We Are Proved Right. Again. (No, We Are Not Tired Of Being Right Yet)

OUT IN THE COLD? Morgan Tsvangirai is seen here at the Dutch Prime Minister's Office with a painting of a snowy winter landscape by P. F. de Noter as a backdrop. (What, no Van Gogh?). The Ducth Prime Minister said his country would not give Zimbabwe any of the money it is seeking. Instead, they will continue with their humanitarian assistance. The denial of aid to Tsvangirai is celebrated in huge front page story today in the Government newspaper, The Herald. It sounds like they like the fact that he got nothing.

Yet again, we are proved right. (No, we do not get tired of proved right on this blog and we never tire of pointing it out).

As you probably know by now, it was announced yesterday that banks in Zimbabwe have now converted Zimbabwe dollar accounts on their books into US dollars.

This blog broke that news on JANUARY 23 2009. Click here to read that article.

At the time, we were not sure what exact predetermined rate would be used by Gideon Gono, but we now know.

The accounts have been converted at a rate of Z$6 quadrillion for every US$0.11. That means for every six quadrillion Zimbabwe dollars in your bank account, you will get eleven United States cents.

The article I refer to above, writte on January 23, explains the thinking that informed this strategy back then.

Still, this is money that is being conjured up out of thin air, so to speak. Tendai Biti and Gideon Gono will have to find the US dollars to fund those accounts they have turned into US dollar accounts.

Where is the money to come from? Tax revenue is not even enough to pay the salaries of civil servants. Will they use the one billion dollars they have secured from African banks to fund this freebie carnival?

What is important for you to understand here is that the Reserve Bank Governor has continued with his and Mugabe's plans as f Tendai Biti did not exist at all.

Gono has defied his principal, Tendai Biti, who announced only recently that the Rand would be the base currency (or currency of reference) for the country.

Gono announced yesterday that this is not so and instead, as the Monetary Authority, he has declared the US dollar to be the base currency of Zimbabwe. All the banks in Zimbabwe have complied with this directive, making the UD dollar Currency Number 0 in their systems (base currency). 

The Zimbabwe dollar is currency Number 43, which means it will not even be accepted as legal tender in Zimbabwe anymore.

I guess Tendai Biti will just have to put all of that in his pipe and smoke it.