Posted on 07/05/2022 11:35:52 AM PDT by dynachrome
How is that NOT convertibility from Zimbabwe paper currency?
It may be convertible but not at a specific rate. If this month its’ Z$1 Million for an ounce of gold, and next month it’s Z$5 Million for an ounce of gold, it didn’t do anything to stabilize the currency.
I would guess that whoever thought this up read a history book which detailed how the Weimar Republic ended its own hyperinflation and once again got a stable currency.
The Weimar Republic was stuck with the Imperial policy to raise money by turning their gold backed currency into a fiat currency, meaning they could inflate its value beyond the amount of gold they had.
WWI reparations were outrageous, so they decided to print money like crazy, which caused hyperinflation to their paper currency, the Papiermark.
The way out of this was to make a second currency backed by gold, the Rentenmark, which was used exclusively between big businesses and the government. It did not inflate, because it could not. And it had a strong stabilizing effect on the German economy.
This is what they likely hope will happen with the Zimbabwe 1 Troy ounce gold coin. It is not intended to be a public currency.
But eventually, once their economy has stabilized, Germany then and Zimbabwe today will need yet another currency, a public currency backed with gold. In Germany’s case it was the Reichsmark, which was gold back and survived the war.
Not having learned their lesson, and wanting a lot of cash to pay for a welfare state, the German government again replaced their gold backed Reichsmark with the fiat currency Deutschmark.
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