Dr. Gideon Gono is appointed Governor of the central Reserve Bank of Zimbabwe. It’s the apogee of his meteoric rise; in fact, his first job was as a tea-boy and dishwasher at the same central bank he now controls. However, Gono has no formal training in macroeconomics, nor finance, and the post is a reward for party loyalty, not an endorsement of ability. The notoriously corrupt Gono has long served as Mugabe’s personal banker, owns a number of government-seized farms, and has begun to build his suburban dream house.
Gono inherits a already damaged financial system; Zimbabwean inflation is estimated to be near 100% annualized at this time, the bills losing half their value each year. Outgoing Finance Minister Leonard Tsumba has clashed openly with Mugabe over the regime’s artificially pegged foreign exchange rate. Mugabe says the currency controls are necessary to “prevent inflation.”
The first banknotes bearing Gono’s signature are circulated to the public. The notes are not typical Zimbabwean dollars, but “bearer cheques” in denominations from $1,000 to $100,000. The bills come with an unusual feature: an expiration date.
The official exchange rate with the US dollar is pegged at $10,000 to $1, but the black market rate is an order of magnitude higher. Of course, black market trading is strongly discouraged, and severely punished in a number of well-publicized cases. Over the next several years Gono will force the shutdown of a number of independent banks suspected to be deviating from the official exchange rate. But somehow escaping prosecution is Gono himself, suspected of buying foreign currencies at the official rate from the RBZ, then selling them back at the street rate for a 1000% profit.
Gono gives his first policy statement to the Parliament of Zimbabwe, broadcast live on state-controlled media. In it, he rails against black market profiteers, and declares that “Failure is not an option.” A devout Christian, Gono concludes with a reference to a higher authority: “In the Lord’s hands, I commit this Monetary Policy Framework for our economic turnaround.”
The RBZ continues to distribute its first issue of bearer checks, and for the first time in the country’s history, the inflation rate hits the quadruple digit mark.
Under Gono’s leadership, the RBZ distributes a second round of bearer cheques, set to expire on December 31, 2006. But they’ll become worthless long before that; outside observers estimate inflation rates at over 2000% annualized, and local media speculate that Gono may be intentionally flooding the country with paper currency, perhaps in attempt to meet civil service salaries, or perhaps to devalue Zimbabwe’s IMF debts.
Inflation hits 8000% annualized; according to principles of exponential decay, a Zimbabwean dollar loses half its worth every two months. With a shelf life of up to 12 months, a Twinkie is a better store of value.
Sometime in 2006
Sometime in 2006 an orbital satellite takes this picture, which is then uploaded to Google Earth. Based on my research, I think this is Gideon Gono’s partially-constructed house, five years in the making and still only half done.
Prices in Harare, the capital, approach absurdity. $7,000 for an egg. $10,000 for an orange. $50,000 for a loaf of bread. In response, Gono announces “Operation Sunrise”, a plan to remonetize the economy with an issue of New Zimbabwean Bearer Cheques, to be exchanged at a rate of 1000 to 1. As three zeroes will be stripped from the existing currency, the plan is promoted in local newspapers with the slogan “From Zero to Hero.”
“Operation Sunrise” is a disaster. With long lines at banks and no grace period, many citizens are left with thousands of notional dollars in worthless old dollars. The Zimbabwe Independent estimates that up to 22% of the money supply is invalidated. The new bearer cheques are issued in denominations ranging from 1 cent to $100,000, with an expiration date of December 31, 2007. The official foreign exchange rate changes accordingly.
Gono directs the RBZ to continue printing and circulating more notes. Since assuming control of the bank, the Zimbabwean money supply has grown by a factor of 10,000. But Gono denies that this is linked to inflation, which he blames on international economic sanctions against Mugabe’s regime.
Responding to citizens’ demands for bills in more useful denominations, RBZ rolls out bearer cheques in $5,000 and $50,000 denominations.
Robert Mugabe’s new mansion nears completion in suburban Harare. It is 36,000 square feet in area and has 25 bedrooms. Gono is heard to whisper that “Mugabe’s mansion is nothing. Wait till I finish mine.”
In a nod to new realities, the RBZ readjusts the official exchange rate upward by a factor of 10. The black market exchange rate is, of course, still higher by an order of magnitude, estimated at 400,000 New Zimbabwean dollars to 1 US dollar. And, of course, Gono’s rumored fixed-vs-floating forex trade still nets an astronomical profit.
Faced with a hyperinflationary crisis of his own creation, Mugabe lashes out. He declares inflation “illegal”, and threatens to jail any businessman caught raising prices. Several local merchants are imprisoned, and for a brief period, the inflation rate slightly declines.
Nevertheless, Mugabe continues to enthusiastically endorse Gono’s money-printing scheme.
In an interview with New African magazine, Gideon Gono denies that printing money causes inflation, and blames the problem on economic sanctions and a lack of balance-of-payment support. He says that the new bills are necessary for infrastructure projects. “We are printing money to build dams and buy irrigation equipment. Combine that infrastructure and the abounding energy of our people to succeed, and you have the makings of an agricultural revolution that is bound to take us to levels not seen in our living memory.” That same month the RBZ rolls out a $200,000 bearer cheque.
Even a man as powerful as Robert Mugabe can’t fight the quantity theory of money. Inflation resumes in earnest.
RBZ introduces a $750,000 bearer cheque.
A new year begins, and it will be the worst in Zimbabwe’s brief history. The original “Operation Sunrise” notes, issued 5 months earlier, are now practically worthless. Gono celebrates the occasion by introducing $1 million, $5 million and $10 million bearer cheques. The black market exchange rate balloons to 6 million New Zimbabwean dollars to one American dollar.
The IMF estimates the current annualized inflation rate at 100,000%. Money loses 90% of its value every four months. Pensions and bank accounts are annihilated. An incandescent light bulb is a better store of value.
An investigative report by the Times of London reveals that RBZ is ordering 500,000 euros per week of uncut currency sheets from Giesecke & Devrient, a privately-held German printer. Daily flights from Dubai to Harare carry as many as 80,000 sheets of paper, convertible to 40 bills each. Each bill is then printed with Zimbabwe’s largest currency denomination, which at this point is still the $10 million bearer cheque. Doing the math, this means that Gono’s RBZ is introducing nearly $25 trillion per day into his country’s money supply.
In a closely-watched election, opposition leader Morgan Tsvangirai appears to defeat President Robert Mugabe, despite Mugabe’s ballot-stuffing and use of strongarm tactics. The final, official tally shows Tsvangirai with nearly 48% of the vote, compared to Mugabe’s 43%. But Mugabe refuses to acknowledge the legitimacy of the results, and demands a second-round runoff.
Perhaps in anticipation of a surprising come-from-behind victory by his sainted boss, Gono officially endorses two new bearer cheques in $25 million and $50 million denominations.
In a sad affair marked by blatant fraud and widespread intimidation, the octogenarian Mugabe “wins” the second-round “election” with 85% of the vote. Mugabe deputizes war veterans and street thugs as “ward officers”, paying them with Gono’s debased currency. Hundreds of Tsvangirai supporters are killed, and thousands are left homeless. International observers agree that printing money may be the only way the regime keeps afloat.
Less than a month after introducing the $25 million and $50 million note, Gono endorses three new denominations: the $100 million, the $250 million, and the $500 million. The bills expire in less than 8 months. On the black market, one American dollar is now worth 777 million New Zimbabwean Dollars. The official exchange rate remains 30,000 to 1. A fixed-vs-foreign currency trade would now net a 25,000% profit; assuming of course, Gono could find anyone to trade with.
A loaf of bread is now worth $100 million, and the Zimbabwe Times, an opposition newspaper, tells of depositors waiting in line for half-a-day or more in a vain attempt to withdraw billions of dollars from ATMs. With billion percent inflation, the money must be spent almost immediately if it is to have any value. In an effort to prevent cash hoarding, Gono caps the daily ATM withdrawal limit at $2.5 billion.
Gono endores three new “agro cheques” with denominations of $5 billion, $25 billion and $50 billion. Initially intended for exclusive use by farmers, they quickly become the dominant national currency. They are worthless within weeks. The official government inflation rate is reported as 231,000,000%, but independent economists place the figure in the trillions. A Zimbabwean dollar loses half its value every 10 days; the unstable plutonium-246 isotope, which can only be created in a laboratory and has a half-life of 10.8 days, is a better store of value.
The official exchange rate is still fixed at 30,000 ZImbabwean dollars to 1 US dollar; the black market rate is estimated at 1.5 billion to 1. The profit margin of the fixed-vs-floating trade is now 5000%. Gono and Mugabe can now access RBZ’s foreign exchanges reserves basically for free, and are presumed to do so. The Zimbabwe Times reports that Grace Mugabe, the president’s wife, blows $80,000 in forex currency on a shopping trip in Rome.
Gono endorses the last of the agro cheques, with a denomination of $100 billion. The 12-digit number proves beyond the accounting capacity of most ATMs, and the bills are distributed at regional banks after a day-long wait. CNN reports the bill will purchase four oranges on the streets of Harare.
Gono institutes the long-delayed Phase II of Operation Sunrise, introducing the Third Zimbabwean Dollar, which will strip 10 zeroes from the beleaguered New (Second) Zimbabwean Dollar. Bizarrely, coins from the First Zimbabwean Dollar regime will now be used as coins in the Third regime, effectively increasing their value by a factor of 10 trillion.
New valuations appear close to sanity; the largest bill is a mere $1000, which is worth a handsome 56 US cents.
But for Gideon Gono, too much of a good thing is never enough, and he quickly introduces a $10,000 bill and a $20,000 bill. The new bills will largely be printed on inferior stock, for, facing international pressure, Giesecke & Devrient have long since withdrawn from their contract to supply the RBZ with banknote paper. Some are printed on newsprint, some on cotton, and some on the recycled, worthless bills of the past currency cycles. Many shopkeepers refuse to accept the low-quality bills. Undeterred, Gono tells a farmer’s association that he is “not afraid of printing money and [will] continue doing so until those who imposed sanctions on us lift them.”
Gono officially suspends all electronic bank transfers in an attempt to stop the ongoing flight to more stable foreign currencies. Gono tells the media that he has “no option but to take this drastic measure in order to maintain sanity in the financial system.”
At this point it is fair to say that the Zimbabwean economy has collapsed. There are no savings, no capital reserves, and practically no jobs. Most citizens rely now on foreign remittances or black market activity in foreign exchange. Many go hungry. Shelves in stores are empty. Basic infrastructure crumbles through lack of maintenance. Stealing and corruption are rampant.
Gono’s first five-year term nears its end. Many speculate that hard-liners within his own party, much damaged by hyperinflation, will push for his permanent retirement.
Mugabe reappoints Gono for a second five-year term as Zimbabwe’s chief banker. Gono rewards him by introducing $100,000, $500,000 and $1 million bills. All bear his signature. Printing presses work round the clock to manufacture the new bills, and begin to break down. The international community refuses to supply RBZ with replacements, and, bizarrely, the country now faces a shortage of physical cash.
December 2008 – August 2009
Somewhere in this period, $45 million US goes missing from the Reserve Bank’s foreign exchange coffers. Gono will later be challenged by Finance Minister Tendai Biti about the location of the funds. Gono acknowledges having withdrawn the money, but claims it went to pay for presidential scholarships and diplomatic missions. The IMF, in agreement with Biti, says the money has been “stolen.” Of course, Gono might have simply exchanged it.
Gono endorses a $100 million bill on December 4th. On December 12th, he endorses a $500 million bill. Perhaps afraid that people are not quite getting the point, he endorses a $10 billion bill on December 19th. A columnist for Forbes Asia points out that, should these trends continue, the annualized inflation rate in Zimbabwe is now 6.5 x 10108%. Printed money loses half its worth in a matter of hours. An unrefrigerated pizza is a better store of value.
The Times of London reports that Gideon Gono has finally, after eight years, finished constructing his house and is prepared to move in. Did I say house? Oh I meant mansion. Estate. Versailles. Never one to think small, Gideon has built one of the continent’s largest dwellings. With no less than 47 bedrooms, it dwarfs the president’s primary residency, and contains a swimming pool, a gym, a theatre, landscaped gardens, a plasma-screen TV in nearly every room, and a security system with fingerprint identification and biometric iris scans. The house is estimated to cost around five million US dollars, or 14 quadrillion in the local currency.
Meanwhile, on the streets of Harare, a cholera epidemic has broken out, claiming over a thousand lives.
Back from a well-deserved vacation in Malaysia, Gideon introduces both a $20 billion and $50 billion bill on January 12. The economy has long since collapsed, and the Zimbabwean paper currency, the laughingstock of the globe, is no longer used by anyone, including government officials. All transactions are now conducted in dollars, or rand, or failing that, simple barter, and the Zimbabwean tax authority announces taxes will henceforth be collected in foreign currencies.But Gideon Gono has a date with immortality, and that date is January 19th, 2009. It is the date on which he officially endorses the 10, the 20, the 50 and, of course, the 100 trillion dollar bill. A one with 14 zeros trailing after it, this is the largest denomination bill in the history of mankind, and is almost instantly worthless. A bowl of ice cream, sitting in the hot sun, is a better store of value.
Gono defends his actions in an interview with Newsweek. “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.”
On February 2nd, a scant thirteen days after securing his place in the history books, Gono introduces Phase III of Operation Sunrise, stripping twelve zeros off the Third Zimbabwean Dollar to create the Fourth, and final, Zimbabwean currency of his tenure. Comparisons to foreign exchange are meaningless; this is merely a sentimental gesture for old time’s sake. Still, it’s worth noting in the final analysis the progress that Gideon has made. One Fourth Zimbabwean Dollar is worth a whopping ten septillion First Zimbabwean Dollars. No man alive can claim to have created so much wealth in such a short period of time.
The Fourth Zimbabwean dollar is officially cancelled, by presidential fiat. All transactions in the country will now be conducted in South African Rand. Gideon Gono somehow retains the governorship of the Reserve Bank of Zimbabwe, despite the fact that his country no longer has a currency.
Finance Minister Tendai Biti, the whistle-blower for the $45 million US missing from RBZ’s coffers, is charged in a bizarre gun-running scandal. However, the charges are quickly dropped for lack of concrete evidence. Outside observers blame Gideon Gono for the frame-up.
Gideon’s masterpiece, the hundred trillion dollar bill, is now a collector’s item. The note has been voided, and so is technically worthless, but, like the Phoenix rising from the ashes, a copy can be found for sale online for $14.95, an implied exchange rate of 6.7 trillion to 1.
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