Late last month, after Greek PM Alexis Tsipras’ announcement that a referendum would be held on the terms of the country’s bailout, we noted [6] that sadly, the supermarkets in Greece were beginning to resemble those of Venezuela as Greeks, anticipating an impending shortage of imported goods, stocked up on food staples:
Many of the visuals and stories that emanate from Venezuela are to be expected, and are generally in line with the transformation of any normal nation to a socialist utopia. None however, are more poignant than the images of supermarkets and grocery stores that have been ransacked empty as a result of the collapsing currency, devastated supply chains and soaring inflation (supermarkets which have since imposed fingerprint scanners in what is no longer capital but food controls). We are sad to announce that what was once a Venezuela trademark has now transitioned to a country that until recently was among the most developed nations in the west: Greece. In clear rejection of Tsipras' plea for calm, the Greek population stormed (now empty) ATMs, grocery stores and gas stations as they scrambled to obtain, or convert, paper currency into tangible products.
Now, with a depositor bail-in looking more likely by the day, and with redenomination risk rising materially, Greece is drawing unflattering comparisons to another country which knows the depths of economic despair all too well: Zimbabwe.
Presented below is a letter from writer, blogger, and Zimbabwean Cathy Buckle [7].
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Dear Family and Friends,
Seeing pictures of hundreds of people crowded around banks in Greece desperate to withdraw their own money from the banks has sent cold but sympathetic shivers down our spines here in Zimbabwe. Greek banks closed for a week, cash withdrawals from ATM’s restricted to a limited amount per person per day is all too familiar to Zimbabweans. We know exactly how this feels: the fear, anger, despair and disbelief that goes with watching your life savings evaporating and knowing there’s nothing you can do to save it. How well we remember standing for hours at the banks and then only being able to draw out enough money to buy a single bar of soap.
Zimbabwe has the dubious honour of being able to say “been there, done that” to almost every bad governance and economic crisis you can think of. It’s been six years since Zimbabwe discontinued using the Zim dollar and began trading in the US dollar and a few other international currencies but for the last few weeks we’ve been doing all the sums again, counting the zeroes and seeing if there’s anything we can salvage from our lost life savings.
When an announcement came in June that the old Zimbabwe dollar was to be demonetized there was a frenzy of rumours that this meant a new Zimbabwe dollar was going to be introduced. A return to the Zim dollar, old or new, is still probably the biggest fear of all Zimbabweans. As bad as things are for people now, at least we have an internationally accepted currency in our pockets and not a worthless currency which isn’t backed by gold reserves, which can be printed at will by an unaccountable government.
People outside of Zimbabwe have never really understood how we woke up one morning in February 2009 and found that all our bank balances had been reduced to zero. Regardless of whether we had millions, billions, trillions, septillions or even octillions of Zim dollars in our accounts, it had all gone. Suddenly our bank balance was just ZERO and we were told to reactivate our accounts by depositing US dollars. Exactly the same thing applied to the huge piles of Zim dollars we had in boxes and bags in our homes : it had all become valueless paper, eroded to almost nothing by super-hyper-inflation and then suddenly worth ZERO.
It’s taken six years for the government of Zimbabwe to put a value on the money that turned to ZERO in 2009 and frankly for most people, who had become paupers through hyperinflation anyway, it’s a pointless exercise. The Central bank announced that bank accounts with balances up to 175 quadrillion Zimbabwe dollars will be paid a flat amount of five US dollars; yes, just five US dollars. Bank balances of over 175 quadrillion will be paid at what we are told is the UN exchange rate of US$1 for every 35 quadrillion Zim dollars. (That’s US$1 ; Z$1,000,000,000,000,000 ) Cash customers can apparently walk into banks with their old Zim dollar notes and will, with “no questions asked,” get US$1 for Zim$250 trillion. For most of us the cost of the taking old notes to the bank will be more than the US cents we get back in our pockets.
There is a “demonetization window” from the 15th June to the 30th September to exchange every 35 quadrillion Zim dollars we have into one US dollar and after that the Zim dollar will be officially dead, no longer legal tender.
The Central Bank announcement says : “Demonitization is not compensation for the loss of value of the Zim $ due to hyper inflation, it is an exchange process.” Compensation is a dirty word in Zimbabwe’s governance system and it doesn’t apply at any level from farm seizures to compulsory 51% indigenization shareholdings to loss of life savings and pensions in hyper inflation.
Looking at the conversion chart and seeing that I can get 0.04 US cents for every 10 trillion dollar note that I have, leaves my head swirling as lines of zeroes mount up on the page. Is that a trillion, quadrillion or octillion I ask myself? I decide I’d rather keep the old bank notes in the cupboard so that I never forget what my government reduced me to after they’d stolen my farm and declared my Title Deeds null and void. So that I’d never forget what bad governance could do to a nation of ten million people or how many thousands died needlessly while trying to survive Zimbabwe’s collapse.
Until next time, thanks for reading, love cathy.
