Zimbabwe and currency have been topics for discussion for quite some time. In 2008, the currency collapsed with the Reserve Bank of Zimbabwe producing $100 Trillion notes. No, that's not a misprint. Yes, the same government was producing $100 notes in 1998 that could be exchanged for $20 in the United States. The $100 Trillion notes weren't worth a penny just 10 years later.
We've discussed this horrifying currency collapse before in our post Why Stock Prices Can Rise in Phase Three Even as the Economy …
When the Zimbabwe currency collapsed, they began using U.S. dollars. It was a pretty smooth transition because at the time (2009), the dollar was really very stable. As the global reserve currency, the dollar attracted a great deal of support during the financial crisis. Of course, there were a few problems. One was that while there were plenty of dollar bills to use, there was very little change (meaning coins). The New York Times wrote a story about this reality in 2012:
Just recently, we learned that Zimbabwe no longer wants to rely exclusively on the U.S. dollar. They have recently turned to the Chinese Yuan in a development that is worth watching. From today's (South Africa) Times:
Click to see photo, Picture taken January 20, 2014.]
Zimbabwe's central bank has announced it would accept the Chinese yuan and three other Asian currencies as legal tender as economic relations have improved in recent years.
[Click here to read the story….]
Yes, it does make sense since trade with China is increasingly important. But this should be watched carefully as it underscores the reality that the American dollar is not the only currency in the world. And, there is little economic reason for Africans to convert to dollars in order to do business with China. Our arrogance regarding this puts us at serious risk. It is essential that we grasp just how dependent we have come to be on the dollar remaining the reserve currency of the world. Our ability to finance and maintain our debt depends on this status yet many outside the U.S. are not only willing to operate without dollars but in some cases are actively working to remove the dollar's use. Here are a few reminder posts on that:
These are just a few of the posts we've made on the risks to the U.S. dollar over the past few months. Clearly, the move in Zimbabwe makes sense for them. The question is whether or not it might also be another dying canary in the coal mine.
If you don't have a Game Plan to deal with potential currency issues, you need to read my latest book. Find out more at http://secretweapon.org.