Comments (16)

• Pat

  There must be some catch. Whenever a government official makes any declaration, you can expect some catch to be there when no one is looking.

  Published: January 29, 2009 2:25 PM

• bob

  this leads to many ?'s...

  are other currencies being privileged, such as through legal tender law?

  what are valid currencies usable to pay taxes?

  are there freely floating exchange rates?

  do banks have free entry and are they free to issue bank notes?

  Published: January 29, 2009 3:11 PM

• Fred

  If the "Z" government's money is worthless, how will it continue to operate? Does this mean the end of the hyperinflation is near?

  Published: January 29, 2009 3:44 PM

• bob

  hyperinflation ends naturally - the market refuses to create prices or even accept payments in the hyperinflated currency. note that the article mentions this occurred before this announcement.

  it usually occurs alongside anarchy, as the government relies on printing its currency to influence labor and other markets, securing its own power. when the currency collapses, government has no means to feed its grunts.

  Published: January 29, 2009 5:20 PM

• Fred

  And government is powerless to stop it (the market). Too bad for the government types.
  Maybe a hyperinflation is needed in the USA. Looks like the results are ultimately good.

  Published: January 29, 2009 5:33 PM

• Fred

  Too bad the people really suffer!! If only there was an easier way to remove government failures.

  Published: January 29, 2009 5:35 PM

• AJ Witoslawski

  Well according to the Heritage Index of Economic Freedom, Zimbabwe scores fall below average in all measures of economic freedom. Taxes are high, expenditures are high, quotas are burdensome, regulation is pervasive, the bureaucracies are extremely corrupt, etc.

  In addition to that, I doubt that this will last because it would force the Zimbabwean government to curb expenditures, since the Zimbabwe dollar would become even more worthless due to falling demand AND rising supply.

  http://www.heritage.org/Index/Country/Zimbabwe

  Published: January 29, 2009 6:16 PM

• Steve Hogan

  You mean...central economic planning doesn't work? Who knew?

  Published: January 29, 2009 9:42 PM

• Tim

  Ah Zimbabwe...a shining testament to the success of Keynesian economics.

  Published: January 29, 2009 11:02 PM

• David Ch

  This is an admission by a bankrupt government that it is powerless to enforce its own monetary laws - hardly a shining example . The fact is that ordinary Zimbabweans have long been using foreign currencies to denominate the movement of goods among themselves. The entire citizenry breaks a welter of 'economic' laws every single day, and have to, just to stay alive. This announcement represents the removal of but one tiny strand in the entire byzantine web - the rest of the laws remain in place, and selectively invoked against the political opponents of the regime in direct proportion to how much they annoy the incumbent oppressors.

  Published: January 30, 2009 12:32 AM

• David Bratton

  So.... who gets to operate currency exchanges?

  Published: January 30, 2009 12:47 AM

• riddci

  David,
  There's acurrency board and fx limitation laws...but people are ignoring them just to stay alive.

  The problem is... when it happens with the USD there will be no foreign currency to flee to...only gold.

  Published: January 30, 2009 2:16 AM

• ktibuk

  Well, I lived in a hyper inflationary environment and I can tell that this is just the Zimbabwe government giving up and actually legalizing what has already being going on for a long time.

  This is a natural process of the market. Finding a better money, when the old money gets destroyed.

  If and when dollar starts going down hill (which I think will happen), the same thing will happen in the US. This doesn't need a government decree. The governments will have to accept the situation sooner or later. After the dollar tanks, the market may even choose Pesos, or Canadian Dollars or even Yen and the FED could be forced to peg the dollar to the most stable foreign currency in order to stabilize the US dollar.

  What will happen is first the more valuable goods would be quoted in the foreign currency. Houses prices, and rent prices for example will be quoted in Pesos, not US dollars. Then the imported stuff will be quoted in foreign currency. Japanese cars may be quoted in yen. Then high paying jobs will be quoted in foreign currency. Ceo's will be making their salaries in Pesos or Yen. If the destruction of dollars continues everything else will be quoted in foreign currency and US dollar will be irrelevant.

  Published: January 30, 2009 5:22 AM

• riddick

  ktibuk,

  problem is... the USD is the reserve currency of the world... all other currencies are pegged to it directly (rials, dirhams..) or indirectly through Central bank reserves and IMF agreements (EUR, CHF...)... so there will be no alternative... it's either return to barter or something new...

  Published: January 30, 2009 8:25 AM

• bennie

  check out...

  http://www.igolder.com/glossary/fiat-currency/

  Published: January 30, 2009 8:29 AM

• I Hate Taxes

  Fred,

  "If only there was an easier way to remove government failures."

  That way is called CIVIL WAR !

  Published: January 30, 2009 10:51 AM