Jump to content
House Price Crash Forum
classixuk

Zimbabwean Dollars

Recommended Posts

How naive am I? :unsure:

(Don't answer that!)

I've been reading about Zimbabwean dollars and the massive inflation the country is suffering from (almost 800%!). I have read that in 2001 $1USD bought you $55 Zimbabean Dollars. Today $1USD buys you $99,000 Zimbabean Dollars.

We all talk about cycles etc. on this website, so how does the cycle of inflation work? It seems quite obvious at first glance that an investor should spend at least $10USD on Zimbabean dollars while they are ultra cheap and then wait maybe 5 years before selling them back. :D On second glance though it makes sense that if this were the thing to do, the cleverer people than I would have done it already.

So my question is, if the Zimbabean dollar will not return to it's former rate, what will happen? What actually happens that prevents people getting very rich from trading currencies in the above matter?

I really haven't a clue so please be gentle while you educate me. My only thought so far is that the Zimbabwean government may one day (without notice) just say that their currency is no longer legal tender and that anyone holding their currency should enjoy colouring in the pretty pictures and that is that. Am I close, and has this happened before?

Thanks in advance for sharing a little time with me.

Share this post


Link to post
Share on other sites

I am no Economist - but here are my views:-

Say 2 years ago a can of Coke cost you 10 Zim Dollars.

Today the same can of coke costs say 10,000 Zim Dollars.

Therefore if you purchased 10 Zim Dollars two years ago - you are now considerably worse off - in terms of the purchasing power of your Zim Dollars.

It might be best to avoid investing in Zim Dollars.

However, I might be wrong?

Share this post


Link to post
Share on other sites

Hyperinflation ruins an economy because the real price of goods gets lost in the chaotic scramble to keep raising nominal prices to keep ahead of increasing costs of bought in goods. This means that rational buying becomes ever harder until what usually happens is the economy grinds to a halt and you get people living in shanty towns. That is what happened in Germany in the early 1920s, when the German government "burned off" its war debts. Another problem is that savings are destroyed, so the capacity to invest from domestic wealth disappears (unless that wealth wen abroad or into PM). Because of these problems, a hyperinflating currency is unlikely to be one you could make money in UNLESS you were extremely savvy and were able to spot short-term arbitrage opportunities. But you'd really need to be there on the sport with your eyes wide open and your calculator working constantly to be able to pick out the opportunities.

Currencies can run a long time in decline with inflation. Look at the Turkish Lira. When I visited Turkey in 1990 the exchange rate was 6,000 TL to the £. It changed materially in the month I was there. Today the exchange rate is 2.33 Turkish NEW lira to the £. They wisely got rid of the old one on 1/1/05. By then it had shrunk to something like 250,000 lira to the £ and was getting to be a bit of an embarrassment. I wish them better luck with the New Lira.

Share this post


Link to post
Share on other sites

A branch of my family lived through the weimark period in Germany.

Its quite illuminating what the process is all about - given that so many people here are saving and renting, registering that inflation is occuring, but hoping for higher interest rates.

The process for an ordinary person was as follows :

The first signs are the rising prices eating into your income. But that does not at first change the saving habit and the moral view of money and thift. (as with this board) You still think your savings are safe.

You trust instead what the government tells you. You do not compute how much of the years of hard work and sacifice has been lost. It hasn't happened.

Then, when the prices keep rising, the shock and horror etc... (which many here feel) - Scrimping and saving becomes the worst thing in the world - a utter moral horror.

However, you STILL need to save - now more than ever.

The habits of thift and saving money, are replaced by a constant worry and a new habit of how to spend it as fast as possible - to save it's real value.

A horrific act of spending whatever income you have, as fast as you can takes complete hold over you in order to survive. Prices rise higher and higher as people refuse to work for the extra money.

As spending rises, wages rise and prices rise. Workers could not wait to spend thier wages before prices rose again. Factory workers had to have more and more breaks and shifts every hour so they could get out and spend the pay as soon as it arrived, before prices rose again.

The difference between Weimark Germany and now?

Mass immigration means wages and prices of goods and services are not inflating in realtion to income - just assets. Wages are not rising with the extra money printed. A mass surfdom is occuring instead.

Edited by brainclamp

Share this post


Link to post
Share on other sites

A branch of my family lived through the weimark period in Germany.

Its quite illuminating what the process is all about - given that so many people here are saving and renting, registering that inflation is occuring, but hoping for higher interest rates.

The process for an ordinary person was as follows :

The first signs are the rising prices eating into your income. But that does not at first change the saving habit and the moral view of money and thift. (as with this board) You still think your savings are safe.

You trust instead what the government tells you. You do not compute how much of the years of hard work and sacifice has been lost. It hasn't happened.

Then, when the prices keep rising, the shock and horror etc... (which many here feel) - Scrimping and saving becomes the worst thing in the world - a utter moral horror.

However, you STILL need to save - now more than ever.

The habits of thift and saving money, are replaced by a constant worry and a new habit of how to spend it as fast as possible - to save it's real value.

A horrific act of spending whatever income you have, as fast as you can takes complete hold over you in order to survive. Prices rise higher and higher as people refuse to work for the extra money.

As spending rises, wages rise and prices rise. Workers could not wait to spend thier wages before prices rose again. Factory workers had to have more and more breaks and shifts every hour so they could get out and spend the pay as soon as it arrived, before prices rose again.

The difference between Weimark Germany and now?

Mass immigration means wages and prices of goods and services are not inflating in realtion to income - just assets. Wages are not rising with the extra money printed. A mass surfdom is occuring instead.

You must be a mega-bull on gold, energy and other hard commodities then?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.