US Dollar Replaces Zimbabwean Dollar

In my reckoning, few countries have a more opinionated, if wrongheaded leader that the African nation of Zimbabwe. Robert Mugabe has led this country since it independence from Britain and his record for the first decade was decent but it is clear that his endurance in leadership has probably outlived its utility. Not only is the political scene characterized by necessarily toxic relationship to the Zimbabweans with different political views, but the intransigence in economic policy led to a disaster evident in the high rates of inflation and the collapse of that local currency.

And yet, given the human ingenuity and liberalized currency policy of the United States, the Zimbabwean Dollar has been replaced by the US currency as the effective currency. This happened because citizens of the country realized that harsh political rhetoric from the leadership is one thing but that the need to anchor their income to a stable currency was prudent. As Lydia Polgreen of the NYT covers in detail, all transactions have shifted to US dollars and the Zimbabwean dollar has all but disappeared. This has in turn had the effect that finding change for small transactions is difficult because of the absence of Us coins in that country. This relative shortage of coins reflects the fact that coins are more difficult to transport across long distances and also that seignorage allows paper currency to carry its value over long distances.     The lesson here is that money may be a store of value but it is also a commodity subject to demand. Just ask Zimbabweans.