time for this question?

Thu, 01/30/2014 - 17:14 | 4385473 Tall Tom
Tall Tom's picture

The Bit as it is simpler. The computer was created to process bits. Enthalpy to Entropy. Simple to Complex.

 

The Egg came first as it is a single Cell, much simpler than a complex Chicken.

 

I understand the joke. But the thermodynamic principle needs to be explained so to have you, as well as your children, well grounded in the understanding of process of life.

Thu, 01/30/2014 - 17:23 | 4385516 SAT 800
SAT 800's picture

Oh, well, that's okay, then. I understand thermodynamics; insofar as that's possible, my problem with the question is it's posed in English, and it's open to interpretations. For instance; the "bit" is a conditioned abstraction, a human construct. How can you prove that the construct wasn't provided to explain and discuss the process of computing? Remember, a computer can be a clay tablet.

Sat, 02/01/2014 - 21:37 | 4392419 MeelionDollerBogus
MeelionDollerBogus's picture

Actually, it can't, but the person using it can be & the clay tablet can be a storage device potentially for bits.

The abacus, perhaps, could be argued as a computer since it has moving parts though a human is still needed to move them.

Thu, 01/30/2014 - 15:37 | 4384979 Theta_Burn
Theta_Burn's picture

Now that makes perfect sence

Productivity will just scream with pitcoins being exchanged.

 

 

Thu, 01/30/2014 - 15:37 | 4384990 savedeposit
savedeposit's picture

There is gramofone star again, of course with a very predictable comment

Thu, 01/30/2014 - 15:39 | 4384994 unplugged
unplugged's picture

and why not?  bits are easy to "print" as well !

Thu, 01/30/2014 - 17:04 | 4385433 SAT 800
SAT 800's picture

left hand threaded wing-nut; the worst kind.

Thu, 01/30/2014 - 20:11 | 4385986 caShOnlY
caShOnlY's picture

Fonestar = Bitard

Thu, 01/30/2014 - 16:17 | 4385197 The Vineyard
The Vineyard's picture

The dollar is the only game in town.  What?  We gonna trade them in for rubbles?  I think not.

Thu, 01/30/2014 - 20:25 | 4386021 yrbmegr
yrbmegr's picture

It's pegged to the dollar, so meh.

Fri, 01/31/2014 - 01:06 | 4386871 Theosebes Goodfellow
Theosebes Goodfellow's picture

~"Presenting The Latest Country To Lose Confidence In The Dollar...Zimbabwe!"~

Why.., those thankless bastards! And considering all the things we never did for them! How's that for gratitude? /sarc

Thu, 01/30/2014 - 15:30 | 4384956 halfawake
halfawake's picture

china has been printing, too, dude.

Thu, 01/30/2014 - 15:59 | 4385101 kralizec
kralizec's picture

Egg Zachary!

And China and Zimbabwe go together like...Mao and Mugabe!

Forward!

Thu, 01/30/2014 - 16:00 | 4385117 halfawake
halfawake's picture

nice, i see what you did there

Thu, 01/30/2014 - 16:04 | 4385134 nuclearsquid
nuclearsquid's picture

they don't print with the same exceptionalism that we do.

 

Thu, 01/30/2014 - 16:58 | 4385404 halfawake
halfawake's picture

no doubt. great avatar, i think they captured one off tokyo recently.

Thu, 01/30/2014 - 20:24 | 4386023 yrbmegr
yrbmegr's picture

They have to.  They fix the exchange rate.

Thu, 01/30/2014 - 15:30 | 4384959 Bryan
Bryan's picture

Look for your friendly government to restrict or deny your ability to invest or stock up on foreign assets or PMs. 

Thu, 01/30/2014 - 15:31 | 4384960 HedgeAccordingly
HedgeAccordingly's picture

we could use .20% of Zimbabbb inflation - http://hedge.ly/1k880Ii

Thu, 01/30/2014 - 15:32 | 4384966 kaiserhoff
kaiserhoff's picture

Dissed by the laughing stock of the woild.

Say it ain't so, Moe.

Thu, 01/30/2014 - 15:34 | 4384968 zerozulu
zerozulu's picture

Time is coming for Zimbabwe to take out their million dollar notes for exchange.

Thu, 01/30/2014 - 15:39 | 4384998 nope-1004
nope-1004's picture

I don't believe confidence in the US dollar exists at all.  The reason why it hasn't hyperinflated is because the US cronies control all aspects of the financial system.  They rig the TNX, bond market, gold paper market, stock market, FX market.....

It will never hyperinflate as long as people keep playing the card game with "house wins" only cards.

 

Thu, 01/30/2014 - 15:41 | 4385009 fijisailor
fijisailor's picture

Hugo Salinas proposes silver money in Mexico.

 

http://www.silverdoctors.com/billionaire-hugo-salinas-price-gold-is-the-...

Thu, 01/30/2014 - 17:18 | 4385492 SAT 800
SAT 800's picture

I love Silver Money, and I love Mexico; spent many of my best years wasting away there in Margaritaville. Don't regret a minute of it. You go Hugo; get them silver pesos back and make the Gringos look like complete hosers. Whee, haa.

Thu, 01/30/2014 - 15:43 | 4385015 SilverDOG
SilverDOG's picture

Zimbabwe just got SMART, in currency terms.

Thu, 01/30/2014 - 15:44 | 4385023 Overfed
Overfed's picture

All I know is that I keep confusing Gideon Gono with Gordon Gano.

Thu, 01/30/2014 - 15:54 | 4385076 kito
kito's picture

really? this is what simon black is throwing at us now? that this shitball country added another currency to its "legal" list?  this article ranks as one of the biggest pieces of crap that zh has graced us with in 2014. and to think that simon wants people to subcribe to his monthly newsletter that comes with bonus chilean inflation protection bonds!!! 

Thu, 01/30/2014 - 15:59 | 4385105 post turtle saver
post turtle saver's picture

saw Simon Black, moved on

Thu, 01/30/2014 - 16:16 | 4385188 TrustWho
TrustWho's picture

This is a great phrase.......

"...American credibility that was built by previous generations."

Thu, 01/30/2014 - 17:16 | 4385490 Tall Tom
Tall Tom's picture

Say it again.

Thu, 01/30/2014 - 16:16 | 4385190 TrustWho
TrustWho's picture

This is a great phrase.......

"...American credibility that was built by previous generations."

Thu, 01/30/2014 - 17:06 | 4385431 WTFUD
WTFUD's picture

@TW, you can say that again, oh you did! Now what about doze WMD's in Zimbabwe Bay? Shouldn't we be taking NSA / DHS et al reported sightings seriously?

Thu, 01/30/2014 - 16:30 | 4385251 Urban Redneck
Urban Redneck's picture

Statistics, Damn Statistics, and Lies

Quote:
The dollar’s share of global reserves has slowly fallen from roughly 75% in 2001, to just over 60% today... I very strongly recommend that you take a portion of your savings and move them into real assets– precious metals... are the most obvious (BTW that figure only includes USD among allocated reserves)

Reality.
During the same time period (2001-2013) worldwide official f/x reserves have increased 600%, from $2 trillion to $12 trillion.
Source: https://www.imf.org/External/np/sta/cofer/eng/index.htm

Meanwhile, in February 2012 official gold holdings were 30,877 tons, and over the preceding decade central banks were net sellers of gold (over 200 tones per year avg).
Sources:
http://www.gold.org/download/value/stats/statistics/archive/pdf/World_Of...
http://www.exchangetradedgold.com/media/ETG/file/liquidity_in_the_global...

Therefore, gold is shrinking as a share of official f/x reserves faster than the USD is. If one is building an investment thesis based on an argument that one should diversify away from assets which are declining share of official f/x reserves, then . one should also reducing physical gold allocations.

Thu, 01/30/2014 - 17:54 | 4385629 DaveA
DaveA's picture

Right now, the Norwegian krone has the strongest fundamentals...

So did the Swiss franc, until its central bank decided they didn't want it to be the world's reserve currency. Don't bet on anything that can talk, and don't speculate on anything that a banker can print more of.

Thu, 01/30/2014 - 18:28 | 4385743 janus
janus's picture

china will NEVER get zimbabwe.

nuff said.

Thu, 01/30/2014 - 19:28 | 4385868 thethirdcoast
thethirdcoast's picture

"FUCK Robert Mugabe...this is DETROIT!!!"

 

Coleman Young, Mayor of Detroit 1974-1994

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