Applied Philosophy

In High Treason in Zimbabwe I suggested the introduction of a gold coin, which I called the Zimbi, to solve the hyperinflation of Zimbabwe:

The zimbi would have turned the monetary system of Zimbabwe from the weakest on Earth to the only one based on gold, thus ensuring that Zimbabwe becomes the world’s only country with a trustworthy currency. Capital would pour into Zimbabwe from all over the world and its economy would boom.

Now Reserve Bank of Zimbabwe Governor Dr Gideon Gono has suggested a plan to reintroduce the Zimbabwean dollar as a gold backed hard currency:

THE GOLD STANDARD

1.23 The gold standard is a monetary system in which money in circulation is freely and fully convertible into a fixed amount of gold. Under such an arrangement, the value of local currency is fully backed by gold. The system allows holders of local currency to redeem paper money for gold at a specified rate.

1.24 The total amount of money in the country would be fixed in relation to the amount of monetary gold. The Central Bank is only able to expand money supply if there is a corresponding increase in gold reserves.

1.25 The gold standard, which is characterised by stable exchange rates removes business uncertainties and facilitates trade and commerce.

THE CURRENCY BOARD

1.26 Under a Currency Board arrangement, Monetary Authorities only issue domestic currency, backed by foreign exchange reserves. The Central Bank issues notes and coins that are convertible into the anchor currency at a fixed rate of exchange.

1.27 Under a Currency Board, however, the country loses monetary autonomy to the anchor country.

OPERATIONAL MODALITIES OF ISSUING THE GOLD/DIAMOND BACKED LOCAL CURRENCY

1.28 Under the gold/diamond backed monetary system, Government will need to provide adequate mineral resources to back each unit of the local currency issued.

1.29 It will be critical to capacitate local gold and diamond producers in order to produce adequate mineral resources.

1.30 Government will establish an Independent Committee of Stakeholders to ascertain and certify the quantity of gold or diamonds produced to back the issuance of the local currency. This Committee would, thus produce certificates of authenticity, indicating the true levels of gold, diamonds, platinum, against which now money would be printed.

1.31 The operational modalities of the gold/diamond backed local currency issuance are as follows:

Step 1:

1.32 Diamond/Gold producers deliver to the designated delivery point

Step 2:

1.33 An all inclusive Independent Panel of stakeholders certifies the quantity of gold/diamonds produced and delivered.

Step 3:

1.34 Upon delivery of gold/diamonds the Independent Panel of experts issues gold/diamond certificates to RBZ, authorizing it to issue local currency equivalent in value to the amount of gold/diamond delivered.

Step 4:

1.35 RBZ instructs Fidelity Printers to print local currency equivalent to the value of the gold/diamond certificates and reports back to the Panel for verification and transparency,.

Step 5:

1.36 Fidelity Printers prints local currency amount equivalent to the value of gold/diamond delivered.

Step 6:

1.37 RBZ issues local currency to the Public through the Banking channels.

RESULT

1.38 The result would be smooth functionality in the country’s payments system, without the risk of over supply of money.

—Reintroduction of Zimdollar – the Defence, by Gideon Gono

Although this plan will not solve all problems and will have problems of its own, it is a thousand times better than the treasonable act of dollarisation. Reaction:

“Reserve Bank of Zimbabwe Governor, Dr Gideon Gono who has identified inflation as the country’s number one enemy and fought to give the national currency a semblance of value, has generated intense debate after he recently called for the reintroduction of local unit.

In a presentation he made in Parliament this week, Dr Gono proposed that the new currency be backed by gold or diamond production in the country, so that it has actual value, as one could have a measure of gold in exchange for money.

The reintroduction of the Zimbabwe dollar, he said, was therefore ‘not a blind return to the money printing press.’”

—Zimdollar Debate – More Than Simple Economics

Addendum

By adding diamond to gold in his plan, Dr. Gono, is confirming what I wrote in Liquidating the Debt of the United States:

Gold is the most liquid hard asset and at the same time easily manageable and transferable, but other hard assets could be mobilised by a government.