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Interview with the central banker of Zimbabwe
As you might expect it is very...what's the right word here? Excerpt:
Here is the whole interview and thanks to Bob for the pointer. This comment was interesting too:
In November you shut down Zimbabwe's stock exchange. Will you open it again?
The
stockbrokers were creating a money supply that wasn't there. I printed
Z$1.5 quadrillion, but the exchange was operating with Z$100
sextillion. So I said, "Who is doing my job?" Unless there is more
discipline and honor, the exchange will stay closed. I can't be
bothered. I don't know when it'll open. It's a free market, a business
which must be allowed to succeed or fail.
Posted by Tyler Cowen on January 25, 2009 at 09:57 AM in Current Affairs | Permalink
Comments
The man's got a point about hypocrisy.
Posted by: Neal W. at Jan 25, 2009 10:08:21 AM
Forget Reaganomics, welcome to Gononomics. Coming soon to a country near you.
Posted by: anonymous at Jan 25, 2009 11:03:47 AM
Chalk up one datapoint for evaluating the success of massive quantitative easing and stimulus programs.
Posted by: anonymous at Jan 25, 2009 11:06:58 AM
The guy is obviously motivated by some bad ideas, but I can definitely see why he feels vindicated. He believes:
(A) Providing liquidity to his markets will improve the economy,
(B) The central bank should crack down on speculative stock bubbles,
and
(C) He will ignore the international critics because God put him in power at just the right time to handle this huge crisis in his country.
I don't think Americans can laugh too much at him.
Posted by: Bob Murphy at Jan 25, 2009 11:23:31 AM
What is the right word here? He sounds like a conspiratorial fundamentalist.
Posted by: Swimmy at Jan 25, 2009 11:35:08 AM
I tend not to trust politicians who invoke God in order to justify their behaviour.
Posted by: kurt at Jan 25, 2009 11:38:03 AM
To be fair to him, the minute he drops the bs story he gives here is the minute he's not seen or heard from again.
Posted by: ben at Jan 25, 2009 12:05:58 PM
...what's the right word here?
"Surreal"?
Posted by: anonymous at Jan 25, 2009 12:29:42 PM
System can work though, if zeros are taken periodically out of the currency and Government collects more taxes from the rich.
The same thing will soon happen in the US as well. In the US it is the crooked elite, at least in Zimbabwe it is the socialist government!
Posted by: Pompeyo at Jan 25, 2009 1:29:26 PM
If this wasn't so sad, it'd be funny.
Posted by: jason voorhees at Jan 25, 2009 3:13:43 PM
"I don't think Americans can laugh too much at him."
I truly believe it's this sort of desire (or maybe natural inclination) to draw comparisons between radically different circumstances using only the most superficial of similarities, ignoring deep and wide differences, and then make judgements (or at least snarky comments) that is both somewhat indicative and causative of the intellectual mess that is "public discourse" across the internet.
Posted by: MM at Jan 25, 2009 3:46:49 PM
"... what's the right word here?"
Familiar.
Posted by: Steve Sailer at Jan 25, 2009 4:15:49 PM
For those saying this has nothing to do with our circumstances, I would say it's sometimes worthwhile to look at extremes of a policy to evaluate lesser forms.
It's also worth noting Zimbabwe is merely the most extreme of what third-world governments have done the world over to stay a "developing" country. Zimbabwe's printing presses did not make money to be thrown from a helicopter. Rather the money went to Mugabe's political clan to terrorize those not in line with Mugabe.
Lesser forms of this favoritism happen the world over. Politically-connected constituencies (GM? Chrysler? Fannie and Freddie?) get new government money when faced with economic trouble due to their underproduction. America, over its history, has only had a tiny bit of GDP steered towards politically-connected constituencies through taxes or inflation. Since 2000, though, lawmakers began in earnest the process of winning votes through giveaways or cozy projects from the public treasury. This process has only accelerated since in the name of quantitative easing.
The fact that the auto bailout was defeated in Congress and even the illegal bailout from Bush had many strings attached gives me hope. Most Americans still put moral significance on actually earning money. But it still remains to be seen whether America will become Italy in 10 years.
Posted by: MW at Jan 25, 2009 4:28:20 PM
Someone's taking two aspirins doesn't vindicate the guy who took a hundred.
Posted by: Hei Lun Chan at Jan 25, 2009 4:30:03 PM
I'll second MM. I thought Bob Murphy's comment was funny, falling under snarky comments, and I truly hope he meant it to be that way. But it only works when everyone's close enough to being on the same page, I agree that far too often statements just like this are made in all seriousness, and swallowed whole. (Most famously perhaps the notion of "moral equivalence" in the cold war.)
Posted by: improbable at Jan 25, 2009 4:31:35 PM
There is not a single bit of economic logic in that entire article. Stunning, to say the least...
Posted by: stanfo at Jan 25, 2009 4:38:29 PM
Some frightening honesty, and indeed the US is heading down the same path...
Posted by: brannigan at Jan 25, 2009 5:53:52 PM
100 sextillion
Wow.
Posted by: TW Andrews at Jan 25, 2009 7:31:15 PM
@Bob Murphy: "(B) The central bank should crack down on speculative stock bubbles"
But that's not what he is doing. He is trying to crack down a huge fiat-money anti-bubble. When inflation is out-of-the-charts, the only way how to transfer your savings into the future is investment into real assets, i.e. stocks, and you are willing to pay seemingly exorbitant prices. The stock prices are not high because people are overly optimistic about the performance of the stocks. Stock prices are high because people are realistic about the value of money tomorrow.
And apparently, these expectations can beat even the risk of expropriation which is far from zero there.
Posted by: pinus at Jan 25, 2009 7:56:09 PM
Since 2000, though, lawmakers began in earnest the process of winning votes through giveaways or cozy projects from the public treasury.
Uh, that's been happening since the founding of the Republic.
Posted by: at Jan 25, 2009 8:15:15 PM
I think MW is wrong on how exactly hyperinflation is used to repress the citizens of Zimbabwe. No politically connected person would touch Zimbabwe currency with a 10-foot poll. Instead, the political favor being given is access to foreign currency reserves. Since Zimbabwe has strict capital controls (for ordinary people, not for the connected) foreign currency is rationed. And of course those who get access to the rationed reserves are the political elites and those who do favors for Mugabe. I've heard Zimbabwe has special foreign currency stores where goods are priced in U.S. dollars -- just like the Soviet Union used to have.
And Hei Lun Chan is spot on with his comment. Some countries use anti-terrorism laws to repress political opponents. Does that mean all anti-terror laws are suspect? We should look at different situations and examine both similarities and differences rather than just going for the (often superficial) similarities. Inflation numbers coming out of the U.S. show hyperinflation is the furthest concern we should have right now.
Posted by: Ricardo at Jan 25, 2009 11:10:07 PM
Ricardo: "No politically connected person would touch Zimbabwe currency with a 10-foot poll. Instead, the political favor being given is access to foreign currency reserves."
This is partially right. Those who do favors for those who do favors for Mugabe do get paid in local currency - lots of it, if there ever was an understatement. His ZANU-PF thugs' (see here: http://www.nytimes.com/2008/04/21/world/africa/21zimbabwe.html?_r=2) loyalty must be financed, and he does not have enough currency to do that.
By the way, the stock exchange was shut down in part to prevent the shares of Old Mutual (see here: http://www.zimbabweanequities.com/#c1) from working as a proxy for inflation.
Posted by: Plamus at Jan 26, 2009 2:14:40 AM
This is partially right. Those who do favors for those who do favors for Mugabe do get paid in local currency - lots of it, if there ever was an understatement. His ZANU-PF thugs' (see here: http://www.nytimes.com/2008/04/21/world/africa/21zimbabwe.html?_r=2) loyalty must be financed, and he does not have enough currency to do that.
Right, I believe junior soldiers also must be paid in local currency as they went on a looting spree recently due to their inability to buy anything. Those at the top of the food chain certainly don't have to deal with this, though. At the very top, of course, there are Mr. and Mrs. Mugabe who withdrew $92,000 from the central bank to pay for a shop-till-you-drop vacation across Asia. Paris, London and New York were not on the itinerary as the Mugabes are forbidden from Europe or the U.S. Asian countries still let them in, apparently. In exchange for this courtesy, Mrs. Mugabe was witnessed punching a photojournalist in the face while her bodyguard held him down in Hong Kong. Lovely people, those Mugabes.
Posted by: Ricardo at Jan 26, 2009 3:14:49 AM
Ricardo, but it is justified, because they act in the interest of the people. The people. The people.
Posted by: kurt at Jan 26, 2009 6:00:31 AM
The only monetary difference between Zimbabwe and The United States is that Zimbabwe is closer to the end of the rope.
Posted by: Yancey Ward at Jan 26, 2009 11:31:46 AM
