Mangudya Is Not Learn: Real reason why there is USD shortage in the market and how it can be fixed

Mangudya Is Not Learn: Real reason why there is USD shortage in the market and how it can be fixed
Published: 27 May 2018 (382 Views)
It's always sad to see people mess up the country, It's even worse when you know how it could be done right. Dr Mangudya broke an economics law by introducing the bond notes the law he broke is called Gresham's law. One would wonder if he ever studied monetary policies at any institute.

Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation.In our case the USD and bond notes which are both accepted as having the same face value by law.

The economy is created in a way that the masses have known responses to any policy changes made by the central banks. The bond coins drove the rand coins out of the market in a matter of 3 months. Bad money drives out bad money. When bond notes were introduced people reacted in the market normally by starting to store the more valuable note and giving away the least valuable for any purchases hence the USD is mow stored under the bed  and people are not ready to give it out hence it's disappearance in the market. This is because people spending money will hand over the "bad" money  rather than the "good" one, keeping the "good" one for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one.

Former minister Tendai Biti said it's a matter of the people's lack of confidence in the government but he was completely wrong, it's never about confidence if you do the right thing it's never a matter of confidence the results will always prove you did the right thing. So how did we come to this point and can it be fixed.Yes it can but this will need a deliberate move by the central bank to bring back the need for using good money in the market it once happened in Zimbabwe and elsewhere before,However on that point in Zimbabwe we don't seem to control our destiny things look as if they happen to us mot us making thing happen. If you have experienced being in projects or business with most Zimbabweans, they seem to ignore basic principles of business and economy even recording petty transactions we usually ignore those.

I will quote Tendai Biti again since he is widely regarded as the best finance minister we have had. He said "decommission the bond notes and introduce the rand", decommissioning the bond note is wrong people will loose their wealth but introducing the rand when we still have the bond note is correct.

This is where the Thiers law which reverses the Gresham law kicks in it states good money will drive away bad money, if the government makes it's standard transactions in the rand and make it the main currency of our multi-currency system the merchants will start refusing bond notes accepting the rand like that time in 2008 when people started refusing the Zim dollar and started accepting the rand mostly.

The rand will be a better foreign currency to use because of this one reason which the President quoted as the solution to cash shortages, we need to increase our exports to get more USD to easy cash shortages, South Africa is our biggest trading partner hence we have more rand imports than any other currency imports in Zimbabwe.

It's not as easy as it sounds it needs people who have studied how money works to implement the Thiers law and manage our destiny that the results will always be what we wanted, l doubt if Mangudya has the know how of implementing it flawlessly.

- Simplisio Muvunde


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