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The Zimbabwe dollar crashed in early 2009 when inflation was growing at an average of 98% PER DAY! Yep, you heard right…pretty insane huh? Their central bank was printing so much money that it was driving up inflation at an alarming rate…so much so that even huge amounts of money weren’t enough to be able to buy daily goods.

They had to go so far as to print a 100 trillion dollar bill! A fellow economist friend of mine actually gave me one that I framed and placed in my office to remind myself of what run-away inflation looks like. This is what mine looks like. Click on the image to enlarge it.

I did get one benefit once from owning one of these bills though. My wife buys stuff on quite a bit. I’ve forgotten what exactly she bought in this instance, I believe it was a couple of pair of boots if I remember correctly.

The lady dropped them off at our home in the Dallas area. She happened to be from Zimbabwe and saw that I had their 100 trillion dollar bill framed in my office. So she gave us a discount on the items of like 20% just because I had that! ha-ha. Other than that, it’s the only use I’ve seen from a Zimbabwe dollar ever since, no matter how large the denomination.

You see, it’s not only the number of dollars you have…or how much money…but rather the “worth” of that money. To give you an example, here’s a sign that someone held up in Zimbabwe when their inflation was running out of control. They had a lot of their dollars, but they still didn’t buy all that much.

The guy had a billion Zimbabwe dollars but was still about to starve! In other words, he was proclaiming that their money wasn’t worth much. Just to emphasize that fact even further, here’s another sign that I found that a person from Zimbabwe had put up in their business.

Their money had gotten so worthless that people wanted to use it to wipe their rear ends with! Now that’s bad!

So since the Zim dollar became worthless, they had to switch to something that they felt would hold up better. Some countries that have their currency crash will revert back to the “world’s reserve currency” for a period of time until they get something else re-established again. That’s what Zimbabwe did.

Since the crash of their currency, they’ve used U.S. dollars. However, now they are questioning the sustainability of those long-term too. So what are they considering switching over to? the Chinese yuan.

Whether they switch over or not…it’s a real-life example of how “money printing” can go bad and how inflation can really get out of hand as a result. We haven’t learned that lesson yet here in the U.S. either. That’s why we always need to have some money in more sound currencies that don’t get into the “money printing” game to fix their problems.

In the end, it doesn’t fix the problems…it actually exasperates them.

So that’s why we spend much of our time in the Currency Cross Trader taking advantage of his dynamic by shorting the “money printers” and buying up fundamentally sound currencies.

Sean Hyman
My E-Book
Editor, Currency Cross Trader

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