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When Money Destroys Nations: How Hyperinflation Ruined Zimbabwe, How Ordinary People Survived, and Warnings for Nations that Print Money Paperback – March 20, 2015
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The greatest risk the world faces at present is not nuclear warfare or environmental disaster as so many think right now. It is a financial meltdown on a global scale. The authors’ state: “A worldwide government debt and currency crisis remains one of the largest of all global economic risks. It is certain that, if governments continue to pile up debts recklessly and to devalue their currency by printing money, a day of debt reckoning must come.” One just has to pay attention to much of the world news right now, and it’s easy to see this happening.
The Zimbabwean lesson, which comes from a very small economy (which at the time had very little effect on the world as a whole), becomes much more of an issue when one applies it to the huge economies of the world today. “Zimbabwe’s government consumed too much and became highly indebted, complacent and over-reliant on foreign funders, while at the same time increasing its money supply in the economy. The government developed an unsustainable spending habit and when the funding suddenly dried up, it was left with two options: either take the hard road and live within its means or bumble down a potholed inflation road leading to destruction.”
The authors state that “Since 2007, the UK and United States have become much more profligate – the United States government almost doubled its debt in the time period to 2013, and the UK government increased its debt by almost 2.5 times….. Like Zimbabwe, the industrialised countries are turning to money printing to revive their ailing economies. While the amounts of new money being printed are staggering, they have not yet been enough to spark runaway inflation. Nonetheless, these economies are adopting dangerous policies that history has shown are hard to reverse.”
Ever-increasing debt and no ability to ever repay it! We’re facing a similar problem in South Africa right now. All the signs are there.
But the book is not a doom-and-gloom chronicle. There was a lot that was encouraging too. In the midst of the most appalling conditions, ordinary Zimbabweans showed their resilience. What was of particular interest to me, as a Christian, was the way in which they overcame their problems - through community. “There was only one way to survive hyperinflation in Zimbabwe, and that was in community. As formal supply chains broke down, an intricate network of community supply evolved throughout the country. Instead of purchasing goods in shops, you had to rely on relationships with people who had access to the food and personal services you needed. In this way, the community developed a bartering network that was practically impossible for the government to control or regulate. Many of those we interviewed described how deeply bonding this process was and still speak of it with fondness and nostalgia. In the midst of the darkness, there was tremendous positivity among the people. It was the bright moon in the night of economic collapse. The deep value system shared across the cultures preserved the rule of law. Most Zimbabweans held Christian convictions that guided them to respect the rule of law, shunning personal aggression and respecting private property, basic social order and contracts. Business was done relationally rather than at arm’s length.”
Whether this will be possible in much of the secular western remains to be seen – but people, generally, are far more resilient than we often give ourselves credit for.
So, what we do about it? Well the authors do make a number of very practical personal suggestions, none of which I felt were ‘doomsday-ish’; but more importantly, their general observations were more helpful:
If deficit spending and money printing ruin economies, we should establish a system that removes the state’s ability to go into debt and to control and print money. What, then, are the best structures to facilitate a sound and just money system? We strongly advocate that as a foundation, people must have freedom to choose whatever money they wish to use in trade. The only standard needs to be one of justice. If an organisation says that the money it issues has a certain backing, such as oil or gold, it must actually have that backing. The money must be what it says it is. At its basic root, this is about trading honestly. The underlying cause of hyperinflation is excessive government spending that precedes money printing. Governments should therefore have strict constitutional limitations on their ability to tax, spend and borrow. The lessons from Zimbabwe’s struggles are clear. When nations enact irresponsible economic policies and then print money to fix their problems, the inevitable result is economic ruin. This pattern has been repeated over and over in history, always with the same results.
Voter activism can certainly play a role, but one wonders if the problems aren’t so deeply entrenched and all-pervading that even new governments will have to ‘fit in’? The authors certainly leave one with this impression, yet there is still the encouragement to do one’s bit! I can cut my own spending and reduce my own debt. I can look at ways to be less reliant on government and municipal structures and services. I can learn to grow more of my own food, and more. But ultimately, as a Christian, I know that my source is God. Not my savings; not my pension fund; not my business – and certainly not the social welfare system.
I think the book should be required reading for all government ministers, especially those in charge of the finances; for all leaders in business, and in fact, for all those involved in community leadership of any kind.