Excerpt
I reveal the shocking details behind Zimbabwe’s new currency crisis and the corruption fueling it. Learn about the Cantillon effect and discover why even the government prefers US dollars over their own currency (ZiG). Watch now to see why Bitcoin could be the ultimate solution for Zimbabweans!
Transcript
I’ve spent over a year in Zimbabwe in the last couple of years, and I … it’s the sixth time now that they issued a new currency since independence in 1980. The sad thing is that there is a lot of corruption going on in Zimbabwe, and also the political elites are sadly stealing from their people. They have been doing this over many years now, and sadly, this hasn’t changed for the better. The problem is that in Zimbabwe, it’s really like a lab where you can see how you can take the fiat system to the extreme. It shows how the traditional monetary system is controlled and can be rigged by those in control. And it goes to show something called the Cantillon effect. It’s named after the 18th-century economist Richard Cantillon, who observed that those who are close to the issuance of new money profit the most. So the money reaches the central banks and the other banks that are in the central bank network first, and the people who work there get the new money first and they can spend it already. In the meantime, the money gets to all the people in the country, but by then there’s already a higher supply of banknotes in the exchange in the country, meaning the value of each banknote goes down. So the later you receive the money, the less value it has. That’s one of the things that you really can see in Zimbabwe. And it’s a kleptocracy. Sadly, the ruling elites are stealing 1.5 billion US dollars in gold every year. Zimbabwe is a very rich country; it has a lot of natural resources. It was the breadbasket of the southern African region, but now sadly, its national currency is not worth anything. No one wants to use it, and that’s a big problem of course for the country and for the businesses inside the country. You were asking about the new currency. So when I came to Zimbabwe the first time in early 2020, the new Zimbabwean dollar was only one year old. In the beginning of 2019, the central bank introduced the new Zimbabwean dollar, and they promised their people the exchange rate would stay one to one to the US dollar. Most people want the US dollar in Zimbabwe, and I think about 80% of the money in circulation is US dollars, and only 20% is the national currency. So when I came the first time, the exchange rate wasn’t one to one anymore. After one year, it was already 1 to 28, and then last time, last year, the exchange rate shot to 1 to 3,500. And then in January this year, when I left the country, it was 1 to 12,000. So, 12,000 Zimbabwean dollars were worth one US dollar. That shows you how much the currency has lost in value. And then in April, the inflation really exploded because the exchange rate went to 1 to 35,000 in only three months. What did the government and the central bank do? They simply invented a new currency. The ZiG, it’s now called. Zimbabwe Gold. Because the central bank says it’s backed by 2.5 tons of gold. So the question is, is it really backed by gold? Because even the government does not accept the new currency for its services. For instance, if you want to get a passport, you have to pay it in US dollars. So it seems that the central bank and the government itself doesn’t want to accept their own currency. The exchange rate already has changed or has risen. At the beginning, it was 1 to 13, and now it’s 1 to 20 again. So it seems to be the same game all over again. And this is really a very sad story and very extreme, but in principle, it shows that the system can be rigged by the powerful. They can print money and they can extort their own people through the fiat system. And this is not possible with bitcoin because you can’t inflate bitcoin. You can’t create bitcoin out of nothing. That’s why it would be such a great tool for Zimbabweans. So another question was, is Bitcoin being used in Zimbabwe? Yes, it is being used. It’s possible to exchange, to send bitcoin to Zimbabweans, and it’s possible for them to exchange it to US dollars peer-to-peer. And I never had a problem to find someone who wants my bitcoin, to be honest. And Bitcoin is being used, and it’s interesting that it’s a similar pareto of distribution of which cryptocurrency or which money is being used. Like 80%, I said before, people are using US dollars, and 20% are using the national currency. 80% want USDT, the stablecoin, and 20% want bitcoin. They hold it as a hedge basically against inflation or to save for the long term. But many people know the US dollar, they value it, although, of course, the US dollar itself has inflation and loses value over time, but not as much as the Zimbabwean currency. But in the end, if you really want to save money long term, I believe that bitcoin is the best option. And then another thing I encountered is that not many people are using the Lightning Network. It’s working. I did my Bitcoin Lightning wallet test in January this year. So people can even use self-custody Lightning wallets; it’s possible. But the adoption of Lightning is in many African countries as well as in Europe I realized these days is very bad. People don’t even know that the Lightning Network exists, which makes Bitcoin payments much faster, more private, and much cheaper. So, that’s the story about Bitcoin and the new Zimbabwe Gold currency in Zimbabwe. We will see how the whole story develops, but sadly, I don’t think that it will change very soon. I believe that it will stay the same for the next years, for the foreseeable future.
