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It was three short years ago that the small former British colony of Zimbabwe was spewing forth 100 trillion dollar bills. Since then, courtesy of a few trillion extra percent of inflationary RDA, the country had given up on its currency and replaced it with US Dollars. Now, the country's cult central banker Gideon Gono has made it clear he wishes to avoid another episode of transplant currency hyperinflation courtesy of his counterpart in the Marriner Eccles building and "has warned that Zimbabwe’s nascent economic recovery is at the mercy of the United States dollar, which is facing new pressures from the Euro-zone debt crisis." Yet the screaming sarcasm is the following: "Gono says Zimbabwe should in fact be looking to the Chinese yuan as its main currency, while urgently seeking to restore its own currency which was abandoned in 2009 after a dramatic loss of its value. With the continuous firming of the Chinese yuan, the US dollar is fast ceasing to be the world's reserve currency and the Euro-Zone debt crisis has made things even worse." And the terminal slap in the face of all that is American: "As a country, we still have the opportunity to avoid being caught napping by adopting the Chinese yuan as part of consolidating the country's look East policy." Well, if recently hyperinflating Zimbabwe is complaining about the US as being on the same path as itself, and instead wants to become a Chinese FX vassal state, perhaps alarm bells should go off somewhere. So the next time Tim Geithner is up on stage somewhere, it may be prudent for a question to be be asked: how and why is it that the world's (formerly) de facto banana republic is complaining that the next up and coming B-Rep is about to replace it in the annals of idiotic monetary policy?
Speaking in Gweru last Saturday, Gono said: “The extraordinary happenings in Europe where economic power houses in the Euro-zone have been hit by a debt crisis deserves extraordinary measures, especially here in Zimbabwe where we have adopted the U dollar as the major currency in our multi-currency regime.
China is now Zimbabwe’s biggest trading partner, with the Asian giant absorbing most of the country’s mineral and agricultural produce.
Vice President Joice Mujuru first raised the possibility of adopting the yuan in September last year, saying it would be a “logical step” and could help solve some of the country’s liquidity constraints.
The multiple currency regime announced in January 2009 has been fraught with difficulties. Retailers are supposed to accept the Euro and the British pound but those two currencies have never caught on, with most transactions being conducted in United States dollars, the South African rand and the Botswana pula.
Finance Minister Biti presented his 2012 budget last week and expects the multiple currency regime to remain in place at least until the end of 2012 when ministers hope it would be replaced by a single currency for the Southern Africa Development Community (SADC).
Gono, speaking at theConfederation of Zimbabwe Industries' (CZI) end-of-year business dinner, said the use of foreign currency was ultimately unsustainable in the long run.
“As long as we continue to use other people's currencies, where we do not have control over that currency, we are not going anywhere as a nation,” he said.
So all sarcasm aside, perhaps someone should be concerned that while the US is enjoying the third year of endless political bickering and deciding if this political candidate or that has had enough illicit sex, while rapidly losing all foreign influence, China is quietly but forcefully taking over the world precisely in the way that the US did in the 20th century: by becoming a primary trading partner, regionalizing its currency, and finally, a step that yet to occur, establishing CNY-denominated debt.