How Zimbabwe’s ‘bad’ bond notes are driving out ‘good’ US dollars  

Spread This News

*This article is taken from
BAD money drives out good, according to Gresham’s Law, dating from 16th century England. Sir Thomas Gresham, money manager for Queen Elizabeth I, argued that, if two coins with the same nominal face value simultaneously circulate, the one with the most gold will be hoarded while the less valuable coin will be used.
Who would have guessed that in our time this medieval axiom would be tested — of all places — in Zimbabwe, the once rich, now impoverished land in southern Africa.
Zimbabwe is ruled by 92-year-old Robert Mugabe, who traveled last week to Cuba for the funeral of his friend Fidel Castro who died at age 90. In 2008 under Mugabe, Zimbabwe recorded the world’s highest rate of inflation. As prices rapidly escalated — rising multiple times daily — the central bank issued progressively larger denomination Zimbabwe dollars. That process culminated with the issuance of a 50 trillion note.
With the economy in chaos, a reformist finance minister, Tendai Biti, was named. He abolished the Zimbabwe dollar and adopted the U.S. dollar DXY, +0.05%