Excerpt
I compare the benefits of cash, such as privacy and ownership, and its drawbacks, such as susceptibility to inflation, using the real-life example of hyperinflation in Zimbabwe. Learn more about the challenges of relying on cash in a digital, inflation-prone world and the need for financial privacy.
Transcript
At the moment, of course, in a way, for many, many million people, cash is great. Why is cash great? Because it gives us ownership. We can hide or stash at home. We don’t need an ID or KYC yourself and give up our privacy to use it. And you can spend it on anything you want and no one knows about it, which gives you your human right to privacy. Financial privacy. Okay, not in all countries, or generally. Actually, globally, fiat cash might also not be so great. Just as an example, that’s a typical bread in Zimbabwe, which costs $1 in 2019. When the government decided to reissue the Zimbabwean dollar at the first time, when I went to Zimbabwe in 2020, the exchange rates was suddenly 1 to 28, and no one really believed that the value will stay the same. So in the following years, 2022, 2023. And as of now, I’ve been to Zimbabwe, the exchange rate is 1 to 12,000 now. So now you pay 12,000 Zimbabwe dollar for a bread that cost you one Zimbabwe dollar in 2019. That’s what hyperinflation and inflation means. And it’s not the phenomenon that’s only happening in African countries 100 years ago. I’m from Austria. We had hyperinflation in Germany and Austria, where people made dresses from banknotes and children played with stashes of cash. So the downside of cash is you have, of course, national inflation. It’s analog. You can’t send and receive it globally. It’s also difficult to have at home for longer periods of times. It rots. There are rats eating it. These are things that happening in rural areas and wherever, and also the monopolistic institutions around us are failing us more and more. How is it possible that here in South Africa, also in Zimbabwe, we have load sheding all the time? How is it possible that banking fees in South Africa are higher than in Germany? How is it possible that we still have central banks and centralized institutions who believe they can control the economy by inflating the amount of currency we have? It’s simply not possible to control complex systems. And that’s why we see high inflation rates all over the world, and especially also in African countries. And as you can see, that’s the purchasing power of a US dollar. From 1971 until only 2018, it has lost so much value. And that was before the pandemic, before the Fed inflated the US dollar currency in circulation with trillions of US dollar. And the red line is how the currency went up, and the blue is how the purchasing power went down. So it’s correlated.
