Whats the implication if Zim adopts the Rand?

[guest2013-1]

I heard on 702 this morning the "president's" suggestion to Zim is so that it adopts the Rand to stop the ridiculous inflation rate and the currency theft they have...

My problem with this is why are we responsible for THEM and THEIR economy? Stricter border control will keep them OUT OF OUR COUNTRY.

You don't see America letting the surrounding countries adopt their currency just because they're poorer? You also see them have strict border controls in place to keep illegals out.

So if we are going through with this, how much more will the Rand weaken? I bet it's their plan because some ANC lobbyists (Might have been the IFP or someone else) suggested we deliberately weaken the Rand so the export of SA goods get some more profit.

Anyway... WTF???

 

[rwenzori]

It would be interesting to hear the view of an economist.

To my (uneconomic) brain, to do that Zim needs Rand and lots of them. How do they get them? They could sell us stuff, but then they could sell the stuff for US$ and are probably doing so, so that won't help. Or, I suppose, we print a pile of Rand and GIVE them to Zim ( maybe in exchange for a worthless ubergazillion Zim $ ). I'm sensing bottomless pit at this point, as Mad Bob steals wodges for his own use. Depending on how many we print, the Rand would devalue in some kind of proportion.

They need investment, so as to create jobs and produce something worth foreign money, but I can't see that being likely with Mad Bob ( alantjie's hero ! ) still there as he will just steal it.

 

[Waaib]

Several Africa countries have their currency linked to other currencies. They still use the local currency but agree on a fixed rate. So they make 1 rand = 10 zim $'s and the rate never changes. The zim $ then becomes linked the rands movements.

I guess it would be similar to when Italy changed from Lira to Euro's in terms of how to peg the price.

 

[w1z4rd]

Borders are stupid ideas. People are people.

 

[rwenzori]

Several Africa countries have their currency linked to other currencies. They still use the local currency but agree on a fixed rate. So they make 1 rand = 10 zim $'s and the rate never changes. The zim $ then becomes linked the rands movements.

I guess it would be similar to when Italy changed from Lira to Euro's in terms of how to peg the price.

Is the Namibian Dollar not pegged to the Rand?

The problem with Zim doing that is that it cannot be maintained for more that a few hours. In fact they have partially done this in the past by Govt regulated exchange rates to the US$. Imagine R1=Z$10. Every man and his dog will be buying Rand, but the supply will run out very quickly - I mean, you aren't going to take your Rand and change them into Z$ now are you? Once the supply runs out, the black market is back in operation, and you are where you started. Zim does not have the forex reserves to achieve this.

( But I don't claim to understand economics very well LOL! )

 

[Keeper]

You don't see America letting the surrounding countries adopt their currency just because they're poorer?

have you heard of the Amero ? (Canada + US + Megico)

 

[Deenem]

You don't see America letting the surrounding countries adopt their currency just because they're poorer?

Incorrect!!! When Australia sells sheep to Burma, they pay in ??? US Dollars!! When Nigeria sells oil to Madagascar they pay in??? US Dollars!!

The Americans love the fact that the world uses their currency to trade because it strengthens the US dollar. They actively encourage everyone to use their currency and we should be doing the same.

Most neighbouring countries already peg their currency to the Rand. Namibia, Lesotho, Swaziland. One more country won't make any difference, other than making the Rand a little stronger.

 

[hoegh]

the problem with the whole pegging to the rand is that you need to ensure that the "printing press" they call their reserve bank needs to stop printing money, I have a degree in ecos and I wont lie I dont quite know what the implications are of Zim adopting our currency,

I think the problem lies with how to get our actual currency into Zim, they need to give us something in return for our currency (and they have nothing), they cant peg the currency to ours because they keep printing money, it would halt inflation for about 2 days and things would just continue to spiral. It just doesn't make sense and I would like to hear what other "edumacted" minds think of it??

 

[hoegh]

Incorrect!!! When Australia sells sheep to Burma, they pay in ??? US Dollars!! When Nigeria sells oil to Madagascar they pay in??? US Dollars!!

The Americans love the fact that the world uses their currency to trade because it strengthens the US dollar. They actively encourage everyone to use their currency and we should be doing the same.

Most neighbouring countries already peg their currency to the Rand. Namibia, Lesotho, Swaziland. One more country won't make any difference, other than making the Rand a little stronger.

its actually out of convinience and nothing else that everyone uses the dollar, a lot of places are now adopting the euro as their trading currency of choice, because of the volatility of the USD

as I said above pegging the currency will do nothing if they don't stop printing money and it certainly won't strengthen our currency getting further involved with that dog show up north.

 

[alloytoo]

the problem with the whole pegging to the rand is that you need to ensure that the "printing press" they call their reserve bank needs to stop printing money, I have a degree in ecos and I wont lie I dont quite know what the implications are of Zim adopting our currency,

I think the problem lies with how to get our actual currency into Zim, they need to give us something in return for our currency (and they have nothing), they cant peg the currency to ours because they keep printing money, it would halt inflation for about 2 days and things would just continue to spiral. It just doesn't make sense and I would like to hear what other "edumacted" minds think of it??

I think there are a significant number of rands in circulation in Zimbabwe anyway. As long as it's our Reserve bank that's printing them, it should bring a measure of stability. Just quietly announce that the Rand is legal tender, and burn the ZRB to the ground.

 

[tco21]

What?

Is it not true that if they adopt the Rand, and our reserve bank is the only one that prints the notes, then it will up our inflation too eventually?

For one, the reserve bank can physically only print so much money at a time, and Yes M1 and M2 money only accounts for a small percentage of the total money in circulation, but if x% of the notes available go to Zim then the demand for them will rise here. That would put pressure on the RB in the short term, and in the long term create inflation because of the higher amount of Rand in circulation.

Unless of course I am mistaken because Zim is a different economy (despite their usage of our currency).

 

[Deenem]

its actually out of convinience and nothing else that everyone uses the dollar, a lot of places are now adopting the euro as their trading currency of choice, because of the volatility of the USD

Crap! The whole focus of the Americana trade policy for the past 60 years has been to force other countries into using the US dollar to trade with, in order to finance their debt.

as I said above pegging the currency will do nothing if they don't stop printing money and it certainly won't strengthen our currency getting further involved with that dog show up north.

The whole point of pegging is that it takes away their ability to print any more money. What do you think that pegging means? They can print as much currency as they want, all they can do with it is sell it as toilet paper because it's no longer legal currency.

 

[hoegh]

I think there are a significant number of rands in circulation in Zimbabwe anyway. As long as it's our Reserve bank that's printing them, it should bring a measure of stability. Just quietly announce that the Rand is legal tender, and burn the ZRB to the ground.

it will bring a measure a stability to the economy BUT the zim gov doesn't have stacks of rands to pay the teachers/soldiers/police, rands are there but there are very few of them, problem is social unrest of large proportions (although from what we have heard, it doesn't seem like the zim people actually care about anything, other than sitting on the you-know-whats doing jack about the situation and then waiting for UN hand outs )

 

[Deenem]

What?

Is it not true that if they adopt the Rand, and our reserve bank is the only one that prints the notes, then it will up our inflation too eventually?

For one, the reserve bank can physically only print so much money at a time, and Yes M1 and M2 money only accounts for a small percentage of the total money in circulation, but if x% of the notes available go to Zim then the demand for them will rise here. That would put pressure on the RB in the short term, and in the long term create inflation because of the higher amount of Rand in circulation.

Unless of course I am mistaken because Zim is a different economy (despite their usage of our currency).

Actually the other way round; less currency in circulation over here would lead to deflation, not inflation. But in either case, the money supply would be controlled by the SARB who would still stick with their inflation targets.

 

[hoegh]

Crap! The whole focus of the Americana trade policy for the past 60 years has been to force other countries into using the US dollar to trade with, in order to finance their debt.

explain to me how other currencies using your currency helps finance your debt? and what debt are you talking about? trade deficits? if so, explain the link between financing trade deficits and other countries using your currency to trade with

The whole point of pegging is that it takes away their ability to print any more money. What do you think that pegging means? They can print as much currency as they want, all they can do with it is sell it as toilet paper because it's no longer legal currency.

how does pegging stop a government from printing money?? i can say that 10 zim $ equals 1 ZAR buyt still keep printing the money - i have in theory "pegged" the currency but it doesn't solve the problem of printing money and rampant inflation??

 

[tco21]

Actually the other way round; less currency in circulation over here would lead to deflation, not inflation. But in either case, the money supply would be controlled by the SARB who would still stick with their inflation targets.

In which case... nothing would really change then. Because to stick to their inflation targets they would make sure that x amount of money is in circulation here, leaving only y amount of money to go to Zim. As far as I know, we have slowly been aligned closer to the inflation targets (if not being overshot slightly), so that would mean that the value of y would be extremely small, in fact negligible.

This would make the whole process redundant and not viable.

 

[CathJ]

Actually, a number of coun.tires have their currency pinned to the dollar.

There was an article on fin24 about this last week - it actually doesn't sound like it would affect the rand much, as they would be using the rand but not printing it, and wouldn't form part of our inflation calculations etc. I'll try to find the article for you.

 

[guest2013-1]

Actually, a number of coun.tires have their currency pinned to the dollar.

There was an article on fin24 about this last week - it actually doesn't sound like it would affect the rand much, as they would be using the rand but not printing it, and wouldn't form part of our inflation calculations etc. I'll try to find the article for you.

ty

and yes i know I'm uneducated in the world financials and who uses dollar and what not. My point wasn't that the dollar wasn't used in trade. My point was that america won't go and say "hey instead of using your stupid currency, use ours as your base"

Personally I haven't walked into a country other than america that only had US Dollars. I might be wrong as i've only been to 2 countries before

 

[Deenem]

explain to me how other currencies using your currency helps finance your debt? and what debt are you talking about? trade deficits? if so, explain the link between financing trade deficits and other countries using your currency to trade with

I'm talking about their current account defecit http://findarticles.com/p/articles/mi_m2633/is_4_18/ai_n8685187

how does pegging stop a government from printing money?? i can say that 10 zim $ equals 1 ZAR buyt still keep printing the money - i have in theory "pegged" the currency but it doesn't solve the problem of printing money and rampant inflation??

Maybe you need to go an do a bit of reasearch before you make anymore confused statements like that. It doesn't seem like you've quite grasped the concept of pegging a currency.

 

[tco21]

I bring you back to the point of printing. Our reserve bank would only be able to print so much. Even if it didn't affect us in a serious way, if Zim kept demanding more notes to be printed etc that would put pressure on them. And in any case, back to the issue of M3, just because they use our currency doesn't make all of their problems null and void.

Wouldn't their further spiraling into the abyss, whilst using our currency, have some sort of underpinning on our state of affairs, economically speaking.