- The Zimbabwean dollar seems unable to prevent yet another cycle of hyperinflation, while demand for Bitcoin continues to rise
Zimbabwean are experiencing some serious deja vu with the Zimbabwe currency collapse, since the national fiat currency is once again collapsing, and this is leading to a surge in crypto use.
In 2008, the inflation rate for the Zimbabwean dollar (ZWL) hit an unimaginable 89.7 sextillion per cent in 2008, leading to scenes of people rolling wheel barrels of cash to the grocery store to buy a loaf of bread. Also, the currency value was falling so quickly that people had to run to the store right when they got paid, since if they waited to buy goods their money would lose most of its value overnight.
The Zimbabwean government tried to combat this situation by redenominating the ZWL, removing three zeros in August 2006, slashing another 10 zeros in July 2008, and taking off another 12 zeros in February 2009. However, removing zeros from the currency did not fix the underlying problems, and ultimately in 2009 the ZWL was abandoned, and Zimbabweans generally switched to other major fiat currencies like the USD and EUR.
However, the government then began to launch its own fiat currency again in 2014 with the launch of Zimbabwean convertible coins that were mostly backed by the USD.
Eventually, a new bond note was launched, and then Zimbabwe launched the RTGS dollar, which only lasted from June to November 2019. Even though the RTGS dollar was only around for several months its inflation rate hit hundreds of percent, and the RTGS dollar was replaced with the new Zimbabwean dollar.
The reason the government of Zimbabwe rapidly switched from the RTGS dollar to the new Zimbabwean dollar was that the RTGS dollar was backed by hard assets, including a basket of major global fiat currencies, while the new Zimbabwean dollar is backed by nothing. Therefore, the government couldn’t print the RTGS dollar at will, but they can print the Zimbabwean dollar at will.
Indeed, the Zimbabwe currency collapse just over a decade ago, and the current one, are both caused by the government of Zimbabwe printing as much money as they want. The government does this to pay their debts and to buy things, but since the currency is backed by nothing, this money printing leads to a deadly cycle where exponentially more money needs to be printed in order to satisfy the needs of the government, and this leads to a currency collapse.
Now the inflation rate for the Zimbabwean dollar is approaching 1,000%, and citizens are flocking to safe-haven assets. Unfortunately, the government is doing everything they can to force people to use the rapidly devaluing Zimbabwean dollar, including banning foreign fiat currencies.
The latest news is that Zimbabwe has literally banned their own stock exchange, because Zimbabwean citizens were using stocks as a safe haven and the stock market was rapidly rising.
Also, Zimbabwe has banned mobile money payments, particularly EcoCash, since citizens were using mobile money payments to convert their funds to safe-haven assets like cryptocurrency and major global fiat currencies.
Indeed, EcoCash is commonly used to buy Bitcoin, and there is such a high demand for Bitcoin right now that it is selling for 18% above the market rate in Zimbabwe.
Notably, EcoCash has refused to comply with the Zimbabwean government, since literally the economy of Zimbabwe would collapse without the mobile money payments it offers. It truly is nonsensical that the Zimbabwean government is willing to destroy the lifeblood of its economy just to slow down the collapse of their dying currency.
Also, the Zimbabwean government is blaming the stock market and EcoCash for the collapse of the Zimbabwean dollar, which is an outright lie, since the government is to blame for the collapsing currency.
Unfortunately, Zimbabwe will likely succeed in making EcoCash illegal, but that will not stop Zimbabwean citizens from converting their money to Bitcoin, other major cryptocurrencies, and major global fiat currencies since this is literally a life and death survival situation for them.
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