Zimbabwe Apparently Going to Relaunch Z$ Under Gold Standard

Nahanda Radio reports that the Zimbabwe government plans to re-launch the Zimbabwe dollar, but that to make it internationally acceptable, and to move away from the risks embedded in the US dollar and Rand, will back the new Zim dollar by gold.

Gideon Gono, the man who destroyed the Zim dollar by printing too much of it, said in June 2012 that his interventions that destroyed the Zim dollar

were exactly in the mould of bail out packages and quantitative easing measures currently instituted in the US and the EU…

With regards to the new Zim dollar and proposed gold standard, Gono said

The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way…The events of the 2008 global financial crisis demand a new approach to self-reliance and a stable mineral-backed currency, and to me gold has proven over the years that it is a stable and most desired precious metal.

Clearly he learnt something from the hyperinflation that he caused.

If the Zim government goes this route it will most likely be successful in relaunching the Zim dollar, as long as the public accept the currency in exchange. If they don’t, the plan will flop despite being backed by gold. Furthermore, a gold standard that is controlled by government is not guaranteed to bring stability for very long, because it is highly likely that the government will over issue paper money relative to the gold that is backing it. It’s very profitable to do this. This will again force the government to go off the gold standard at some point in the future, setting another hyperinflationary cycle in motion.