A friend recently went back to Zimbabwe to do repairs on the ancestral house. Cement was quoted at $55 per bag. In the time it took for him to change his foreign currency to the official RTGS dollars (Real-time Gross Settlement System, an electronic currency supposed to be on par with the US dollar) the price of his order had gone up to $65. A small serving of cheese in a supermarket sold for $32.

The specter of the runaway Zimbabwe inflation of 2008, when they stopped counting at a year-on-year inflation rate of 89.7 sextillion percent, still prowls Zimbabwe, and barter is returning as a way to pay for goods and services. The recent crisis came about when Finance Minister Ncube announced that foreign currency, commonly used in Zimbabwe over the last decade, was outlawed and only RTGS Bonds (aka Bollars) would be legal tender. The official exchange rate was immediately discounted and runs at 10:1 as I write.

Magic? Well, if you are in the right circles, you can change your Bollars at the Central Bank for US Dollars, at the official rate, walk out into the street, and change them for Bollars at 10:1, and come back… Which might explain why a backbench Member of Parliament was able to buy a $210,000 Lamborghini recently.

 

 

Such opulence amidst the poverty that is again gripping this potentially prosperous country is bound to create problems, but only when the ruling circle loses control over the levers of power.

South-of-the-border populists clamor for the nationalization of the SA Reserve Bank with no less than the Secretary-General of the ruling ANC favoring a grab for the money-printing presses.

We also hear that President Trump is not happy with the way the Federal Reserve is doing it’s job. But even control of the levers of power does not guarantee economic success, as Mao’s Great Leap Forward proved: Economics do not obey ideology. 

Perhaps a lesson should be taken from a Viking King: Knut the Great, ruler of Denmark, England, and Norway, was by all accounts a great warrior, a statesmanm and a religious person.

Surrounded by fawning courtiers who exaggerated his powers, he is said to have had his throne set on the beach at Easter of 1028, and to have commanded the tide not to rise.

The fact that the forces of nature did not respect his reputation as warrior, his royal title, or his religious piety enabled him to point out that even his powers were limited.
 
Humility in the face of economic reality might be advisable.