Dark Days at the Reserve Bank of Zimbabwe

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machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Dark Days at the Reserve Bank of Zimbabwe

An article from earlier this year describes what happens when a central bank goes broke. Unlike the Federal Reserve, the Reserve Bank of Zimbabwe didn't hold a large portfolio of interest-bearing securities. It simply printed Zimbabwe dollars, acting as an arm of fiscal policy, and ran deficits. Now, post dollarization, it is utterly dependent on the Finance Ministry for income:

THE house that central bank governor Gideon Gono built over the past six years is tottering on the brink of collapse, weighed down by under-funding, a protracted labour dispute and failure to service debts, among a host of other problems. The bank confirmed this week that its existence was under threat.

Impeccable sources at the bank told the Zimbabwe Independent that Gono created a “monster” that was now haunting the Reserve Bank of Zimbabwe (RBZ) when he stitched [together] a number of quasi-fiscal facilities since his appointment in December 2003.

The facilities, among them, the Productive Sector Facility, Basic Commodity Supply Side Intervention (Bacossi), Local Authorities Reorientation Programme (LARP), the Farm Mechanisation Programme and the Agricultural Support Enhancement Facility, were financed by printing money. The quasi-fiscal activities, Gono argued, were meant to keep the country limping [along] and to bust economic sanctions.

But with the dollarisation of the economy last January, printing money was rendered useless and the central bank’s life blood dried [up] leaving Gono with no option but to turn to the treasury for funding.

Finance minister Tendai Biti has not been of much help to the central bank as he has refused to adequately fund the RBZ. While the sources could not give figures on what the central bank owes its creditors, the bank is reportedly facing eviction from premises it was renting throughout the country after failing to pay rentals.

http://www.zimtelegraph.com/?p=5349

The effect on the central bank's staff is both sad and comical:

Staff morale at the bank, the sources said, had reached rock bottom with the top bank reportedly still paying its workers’ salaries in the demonitised Zimbabwe dollars piling [up] in their bank accounts. Employees at the bank are paid a US$150 monthly allowance.

The sources said the workers and the RBZ went for arbitration last year and the bank was told to pay salaries in US dollars backdated to last July, but could not do so because there was no board to ratify the ruling and the bank was broke.

The bank has a staff compliment of between 1 500 and 2 000 compared to less than 500 workers when Leonard Tsumba was governor.

“Gono has told the workers that he cannot retrench them because the bank has no money to pay packages,” a senior manager at the bank said. “The opulent life we enjoyed before dollarisation is gone and we are struggling to make ends meet.”

Now there's an idea for Ron Paul: stipulate that if the US dollar should be replaced, Fed staffers must keep eating their own cooking, in the form of worthless FRNs. Or else volunteer to dig holes with their bare paws and then fill them back up, like PhD groundhogs. 

 

"Our canonical collinear calculus shows that every trillion of QE puts 13 cents in your pocket -- and $20 billion in ours!"

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Dark Days at the Reserve Bank of Zimbabwe
machinehead wrote:

"Our canonical collinear calculus shows that every trillion of QE puts 13 cents in your pocket -- and $20 billion in ours!"

 

I split pennies with you MH:

In my latest rant over at FSN I quoted Eric Sprott's piece which said .09 cents. When picking rotten cherries I go for the worst. Here is a link to his piece as well. LINK to Sprott's "A Bsted Formula. 

And here is my going off on what these lunatics did and are planning to do.

Stimulus: When it comes to government spending and stimulus Eric Sprott’s “A Busted Formula” says it clearly, correctly and concisely. 2.5 trillion dollars ($2,500,000,000,000.00) of stimulus gave us a hard dollar impact of 200 billion dollars ($200,000,000,000.00). 

2.5 trillion borrowed dollars to get a 200 billion dollar positive bump in GDP? 

.09 cents of gain for every dollar borrowed? And they are even considering doing this again????? I’d say that by definition, this defines insanity. Talking about doing another stimulus after that disaster proves that these people should be locked in a mental institution! If we cut through the manure, Romer is saying: Let us go into debt for another 2.3 trillion dollars.

barrt's picture
barrt
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 171
Hey guys! I'm a quadrillionaire!

Rather peversely, some of the best, most satisfying and rewarding money I've spent recently has been on Zimbabwe dollars.

I am now the very proud owner of several mint condition ZBCB gems such as;

and

 

and;

Whatever an Agro Cheque is I dont know! Who cares!

See the wonder on your friends faces as they behold the truly mind bending & boggling;

 

and lets not leave out The Daddy, the biggest banknote ever printed;

"I promise to pay the bearer on demand 100,000,000,000,000" Oh yeah? can you explain that one to me Mr GG All-In?

Seriously though guys, these are on sale now on ebay, there is currently a very good exchange rate too for the FRN voucher.

http://shop.ebay.com/i.html?_nkw=zimbabwe+dollar&_sacat=0&_dmpt=Paper_Mo...

I went the whole hog and orderd a cool Quad, 10 of the Big Daddy's, those will be framed on the wall. But the other 'smaller' notes I'm bringing out every chance i get, buy some of these folks and you are guaranteed wide eyed hanging jawed friends and family Surprised

Once you got 'em off guard like that, whip out a gleaming 1964 Kennedy Half dollar (90% silver, 50 cent face value legal tender currently selling for circa $8 - BARGAIN ALERT!)

http://shop.ebay.com/i.html?_nkw=1964+kennedy+&_sacat=0

and tell them about that! how it just keeps going up in value, the history behind JFK and his executive orders and you see the dropped jaws turn into crinkled frowns. Undecided

Truly Priceless!

Money mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouthMoney mouth

Etc etc...

 

 

http://shop.ebay.com/?_from=R40&_trksid=p3907.m570.l1312&_nkw=1964+kennedy+half+dollar&_sacat=See-All-Categories
barrt's picture
barrt
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 171
Re: Look Ma! I'm a quadrillionaire!

Some good news from Zim at last! at least for plucky holders of Zimbabwe Central Bank voucher holders like me!

Inflation drops again in Zimbabwe

The deflation seen since March marks a stunning turnaround for an economy that just six months ago had world-record hyperinflation estimated in multiples of billions.

http://www.zimtelegraph.com/?p=789

Deflation in Zimbabwe! who would have thought? So, being the proud owner of over a Quadrillion of these babies, naturally im quite excited by the news. They say in the article that deflation is currently running at around 1.1% - Could one of you maths guys help me out with the calculations? What I want to know is; At this rate, when will I be fabulously rich?

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