I recently acquired a crisp new monetary note from the reserve bank of Zimbabwe in the amount of 100 Trillion Zimbabwe Dollars. It’s a real beaut with all kinds of officious markings on it. Yeah, those Zim con men really pulled out all the stops in designing this money. It’s got multiple colors, not one but two serial numbers, a realistic looking (but faux) metal “security strip” going through the middle of it and pretty pictures of rocks with a waterfall and a water buffalo on the back. The casual observer (AKA the people) were probably very impressed by this paper at some point. I bet people worked their whole lives chasing this stuff in the hopes of a nice retirement (or at least the hope of avoiding starvation). Yep, gotta make the money tough to counterfeit because thieves and dishonest people are all around, right? Too bad the people could not protect the money or themselves from the biggest counterfeiter which was the government itself.
There was a day not so long ago when the Zim dollar traded against the US greenback at a ratio of 7:1. Now we see that 100 Trillion Zim dollars aren’t worth the postage stamp used to send it to me. In fact, they are now officially worth zero as the reserve bank of Zimbabwe has abandoned the currency, but only after the people of Zimbabwe and their trading partners would no longer accept it. Now the workers of the country only accept foreign currency. The pretty colored paper that they used to call money is now available for purchase on Ebay for a few bucks as a souvenir. Note to self: if ever I see some portion of the economy decide to not accept dollars in exchange for their goods or services, don’t take it lightly.
What’s so sad about this is that it is such an obvious con game. When we see it happening to others we write it off as the workings of a corrupt 3rd world country run by narcissistic, militaristic kleptocracy. Unfortunately, the con is exactly the same in the US (and all other major nations of the world) as it was in Zimbabwe. What’s the con? I circled it in red on the Zim note below. Let me explain. A note is a legal promise to pay something (i.e. your “house note”). In other words, it is a loan marker. So the government bank of Zimbabwe was making a legal promise to pay something if you ever presented this note and demanded your payment.
So here’s the con. They promised to pay more worthless colored paper. If you handed them the trillion dollar note they might have made change for you in equally worthless notes (did you bring your wheelbarrow?) while still satisfying their legal obligation under the note. In essence, they promise to pay nothing. And people fell for it. They traded their goods and services for this paper. What a bunch of morons, right? I mean, the way it’s supposed to work is that the government note is a marker for something of value. You may have heard of old US money that could be exchanged for gold upon demand. It was known as “the dollar” too but that was a long time ago. The current US dollar makes the exact same empty promise that the Zim dollar made before it began its decline to zero. Take a second and pull out an (ever more colorful and full of security devices) federal reserve note and read it. All of the promises have been removed. The note simply says “This note is legal tender for all debts public and private”.
That’s like saying “trust me” and “we’re here to help”. It’s a bad cliché yet that’s what we have and few people seem too upset or worried about it. At least for the time being. We still have some time left before our currency gets whacked but I don’t expect we will get much more than a decade, maybe two (best case) before the con collapses.
