Zimbabwe Launches Gold-Backed Currency
The Zimbabwean dollar has lost over 70 percent of its value since January, so Zimbabwean officials are taking drastic action.
On April 5, Zimbabwe’s central bank governor, John Mushayavanhu, announced the creation of a new gold-backed currency called ZiG, “Zimbabwe Gold.” Zimbabwe has only 2.5 tons of gold reserves, so the ZiG will be anchored to a basket of foreign currencies in addition to actual bullion. But Zimbabwe is recognizing the pitfalls of fiat money.
Lessons from history: After the late dictator Robert Mugabe forced thousands of white farmers from their land without compensation, the Zimbabwean government tried to stimulate the economy by printing $100-trillion notes. The result was the second-worst hyperinflation crisis in history.
In 2008, prices doubled every 24.7 hours until a loaf of bread cost $10 million. The government eventually abolished its currency and used United States dollars and South African rand. Now officials are trying to establish a stable currency.
Gold standard: There are two types of inflation: nonmonetary and monetary. The first occurs when drought destroys a harvest or war disrupts a supply line. The second occurs when a government devalues its currency through deficit spending and quantitative easing, like Zimbabwe did in 2008.
Droughts, wars and other catastrophes always affect prices, but there is a solution to monetary inflation. Governments must stop printing and borrowing money to finance perennial deficits and actually run a balanced budget. Then they must peg their currency to something that has more innate value than paper, such as gold, silver, copper or some other tangible asset.
God’s system: In The Wonderful World Tomorrow—What It Will Be Like, Herbert W. Armstrong used Haggai 2:6-8 to explain that under God’s economic system, a fixed standard will be established and prices will never change.
Government officials could set up such a system today if they were not so addicted to debt. But economic planners prefer to pay for things by creating money out of thin air.
To learn more about God’s system, request your free copy of The Wonderful World Tomorrow—What It Will Be Like.
