Is this where we’re heading?

I bought this on ebay last week:

Yes you read that right, a 50 Trillion Zimbabwe dollar bill, issued in 2008. How much was this worth you ask? It cost me £1.70 (plus postage).  Even Mugabe and co have finally realised that this is ridiculous, and abandoned the currency in 2009- since when US, SA dollars and hard currency have been used and prices have stabilised (Critics of Douglas Carswell’s 10 minute bill on legal tender laws take note)

Why bring this up? Well given yesterday’s announcement (after much speculation of QE2 by the Bank  of England, it illustrates where such a policy eventually leads. Increasing the money supply simple decreases its value. If you think the current inflation rate is bad, you ain’t seen nothing yet! As the Wiki article on the Zim dollar states:

In the Guardian, on 18 July 2008, a report on Zimbabwe’s inflation, said that an egg costs ZW$50 billion (GBP 0.17, USD 0.32), and it showed adverts for prizes of Z$100 trillion in a Zimbabwean derby and ZW$1.2 quadrillion ($1,200,000,000,000,000.00: approx. GBP 2,100; USD 4,200) in a lottery. It also showed a monthly war pension currently is ZW$109 billion (GBP 0.37, USD 0.74), shops can only cash cheques if the customer writes double the amount, because the cost will go up by the time the cheque has cleared, and people can only withdraw a maximum of ZW$100 billion from cashpoints.

For the past few weeks I have also been buying silver coins on ebay, and suggest if you wish to perserve some of your wealth do likewise.

  2 comments for “Is this where we’re heading?

  1. pavel
    Oct 15, 2011 at 1:04 pm

    But how would you sell silver/gold? Is it possible to open gold account, i.e. gold is physically stored in a bank and you can withdraw it on demand?
    This way spread aka difference between buy and sell price will be much smaller than “buy 1kg gold on ebay and than find someone who will pay at least 99% of the original price”.

  2. pavel
    Oct 15, 2011 at 1:18 pm

    OK, one could say “banks can go bust” – but if a Swiss/Liechtensteiner bank goes bankrupt, there are bigger problems to solve: how to run your own diesel generator, where to buy diesel and bullets for your gun and so on.

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