Since not everyone in Italy follows the lively and interesting monetary policy of Zimbabwe, we believe it is useful to provide an update. Prior to independence, the Rhodesian dollar was solidly pegged to sterling. After 1981, the equal relationship between the US dollar and the Zimbabwean dollar was established. The courageous policy of Quantitative easing (combined, unlike the European one, with an equally courageous public deficit policy) led to a gradual devaluation, so much so that in 2006 one hundred Zimbabwean dollars were already needed to buy an American one. With a clever maneuver, called Operation Alba, the central bank then decided to further devalue its currency by 60 percent, however removing three zeros from the new banknotes. It also made a great deal, because 22 percent of the old banknotes were not even changed into the new ones but directly sent to the rubbish bin.
Several and now useless zeros were again stripped from the new banknotes in 2008 and still more in the following year. In recent days, the Reserve Bank of Zimbabwe announced the demonetization of its dollar by the end of 2015. The banknotes, at that point, can be used as wallpaper, fuel for the fireplace and a thousand other uses, but not as currency . Meanwhile, as compensation, bank accounts will be credited with US$5 for every 175 quadrillion Zimbabwean dollars deposited. The courageous monetary experiment thus closes with 10 to the 25th Zimbabwean dollar today which is worth a single Zimbabwe dollar in 1981. The country, which had pegged its dollar to the US at par, returns to its starting point and directly adopts the dollar American as official currency. Already today, after all, exchanges are settled in Zimbabwe in various currencies. The Indians, very strong in the commercial sector, use rupees, the Chinese use renminbi and all the others make do with South African rands, Botswana pula or US dollars. The country is happily multicultural and multicurrency. Fortunately, for one experiment starting at dusk in Africa, another could see dawn in Europe in the coming weeks if the Greek government starts paying July pensions and salaries in Greek euro-denominated bills, which will stay at European euro like the Zimbabwean dollar initially stood against the US dollar, ie at par.
Di print drachmasin fact, for the moment there is no mention also because, as Erik Nielsen points out, Greece does not have adequate rotary presses (if it had ordered drachmas from a foreign printer, it would have come to light). With badly printed banknotes, Greece would become like Somalia, a country that accepts old legal and counterfeit banknotes alike. The Greek affair, however one turns it, will remain tangled for a long time. The paradox is that both Tsipras and the creditors want Greece to stay in the eurozone. There is also agreement on the primary surplus, although there is disagreement on the means to achieve it. Europe would like a pension reform, while Tsipras wants to raise money with one-off amnesties and with the taxation of the television stations that oppose him.
On social security, Europe is asking for the amounts of baby pensions to be limited and for the level of the retirement age to be raised. The first request, we are willing to bet, will be withdrawn in the negotiations, but the second will not. Countries like Slovakia or the Baltics, poorer than the Greeks, are wondering why they should give money to the Greeks to allow them to retire ten years before them. As for VAT, the differences in position are minimal. VAT for the islands, currently exempt, could be introduced but, in practice, not applied. Tsipras' real goal at the moment is to obtain a debt reduction to cover the retirement age retreat. Debt relief would have no impact on cash flows until 2023, but it would be a huge advertising success. The opposite obviously applies to creditors, who would like to avoid Greece setting a bad example for all debtors on the continent. It has been pointed out by many that the negotiations could go on until July 20, the date on which Greece must return money to European creditors. The debt to criminals of the Monetary Fund (the definition is by Tsipras) could in fact enter a two-month grace period. However, Lagarde made it known that there is no mention of grace, implicitly confirming the fact that creditors want to speed up the times.
A default to the Fund could be useful for Tsipras in the negotiations, but at that point his road would become dangerously without return. One way or another, by the end of July (not necessarily by the end of June, as many say at the moment) many things will be clearer, including the composition of the government coalition in Athens. Meanwhile, financial markets will suffer, but selectively. The euro will be supported by central banks to give an image of stability and the United States will be happy to help keep the dollar from rising. European bonds will be supported by ECB purchases, which will become more aggressive if needed. German Bunds could be buoyed by the flight to quality. As for the stock markets, Wall Street will spend the summer comforted by a Fed which has made it clear that the first rate hike could be postponed to December and that, more importantly, monetary policy will remain very, very expansionary (interest rates will to rise with inflation). Greek tensions will therefore, in practice, be unloaded solely on the European stock exchanges. Selling now, however, certainly means saving yourself from further short-term suffering, but also cutting yourself off from the very rapid recovery that would exist in the event of a solution, even a botched one, of the Greek question. The precedents of 2011 and 2012, which saw strong summer falls (linked to the Italian and Greek events) followed by recoveries in the last part of the year, could set a precedent.
