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Tuesday, June 03, 2008

Zimbabwe Vindicated!

For those of you who are interested in eating and plan on using money in the future to purchase more food, you might be interested in a short article by Adrian Burridge. Adrian briefly takes a hilarious but terrifying peek into a public statement from the central bankers of Zimbabwe, whose economic policies are now VINDICATED. You see, the path they began taking years ago - with much derision from other nations - is precisely the path the the Western central banks are now pursuing. They suffered "demonization" for this economic course, which has destroyed the welfare of the nation and wiped out hope, audacity and all, for millions who now face an inflation rate in the kazillions. Since the policies that led to their difficulties are similar to policies our government is taking, it might make sense to consider the long-term consequences - and make sure you continue your food storage program.

Don't mean to be alarmist or anything, but I do sleep better knowing that my readers have a better chance of feeding their families and their neighbors in the future. Remember: FOOD GOOD. STARVATION BAD. GET FOOD. For those of you caught up in the in-depth coverage of Presidential candidates, maybe I should out it this way: Food is even better than hope, change, experience, and being a war hero. Vote for food. Buy food now.

The Zimbabwe dollar used to be about equal to the US dollar a couple decades ago. Today, one US dollar is worth 594,187,320 Zimbabwe dollars. A year ago, the inflation rate was 1200% (see a news video from April 2007). Today it's at least 24,000% (that's the rate we had in February, per CNN. Could similar hyperinflation happen here? We have a lot propping up the dollar - but when a nation chooses to devalue its currency and use printing presses to satisfy insatiable appetites for spending, it cannot continue this forever without disaster. We are on a dangerous path.

Here's part of Adrian's article:
The first quarter monetary policy update from Dr. G. Gono, the Governor of the Reserve Bank of Zimbabwe COMMENDS his peers, the world over. Referring to the United States and the United Kingdom. Dated April 30th, 2008. Pages 8 through 12 – Point 1.14 to 1.29. (http://www.rbz.co.zw/pdfs/2008%20MPS/AprilMPS2008.pdf)

Permit to quote. (I especially like his use of bolding – I added bolding where he did).
1.14 Equally also, our thrust has been founded on our unwavering belief that extraordinary circumstances must be confronted through extraordinary interventions and not through half baked or even wholesale 16th century economic dogmas that have been long discarded in their founding countries.

1.15 As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.

1.16 That is precisely the path that we began over 4 years ago in pursuit of our national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification, and demonization we have endured from across the political divide.

1.22 Here in Zimbabwe we had our near-bank failures a few years ago and we responded by providing the affected Banks with the Troubled Bank Fund (TBF) for which we were heavily criticized even by some multi-lateral institutions who today are silent when the Central Banks of UK and USA are going the same way and doing the same thing under very similar circumstances thereby continuing the unfortunate hypocrisy that what's good for goose is not good for the gander.

1.26 As Monetary Authorities, we commend those of our peers, the world over, who have now seen the light on the need for the adoption of flexible and practical interventions and support to key sectors of the economy when faced with unusual circumstances.

1.27 Of course, in the short term such interventions are without doubt inflationary but in the medium to long-term they trigger and propel economic growth and development that everyone craves for.


Later on in the document you learn the unsecured lending rates were raised to 5000% from 4500%. Page 46.

Of the 309 registered microfinance/money lending institutions only 184 are still operational. Page 61.

In other words bank failures and hyperinflation appear to go hand in hand.
To the Saints and all others in Zimbabwe, I'm so pained at that is happening to your beautiful nation. May there be real change, real hope, and real help shortly. And to all of you living in more prosperous circumstances, prepare now to help your family and others overcome whatever financial crises are brewing. They can come swiftly and unexpectedly.

6 comments:

Micah & Sarah said...

Just before I went to Ecuador on my mission they were going through similar inflation. By the time I got there they had switched their currency to the US dollar. I don't recall their inflation rate but at the time of the switch you could get 4 cents for 1000 sucre. 25000 sucre to the dollar. Their largest bill was equivalent to $2. Poor people will have to endure inflation again with the US dollar.

Ryan said...

Wow. I don't know if it's scarier that we're following in Zimbabwe's footsteps or that Zimbabwe actually thinks their example is worth following.

Anonymous said...

What's amazing is how much Americans have been stupefied into not really thinking about inflation. Bogus stats make us thing it's under control - only 2 or 3%. Even if that's true, it means big trouble. But when you realize that the real value of M3 - the inflation of the money supply - is around 12% right now, which inevitably drives prices - then we are already at crisis level. If you get 10-12% returns in your 401k, congrats, you've just broken even.

Inflation is an invisible tax that lets corrupt politicians fuel their spending addictions. And now all 3 candidates are promising more spending and higher taxes. Look out!!

Bookslinger said...

micah/sarah,
When I first got to Ecuador in 1984, 1 sucre was about 1 cent. wow.

cadams said...

Food is even better than hope, change, experience, and being a war hero. Vote for food. Buy food now.

Nicely said. Hyperinflation is one of those things that can cause total anarchy. Food becomes money. God bless us all.

Skeptometer said...

From Howard Ruff, also at your favorite Kitco.com site:

What is the biggest mistake you can make with your money in 2008? Ignoring gold, silver and their related inflation hedges can lose you more money than all the other mistakes you can make put together, except for playing the roulette table in Vegas.

Once in a lifetime, there comes a chance to turn a relatively small amount of money into a fortune, and this is one of them. We are in the early stages of a massive multi-year bull market in the metals. The supply-demand situation beggars belief. This is as close to riskless as anything I have ever recommended in 31 years of publishing The Ruff Times. You can put a list of mining stocks on the wall, throw a dart at them, invest in the holes and make a lot of money, in effect creating your personal mutual fund. When the wind blows, even the turkeys fly. Of course you can make lot more money picking the sheep from the goats, and that is what the Ruff Times is for, separating the biggest winners from the holes in the ground surrounded by liars.

A word of caution: all my words of advice are for the long term only. In the short term, gold and silver can do anything, go anywhere. In the last bull market of the ‘70s-‘80s gold went from $120 to $850, but there were discouraging retreats of as much as 30% several times along the way. It was attacked by speculators, central banks, and even Uncle Sam through Jimmy Carter. But gold and silver prevailed, even though chickens bailed out from time to time. I was new to the advice business back then, and even I got scared out once for a little while.

Actually, this is “déjà vu all over again,” as said the master of malapropism, Yogi Berra. It’s an eerie repeat of the 1970s, only more so. All the same factors that drove that historic 1970s bull market are back, only a lot more so; an explosion of money creation by the Federal Reserve that is so great they have even stopped publishing a monthly report on M-3, the most trustworthy measure of changes in the money supply. I guess they no longer know, or don’t want you to know, the embarrassing numbers.

Actually, it’s worse than that. Did you know that the phrase “printing press” no longer means much when it comes to money? Actually, less than five percent of the money is actually minted, printed or coined! The rest of it is in cyberspace, created at the Federal Reserve, or by commercial banks. The amount is beyond comprehension. This process is called “monetary inflation,” and that is what ultimately drives price inflation and drives gold and silver. The more money is created, the higher go the precious metals.

Also, they react to the prospect of war, or actual war itself, and America has never been more threatened by war that will affect us at home than we are now, by terrorism and nuclear proliferation by rogue nations.

History tells us that ever since the invention of Guttenberg’s movable type press, and the subsequent development of paper currency. The average time each currency lasts is 50 to 75 years before the world is littered in dead paper currencies, and until we invent a new one, gold and silver coins reign supreme, but not before they soar to the moon in value. There is not a time in human history when gold and silver have not been considered real wealth and instinctively turned to when paper decorated with ink has become so much confetti.

How long will it take us, and are we near the brink? No one knows. We have become immensely sophisticated at postponing the inevitable. It might be five years, ten years, or twenty-five or fifty years before the inevitable drama plays out. But play out it will.

In the meantime, we will make a bundle in the metals and their derivatives. In fact, they will be a new way for the middle class to in effect print money, and in dollar terms, the metals are going to the moon. $2500 gold or $125 silver anyone? And what about 500% to 2000% profits in the next few years. That is written in cement over the next few years – or in gold or silver.

By Howard Ruff
The Ruff Times

You've advocated silver, gold, and precious metals stocks before. Sill a good time to buy?? They've gone up a lot in the past year.