A reform proposal for Zimbabwean inflation

And thus I suggest that Zimbabwe might as well have a go with free banking.
One of the curios of the Zimbabwean economy is that it still has a
significant presence from UK commercial banks (Barclays Zimbabwe, a
subsidiary of Barclays plc is the largest, with Standard Chartered not
far behind). Not very well informed UK journalists often discover this
fact and then write ill-informed
articles about "propping up Mugabe" (the reality is that neither
company has made a cent in profit in Zimbabwe for about five years, but
both of them have correctly assessed that they would hardly be doing
the Zimbabweans a favour by destroying their domestic banking system.
They don’t "make loans to the Mugabe regime", they hold excess deposits
(which are substantial as there aren’t many viable commercial lending
propositions in Zimbabwe) in short term government bonds.

BBZ and SC have substantially better credit ratings than the Zimbabwean
state and justifiably so, and they have more of an interest in
maintaining sound money in the long term than the Zimbabwean state too.
They certainly don’t have any interest in printing a note with twelve
zeroes on it. Why not let them print banknotes and treat them as legal
tender? There’s my plan for monetary reform; doesn’t work for most
hyperinflationary countries as the local banking system is usually
about as weak as the state but Zimbabwe is a special case.

That’s from DSquared and right on the mark I would say.


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