Follow up on Zimbabwe hyperinflation – Government introduces coins for making change
When I described This is what hyperinflation looks like, I mentioned the Zimbabwe government was withdrawing all currency from circulation. They were exchanging 250 trillion Zimbabwe paper dollars for one US dollar.
The $10 trillion bill, pictured above is worth US$0.04.
For many years US dollars and South African Rands have been used as the de facto currency. The two Rand coin is worth about $.16 so the one and two Rand coins are used for making change.
With the Rand depreciating after having been stable for a long time, there is need for another way to make change.
The government floated a $50 million bond issue to back up an issue of coins in small amounts denominated in American dollars, such as a dime.
This is possible by issuing a bond in South Africa denominated in dollars which will somehow back the coins. More details from the Wall Street Journal, Change Comes to Zimbabwe, Replacing U.S. Dollars.
The article does not explain how the coins are supported by the bond. After all, the coins are issued by the Zimbabwe government, which does not have much credibility in the economy. I’m curious to know how this plan will protect the value of the “bond coins”, but not curious enough to spend anymore time trying to find out.
The coins are slowly being accepted according to the article. A concern by some people is whether the government is getting ready to reintroduce currency. The government denies that and I trust they are not that foolish.