Interview with the central banker of Zimbabwe

by on January 25, 2009 at 9:57 am in Current Affairs | Permalink

As you might expect it is very…what's the right word here?  Excerpt:

I've been condemned by traditional economists who said that printing
money is responsible for inflation. Out of the necessity to exist, to
ensure my people survive, I had to find myself printing money. I found
myself doing extraordinary things that aren't in the textbooks. Then
the IMF asked the U.S. to please print money. I began to see the whole
world now in a mode of practicing what they have been saying I should
not. I decided that God had been on my side and had come to vindicate
me.

Here is the whole interview and thanks to Bob for the pointer. This comment was interesting too:

In November you shut down Zimbabwe's stock exchange. Will you open it again?
The
stockbrokers were creating a money supply that wasn't there. I printed
Z$1.5 quadrillion, but the exchange was operating with Z$100
sextillion. So I said, "Who is doing my job?" Unless there is more
discipline and honor, the exchange will stay closed. I can't be
bothered. I don't know when it'll open. It's a free market, a business
which must be allowed to succeed or fail.

1 Neal W. January 25, 2009 at 10:08 am

The man’s got a point about hypocrisy.

2 anonymous January 25, 2009 at 11:06 am

Chalk up one datapoint for evaluating the success of massive quantitative easing and stimulus programs.

3 Swimmy January 25, 2009 at 11:35 am

What is the right word here? He sounds like a conspiratorial fundamentalist.

4 ben January 25, 2009 at 12:05 pm

To be fair to him, the minute he drops the bs story he gives here is the minute he’s not seen or heard from again.

5 Pompeyo January 25, 2009 at 1:29 pm

System can work though, if zeros are taken periodically out of the currency and Government collects more taxes from the rich.
The same thing will soon happen in the US as well. In the US it is the crooked elite, at least in Zimbabwe it is the socialist government!

6 MM January 25, 2009 at 3:46 pm

“I don’t think Americans can laugh too much at him.”

I truly believe it’s this sort of desire (or maybe natural inclination) to draw comparisons between radically different circumstances using only the most superficial of similarities, ignoring deep and wide differences, and then make judgements (or at least snarky comments) that is both somewhat indicative and causative of the intellectual mess that is “public discourse” across the internet.

7 MW January 25, 2009 at 4:28 pm

For those saying this has nothing to do with our circumstances, I would say it’s sometimes worthwhile to look at extremes of a policy to evaluate lesser forms.

It’s also worth noting Zimbabwe is merely the most extreme of what third-world governments have done the world over to stay a “developing” country. Zimbabwe’s printing presses did not make money to be thrown from a helicopter. Rather the money went to Mugabe’s political clan to terrorize those not in line with Mugabe.

Lesser forms of this favoritism happen the world over. Politically-connected constituencies (GM? Chrysler? Fannie and Freddie?) get new government money when faced with economic trouble due to their underproduction. America, over its history, has only had a tiny bit of GDP steered towards politically-connected constituencies through taxes or inflation. Since 2000, though, lawmakers began in earnest the process of winning votes through giveaways or cozy projects from the public treasury. This process has only accelerated since in the name of quantitative easing.

The fact that the auto bailout was defeated in Congress and even the illegal bailout from Bush had many strings attached gives me hope. Most Americans still put moral significance on actually earning money. But it still remains to be seen whether America will become Italy in 10 years.

8 improbable January 25, 2009 at 4:31 pm

I’ll second MM. I thought Bob Murphy’s comment was funny, falling under snarky comments, and I truly hope he meant it to be that way. But it only works when everyone’s close enough to being on the same page, I agree that far too often statements just like this are made in all seriousness, and swallowed whole. (Most famously perhaps the notion of “moral equivalence” in the cold war.)

9 brannigan January 25, 2009 at 5:53 pm

Some frightening honesty, and indeed the US is heading down the same path…

10 pinus January 25, 2009 at 7:56 pm

@Bob Murphy: “(B) The central bank should crack down on speculative stock bubbles”

But that’s not what he is doing. He is trying to crack down a huge fiat-money anti-bubble. When inflation is out-of-the-charts, the only way how to transfer your savings into the future is investment into real assets, i.e. stocks, and you are willing to pay seemingly exorbitant prices. The stock prices are not high because people are overly optimistic about the performance of the stocks. Stock prices are high because people are realistic about the value of money tomorrow.

And apparently, these expectations can beat even the risk of expropriation which is far from zero there.

11 Ricardo January 25, 2009 at 11:10 pm

I think MW is wrong on how exactly hyperinflation is used to repress the citizens of Zimbabwe. No politically connected person would touch Zimbabwe currency with a 10-foot poll. Instead, the political favor being given is access to foreign currency reserves. Since Zimbabwe has strict capital controls (for ordinary people, not for the connected) foreign currency is rationed. And of course those who get access to the rationed reserves are the political elites and those who do favors for Mugabe. I’ve heard Zimbabwe has special foreign currency stores where goods are priced in U.S. dollars — just like the Soviet Union used to have.

And Hei Lun Chan is spot on with his comment. Some countries use anti-terrorism laws to repress political opponents. Does that mean all anti-terror laws are suspect? We should look at different situations and examine both similarities and differences rather than just going for the (often superficial) similarities. Inflation numbers coming out of the U.S. show hyperinflation is the furthest concern we should have right now.

12 Ricardo January 26, 2009 at 3:14 am

This is partially right. Those who do favors for those who do favors for Mugabe do get paid in local currency – lots of it, if there ever was an understatement. His ZANU-PF thugs’ (see here: http://www.nytimes.com/2008/04/21/world/africa/21zimbabwe.html?_r=2) loyalty must be financed, and he does not have enough currency to do that.

Right, I believe junior soldiers also must be paid in local currency as they went on a looting spree recently due to their inability to buy anything. Those at the top of the food chain certainly don’t have to deal with this, though. At the very top, of course, there are Mr. and Mrs. Mugabe who withdrew $92,000 from the central bank to pay for a shop-till-you-drop vacation across Asia. Paris, London and New York were not on the itinerary as the Mugabes are forbidden from Europe or the U.S. Asian countries still let them in, apparently. In exchange for this courtesy, Mrs. Mugabe was witnessed punching a photojournalist in the face while her bodyguard held him down in Hong Kong. Lovely people, those Mugabes.

13 Yancey Ward January 26, 2009 at 11:31 am

The only monetary difference between Zimbabwe and The United States is that Zimbabwe is closer to the end of the rope.

14 Yancey Ward January 26, 2009 at 4:12 pm

Roy,

Inflation increases exponentially. At the rate it is going, Zimbabwe will have more inflation in the coming year than it has had in it’s entire history, too.

15 8 January 27, 2009 at 5:38 pm

Recently overheard at Federal Reserve Bank of New York…

Gono: Just print the money!
Bernanke: We can’t to that, it will raise inflation expectations.
Gono: (laughs) What are you talking about man, people want the money. Just keep printing it!
Bernanke: We don’t want an inflationary spiral.
Gono: What spiral? You’ve still got deflation. You got to print! You ask for my advice, and I’m telling you, print like a mother$%^$^!
Bernanke: We’ve seen some stabilization in wages…
Gono: Wages in my country are up 23434455658567867867867% since lunchtime. And you can’t even lift them 0.1%? What do they pay you for?

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