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Forum Post: Zimbabwe Bashes US Dollar, Aligns With Yuan

Posted 10 years ago on Dec. 1, 2011, 5:12 p.m. EST by nucleus (3291)
This content is user submitted and not an official statement

Zimbabwe Bashes US Dollar, Aligns With Yuan

In yet another sign that the global economy is on the verge of collapse, Zimbabwe is looking to dump the US dollar as the national currency and adopt the Chinese yuan in its place.

This is another huge vote of confidence in the US economy from a country that has experienced 79,600,000,000% inflation, where prices doubled every 25 hours.

The way they are printing them now, this could be the future of the US dollar:



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[-] 1 points by MonetizingDiscontent (1257) 10 years ago

Great Post You beat me to it! please allow me to throw some of the article up anyway.

::::Zimbabwe Bashes US Dollar, Alligns With Yuan::::



(TylerDurden) It was three short years ago that the small former British colony of Zimbabwe was spewing forth 100 trillion dollar bills. Since then, courtesy of a few trillion extra percent of inflationary RDA, the country had given up on its currency and replaced it with US Dollars. Now, the country's cult central banker Gideon Gono has made it clear he wishes to avoid another episode of transplant currency hyperinflation courtesy of his counterpart in the Marriner Eccles building and "has warned that Zimbabwe’s nascent economic recovery is at the mercy of the United States dollar, which is facing new pressures from the Euro-zone debt crisis." Yet the screaming sarcasm is the following: "Gono says Zimbabwe should in fact be looking to the Chinese yuan as its main currency, while urgently seeking to restore its own currency which was abandoned in 2009 after a dramatic loss of its value.

With the continuous firming of the Chinese yuan, the US dollar is fast ceasing to be the world's reserve currency and the Euro-Zone debt crisis has made things even worse." And the terminal slap in the face of all that is American: "As a country, we still have the opportunity to avoid being caught napping by adopting the Chinese yuan as part of consolidating the country's look East policy."

Well, if recently hyperinflating Zimbabwe is complaining about the US as being on the same path as itself, and instead wants to become a Chinese FX vassal state, perhaps alarm bells should go off somewhere. So the next time Tim Geithner is up on stage somewhere, it may be prudent for a question to be be asked: how and why is it that the world's (formerly) de facto banana republic is complaining that the next up and coming B-Rep is about to replace it in the annals of idiotic monetary policy?

From New Zimbabwe: http://www.newzimbabwe.com/business-6599-Gono%20nudges%20Zim%20towards%20yuan/business.aspx

...So all sarcasm aside, perhaps someone should be concerned that while the US is enjoying the third year of endless political bickering and deciding if this political candidate or that has had enough illicit sex, while rapidly losing all foreign influence, China is quietly but forcefully taking over the world precisely in the way that the US did in the 20th century: by becoming a primary trading partner, regionalizing its currency, and finally, a step that yet to occur, establishing CNY-denominated debt.

Does anyone still doubt what the endgame is?

[-] 1 points by Rico (3027) 10 years ago

Oh my GOD ! Whatever will we do without Zimbabwe ?

[-] 1 points by 99thpercentile (94) 10 years ago

The point is not that Zimbabwe matters. It's that they've lived through the very crisis that we're possibly going to enter. It's better to learn from other people's mistakes than make them yourself.

[-] 1 points by Rico (3027) 10 years ago

With one or two HUGE differences.... we're the world's reserve currency, and we still have the largest GDP.

As for the Yuan, see http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1322794437531&chddm=2677759&q=CURRENCY:CNYUSD&ntsp=0

Yuan was $0.1208 in 2004, now at $0.1571. Also note China just dropper her reserve requirement, so she's inflating as well ( see http://www.china-briefing.com/news/2011/12/01/china-cuts-bank-reserve-requirement-first-time-in-3-years.html ).

[-] 1 points by 99thpercentile (94) 10 years ago

Yeah well just because we are the reserve currency doesn't mean we always will be and it means that we haven't felt the pain that we should have up until this point so when the crash happens its gonna be a whole lot worse than it would have been. Kindof like how a diabetic can't feel pain in his feet so he loses his leg because he stepped on a tack and his foot became gangrenous. Yeah a lot like that.

[-] 1 points by Rico (3027) 10 years ago

Agreed. There is a move afoot to transition to the IMF's Special Drawing Rights (SDR) in place of the dollar. When that happens, our debt will be as real as Greece's (though we hopefully won't be stupid enough to abandon our sovereign currency and the ability to inflate our way out of debt rather than suffer a hard default). We CERTAINLY better start getting our house in order now.

[-] 1 points by Rico (3027) 10 years ago

I disagree, but I know I'll never convince you you're wrong, so I won't even try.

[-] 1 points by nucleus (3291) 10 years ago

I don't think you understand the concept of "metaphor".

[-] 1 points by Rico (3027) 10 years ago

Wasn't that more a hyperbole than a metaphor ?

See http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1322794437531&chddm=2677759&q=CURRENCY:CNYUSD&ntsp=0

Yuan was $0.1208 in 2004, now at $0.1571

Click the checkboxes to see what it's done vs. the Candandian Dollar, the Euro, the Yen, etc.

[-] 1 points by nucleus (3291) 10 years ago

China is a command economy, they set the value of their own currency. The value of the US dollar is set on the so-called "open" market.

[-] 1 points by Rico (3027) 10 years ago

The dollar is "open" only to a limited extent. We're the worlds reserve currency, and a huger percentage of the worlds transactions are conducted in dollars. That fact combined with the fact that people still flee to the dollar when they get scared explains why it's still holding up in spite of QE.

[-] 1 points by nucleus (3291) 10 years ago

Keep thinking that. It will increase the shock value when it collapses.

Why the Dollar's Reign Is Near an End WSJ, March 2, 2011

"In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks."

That was 8 months ago.

[-] 1 points by Rico (3027) 10 years ago

I am fully aware of the transition away from the dollar. Have you seen the timetable ? We have time, but we DO need to get moving.

Note, by the way, that the article you're linking to predates the latest blowup with the Euro. It's going to be a long time until anyone selects it as a reserve currency. The odd's on favorite is the IMFs Special Drawing Rights, and those still have a lot of dollars in them.

[-] 1 points by nucleus (3291) 10 years ago

SDR's aren't currency, they are claims to currency held (in theory) by member countries. After the $16 trillion bailout, this week's additional bailout and the fact that US debt to GDP is 99.5%, the printing presses are running FULL TIME.

Thus the original post with the $100 trillion dollar Zimbabwe note.

[-] 1 points by Rico (3027) 10 years ago

See http://tinyurl.com/7q7dky6 and http://tinyurl.com/7l4vwmr . SDR's ARE being promoted as the world's reserve currency. They are essentially the 'Bancor' that Keynes was promoting at Bretton Woods to avoid the 'Triffin Dilemma.' They would not be used by citizens per se, so in that sense they are not like the currency you and I hold, but worldwide transactions in commodities and other critical areas would occur in SDRs rather than dollars.

Yes, the printing presses are running at full bore... as they should.

[-] 1 points by nucleus (3291) 10 years ago

Failure to address the underlying problems in 2008 has resulted in the worsening of global economic conditions. Failure to address these conditions now with nationalization of corrupt banks, wage and price controls, elimination of global free markets and the re-institution of trade tariffs will only result in a much more massive and damaging collapse in the very near future.

The more effort that is put into propping up the house of cards, the less effort is put into creating the kind of solutions we need to survive.

[-] 1 points by Rico (3027) 10 years ago

I'm just not as pessimistic as you. I believe the financial system, just like society and civilization, is like a living organism that evolves over time. Each time we survive an event, we refine the system to help prevent the same problem as before. We have passed a lot of legislation to try and correct our financial DNA both nationally and internationally (see Basel III). I think we'll recover.

[-] 1 points by hchc (3297) from Tampa, FL 10 years ago

ECB announces more debt, stocks SKYROCKET!

This world is too dumb to survive..

[-] 1 points by mserfas (652) from Ashland, PA 10 years ago

Reading that article, it doesn't sound like Zimbabwe has much control over which currencies its people are using now. Nonetheless, it is a sign that China is continuing to develop a sphere of influence in East Africa - note its well-known involvement in Sudan, its development efforts in Kenya ( http://www.npr.org/2011/06/21/137185048/will-kenyan-superhighway-also-benefit-china ) and its lesser-known but to me more impressive role in wiping out malaria in the Comoros Islands ( http://development.thinkaboutit.eu/think3/post/china_clashes_with_the_west_over_the_battle_against_malaria ).

Really, this should be no surprise - Europe's appetite for colonization in Africa has long since been sated, and ever since the incident with the soldiers being dragged around in Somalia, people here have had little desire to be involved either. With substantial economic inequality and rapidly rising domestic wages, I suppose China's wealthy class will be as eager as ours to find a place to outsource labor to - given their ability to plan ahead, who knows, maybe Africa will become that place.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

Zimbabwe is a rogue state. Good governance is the solution.

[-] 3 points by 99thpercentile (94) 10 years ago

A "rogue state"? Zimbabwe had a hyperinflation because it thought that it could pay for stuff by printing money. America does the exact same thing. The only reason we've gotten away with it for so long is that up until now everybody has used dollars to trade and as a reserve currency. That is changing fast. Once we can no longer export our inflation then we will be just like Zimbabwe. Good governance is code for centralization. Well when you centralize your way out of every crisis at some point everything comes crashing down.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

Don't compare the US to Zimbabwe. They are completely nuts.

[-] 2 points by 99thpercentile (94) 10 years ago

Our policies are completely nuts. It's our hubris that makes us think that we can continue to do the things that we do and not see a catastrophic result. History will wonder how the typical American was ever able to believe the things that we believe. We are a brain-washed populace. The Germans know what hyperinflation feels like. It lead to the Nazi regime. Germany was a progressive, liberal democracy before it's economic crisis. Do you think we are immune from that?

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

1929 WallSt !

Hitler was financed by the US to contain Communism. FOX(!) provided the latest motion picture technologies for his campaign. Hitler seems to me like the Tea Party. A decoy. Hitler blamed WWII on WallSt "jews" and threatened another war would result in the downfall of the 'Jewish race' in Europe. Plain nonsense.

[-] 1 points by 99thpercentile (94) 10 years ago

I don't really understand your point. Please clarify.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

1929 WallSt crash led to The Great Depression, the World Economic crisis led to a radical shift in German society. Hitler was financed by WallSt to contain communism and Jewish elites.

War with Germany and Japan helped the United States economy to overcome the Depression. That it what Noble winner Krugman says.

[-] 1 points by 99thpercentile (94) 10 years ago

Krugman also said that the best thing for our economy would be for aliens to invade. WWII didn't get us out of the Great Depression. The Depression was caused by years and years of bad policy that were ceased after the end of the Second World War. My point was that Germany was radicalized by its economic crisis which was caused by hyper-inflation due to its monetization of its World War I debt. We are also monetizing our debt. Learn from history or you are doomed to repeat it.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

WWI debt was fantasy debt. 1929 hit Germany harder which gave rise to fringe politics.

Krugman often uses the war argument because it is factually true.

The current debt crisis of some Euro-States is explained by the fact that they cannot monetize debt because of a pooled currency plus decentral spending.

[-] 1 points by 99thpercentile (94) 10 years ago

If war made the economy stronger then why not just build a bunch of battle ships sail them to the middle of the pacific and have them blow each other up. That's a ridiculous economic fallacy that has persisted only due to the fact that governments love Keynesianism because it's the justification that they use for all of their spending and inflation. Your precious Krugman didn't see the housing crisis or the following economic crash coming but lot's of non-Keynesian economists did years before the first foreclosure. How is it that people who subscribe to Keynes can be wrong again and again and again and still believe in that fairy tale? Well there is still a flat earth society too so I guess it's not that surprising. You should study the Austrian model if you want to really understand economics.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

What's the difference between the moon landing and your battle ship experiment? ;-)

[-] 1 points by 99thpercentile (94) 10 years ago

The type of ship I suppose.

[-] 1 points by genickgenau (22) from New York City, NY 10 years ago

It is important to view economic policies instrumental and non-partisan.

It's interesting how these policies apply despite the rhetorics.

All economists saw the housing crisis coming. That was a simple matter of fundamentals. It is just that you don't know when the bubble would burst, and before it does critics get silenced by the celebrations.

[-] 1 points by 99thpercentile (94) 10 years ago

You are right that the timing is always difficult to figure out. But all economists didn't see the crisis coming because many advised the government of the flawed housing and monetary policies that lead to the crisis in the first place. When you subsidize something you get more of it so they say. But not just more of it...too much of it. Our governments housing policies in addition to artificially cheap money from the Federal Reserve created the bubble at the expense of the productive economy. The question isn't when should we have jumped ship on the housing crisis but whether we should have set sail in the first place.

[-] 1 points by Rooster8 (49) 10 years ago

Capitalism will always be destroyed by government when they spend more and more money on programs and do not pay for these programs that results in uncontrollable debt. I do not mind a lot of these social programs, but WE HAVE TO PAY AS WILL GO or we jeopardize everything.

[-] 1 points by 99thpercentile (94) 10 years ago

I think Thomas Jefferson said something along those lines. There is a difference between what would be nice to have and what is sustainable. What we are doing regarding welfare and warfare isn't sustainable. We have to cut massively across the board. We start with our military spending because that's the easiest to cut but then we have to cut our social spending too. We have a broken system.

[-] 2 points by Rooster8 (49) 10 years ago

Yes, I agree - it would be nice to know what is too much debt and what is sustainable. Even 15 trillion is be debated as sustainable, but we never been out this far. (?). Unfortunately TJ was not at the Convention of 1787 (Our current Constitution) and the Constitution just states that the federal government can go into debt. The federal government was to be limited to Art 1 sect. 8 and was to have limited powers and more power to the states. However, since the 1930, Congress has enjoyed continual growth of power with the loosening of the Necessary and Proper clause, combined with expansive readings of Commerce clause, Spending and General Welfare clause. Over the years, these "implied" precedents and case law decisions have resulted in: Federal Education, Social Security, Medicare, HHS, HUD, AFT, DEA, FDA, OSHA, EEOC, EPA, most recently, TARP, Stimulus Bill, government bailouts of the banks and auto manufactures, soon-to-be national health care and the list goes on and on.
The programs should have been done at the state level (republic form of government and the Tenth and Amendment), according to our Founders' original intentions. This was to prevent overspending and debt by our federal government.

[-] 1 points by afarmer (65) 10 years ago

"I,however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared."

T. Jefferson

[-] 1 points by randart (498) 10 years ago

This was foretold by economists about a year ago. There is a movie you can watch on youtube called "The Prophets of Doom". One of the speakers used to be an investment banker and he said this would be a real bad sign for total collapse of the US dollar. At least I think this was the movie. It is worth watching anyway.

[-] 0 points by technoviking (484) 10 years ago

Should have picked another currency. Rmb is floated against the USD

[-] 1 points by nucleus (3291) 10 years ago

... at a rate set by the People's Bank of China.

[-] 1 points by technoviking (484) 10 years ago

Well yeah... Of course. The pboc controls the money supply after all.

And since it's pegged to the USD, the purchasing power of the RMB is also at the whim and fancy of the Bernank. Well, to be fair, the Chinese don't care since all commercially important imports, copper, oil, steel, are largely traded using USD in US exchanges.

In another 20y or so the rmb may transition to another peg. Currently capital flows is still strictly controlled in order to ensure the integrity of the peg, and a lot of its domestic capital controls (banks fractional reserve rate is an instrument) are straining under the opening up of foreign capital flows. I don't know how much faster the PBoC is willing to speed up capital freedom when they currently need to loosen domestic monetary policy to support weakening export industries.

So yeah... In the meantime, while US remains the biggest dumping ground for Chinese goods, pegging the currency to USD, which cedes control of the value of RMB to the bernank, is an extremely valuable and powerful tool to essentiall subsidize Chinese exporters selling to the US.

[-] 0 points by MVSN (768) from Stockton, CA 10 years ago


[-] 0 points by Occupyjail (1) 10 years ago

This will never be the future of the US dollar. Our first step is to oust the clowns suggesting we continue our spending spree in foreign aid, baseless Solyndra bailouts and previously failed "jobs" bills. Goodbye Obummer! Goodbye democrats! Your time is up!

[-] 1 points by nucleus (3291) 10 years ago

Spoken like a true zealot. "It's all the Democrats fault ..."

You should stock up on Depends before the next election, you are going to need them.