Thursday, November 19, 2009
Zimbabwe anarchy an unforeseen blessing
Most interesting from a libertarian viewpoint
In February 2009 Zimbabwe was the only country in the world without debt. Nobody owed anyone anything. Following the abandonment of the Zimbabwe Dollar as the local currency all local debt was wiped out and the country started with a clean slate.
It is now a country without a functioning Central Bank and without a local currency that can be produced at will at the behest of politicians. Since February 2009 there has been no lender of last resort in Zimbabwe, causing banks to be ultra cautious in their lending policies. The US Dollar is the de facto currency in use although the Euro, GB Pound and South African Rand are accepted in local transactions.
Price controls and foreign exchange regulations have been abandoned. Zimbabwe literally joined the real world at the stroke of a pen. Money now flows in and out of the country without restriction. Super market shelves, bare in January, are now bursting with products.
I recently visited Zimbabwe in the company of a leading Australian fund manager. As a student of monetary history, I was interested to see what had happened to a country that had suffered hyperinflation. How did the people cope? How is the country progressing now? The current Zimbabwean situation is complicated by the fact that President Robert Mugabe is determined to stay in power whatever the cost....
The worst trauma for ordinary people during the hyperinflation was lack of food. This was due mainly to the imposition of price controls. If the cost of production of an item was $10 and the price controllers instructed that the item could only be sold for $5, the business would soon go bankrupt if they sold at the controlled price. The result was that production and imports just dried up, hence the empty shelves in the supermarkets.
People survived by shopping in neighboring countries and relied on assistance from South Africa and the aid agencies. Companies survived the hyperinflation with great difficulty and often by ignoring laws. Although companies were left without debt post February 2009, they were also left deficient in working capital and had dilapidated plant and equipment. Regular repairs and maintenance could not be afforded. Most companies now require urgent recapitalization.
There has been a major exodus of Zimbabweans over the years, estimated at about 3 million prior to 2008. Many of these were qualified people who were subjected to Mugabe’s campaign of terror. During the latter stages of the hyperinflation there was a further exodus because people were starving. Most of these people went south into South Africa. The current population of Zimbabwe is estimated to be between 10 and 12 million people, so the numbers that have fled the country are significant relative to the total population.
Current economic activity is strongly supported by remittances from Zimbabwean migrants to their families in Zimbabwe. Once the political situation settles down, it is likely that many of these migrants will wish to return to Zimbabwe. Some have already done so. Many activities that perished in the hyperinflation, such as insurance, are now starting to resuscitate.
Credit financing activities are starting to revive. Visa credit cards are once again operating successfully in Zimbabwe, others will surely follow. Banks have had both sides of their balance sheets devastated by hyperinflation and now have no lender of last resort to call on. They are understandably cautious in lending the deposits that are slowly filtering back into the system. Banks also lost much of their equity capital. Barclays Bank survived because it had 40 branches where the bank owned the real estate and had a strong parent. These properties plus some foreign currency holdings represent the equity capital on which the bank currently operates.
In a country with no debt, only assets, people and companies are under geared. With the ultra cautious lending policies of the banks, there is a huge opportunity for foreign investors in the credit purveying industry.
There has been a sharp rise in economic activity since February. Real wages have risen substantially compared to a year ago. Whatever workers were paid in Zimbabwe Dollars during the hyperinflation bought virtually nothing. Now even the minimum wage of around $100 per month allows for basic purchases. A 10kg bag of maize meal, a staple in the local diet, costs $3.50 and lasts for two weeks. Demand for products and services is increasing rapidly. Corporate profits are rising, leading to greater tax revenues for the Government, augmented by rising VAT taxes. Greater Government revenue allows for greater Government spending.
This self-reinforcing loop will continue. The improvement in the economy will become dramatic once Mugabe leaves the scene. At that time aid agencies, NGO’s, Charities and foreign governments will start injecting large volumes of funds and assistance into the country. They refuse to commit any meaningful funds while Mugabe is still the President.
With Mugabe out of the way and the economy recovering strongly, one could reasonably anticipate that a large proportion of the Zimbabweans living overseas will return to the country bringing welcome skills and capital. Indeed foreigners will also be attracted to investing in the country in those circumstances.
It is fascinating to see how rapidly the economy is recovering. It is a great testament to what can be achieved in a free enterprise environment by the elimination of controls combined with the institution of new money that people trust. It needs to be money that their Government cannot create via the printing (or electronic) press.
The economic future of Zimbabwe is likely to be in mining, agriculture, tourism and service industries, especially those providing infrastructure and maintenance facilities. There remain many problems, not the least being chronic unemployment, but the future looks bright beyond the Mugabe horizon. The population is amongst the best educated in Africa and most people can speak English. With the Zimbabwe’s natural assets, there is scope for realistic optimism about the economic future, especially once the current political difficulties are overcome. The population has been brutally traumatized by the hyperinflation and the political situation. They really deserve a decent change of fortune.
Much more HERE
Stop lying about those stimulus jobs
Give the mainstream news media some credit: They have diligently dug into President Obama's fanciful boasts of job creation. When Obama claimed earlier this month that his $787 billion economic stimulus package had "saved or created" 640,000 jobs, a dozen news organizations pounced. They soon highlighted some of the most egregious cases of sketchy job creation in about 20 states.
From their reports, The Examiner has created an online interactive map for tracking exaggerated stimulus claims. So far, more than 75,000 jobs -- exceeding 10 percent of the total -- are either highly doubtful or clearly imaginary. In the coming weeks, we expect to add many thousands more to that total as other media organizations scrutinize stimulus grants in their areas.
Obama and his senior aides have sought to downplay the importance of exact numbers, but they invited close scrutiny earlier this year by setting dramatic expectations for the effect the stimulus program would have on employment. If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.
With his political advisers in a panic, Obama is now planning a State of the Union policy pivot intended to stave off a disastrous congressional election in 2010. After running up the nation's first-ever $1.4 trillion annual budget deficit for 2009, Obama will strike a new pose in January as the man who will stop government extravagance. Budget Director Peter Orszag says Obama will offer new suggestions for budget cuts and "revenue raisers," aka "tax hikes."
Obama's previous budget-cutting masquerade was laughable. In July, he called for a pathetic $265 million in cuts. But with a $3 trillion annual budget, Washington blows that much in about two blinks of an eye. Besides, most of the Obama "cuts" were proposed in full knowledge that Congress would never approve them. No doubt, Obama will present the same sort of faux budget cuts in 2010. But Obama's "concern" about excessive government spending likely will be no more credible to voters next November than the thousands of phantom stimulus jobs he claims to have created this year.
The US economy is beginning to resemble a Japanese economic tragedy : Inflation is the disease, not the cure. Using inflationary policies as counter recessionary-weapons will - depending on the circumstance - create stagflation or generate another boom followed by another crash. Right now it looks like stagflation
The Treasury wants to impose the fallacious rental resource tax on mining companies : Despite the fact that the concept of economic rent has been refuted a number of times the Treasury is now proposing to use this dangerous fallacy as an excuse to impose more taxes on the mining industry. Treasury officials seem to think of the mining industry as a magic cow that can keep on giving no matter how much you milk it
Will a constant money supply generate economic stability? :The whole idea that money could be neutral is ridiculous. Neutrality means that money would cease to be the medium of the exchange. However, then it would no longer be money
Headed towards defeat in Afghanistan : The Democrats really are the Party of Defeat. The administration's loathing for America is reflected in its callous treatment of US troops, treatment that is killing them
When our military is attacked, Obama is a Nowhere Man : Obama loves his wife, children, dog Bo, and himself - especially himself. And he relishes his far left ideology. But the working stiff, the heart and soul of this country? I don't see it. The United States? I don't think so. And that's why Obama should never have been elected president
The Fort Hood massacre: Time to jump to some conclusions : Political correctness is murdering American troops and Obama refuses to stop it in the name of diversity. An army is held together not by diversity but discipline, unity of purpose and patriotism - especially patriotism. Is that why Democrats loath the military?
The Berlin Wall: 20 years on : The anniversary of the fall of the Berlin Wall finds millions of human beings still under recalcitrant communist tyrannies that have defied the historical 'inevitability' of totalitarianism's demise. We owe it to the inhabitants of Cuba, North Korea, Laos and Cambodia to take a fresh look at what happened on Nov. 9, 1989
Jobs 'Saved or Created' in Congressional Districts That Don't Exist: "Here's a stimulus success story: In Arizona's 15th congressional district, 30 jobs have been saved or created with just $761,420 in federal stimulus spending. At least that's what the Web site set up by the Obama administration to track the $787 billion stimulus says. There's one problem, though: There is no 15th congressional district in Arizona; the state has only eight districts. And ABC News has found many more entries for projects like this in places that are incorrectly identified."
Bernanke offers grim job outlook: "Federal Reserve Chairman Ben S. Bernanke waded Monday into the debate among policymakers over the vigor of the economic recovery, offering a sobering view of what lies ahead in his most detailed comments on the economy in months. Bernanke's focus on the weak job market and his opinion that inflation will remain subdued show that he is looking to keep the Fed focused on supporting growth for quite a while longer by leaving interest rates at rock-bottom levels. Financial markets may be soaring and the economy expanding. But, he said, "the best thing we can say about the labor market right now is that it may be getting worse more slowly."
South Korea gains as global bidder to build nuclear power plants: "South Korea is emerging as an unexpected contender in the global race to build nuclear power plants, turning up as a finalist for one of the industry's most-coveted projects. The Korean bid has surprised more-established competitors -- including industry leader Areva of France -- as well as officials in the United Arab Emirates, who are examining bids for a contract that could be worth as much as $US40 billion to build and run the Arab world's first nuclear-power plants. UAE officials could award the contract as early as the next few weeks. Three groups have been short-listed for the UAE deal, according to people familiar with the situation. Early in the bidding process, many observers expected a two-horse race between a French consortium including Areva, GdF Suez, Electricite de France and Total and a US-Japanese consortium including General Electric and Hitachi. But the Korean bid has emerged as "far more competitive than anyone first thought," according to a person familiar with the situation. The UAE deal calls for the winner to spearhead the development, construction and operation of nuclear reactors and supporting facilities in Abu Dhabi, the biggest and richest of the UAE's seven semiautonomous emirates."
Your patriotic and economic duty: Fire a Democrat: "If you are an employer who will be forced to fire employees (or not hire) because of the damage done to your business either by the weak economy (made much weaker by the Democrats’ policies) or by Democrat-passed legislation, such as if health care ‘reform’ or cap-and-trade were to pass, fire Obama supporters first. Of course, you can’t actually say that’s your reason.”
The media as enablers of government: "Why do politicians so easily get away with telling lies? In large part, because the news media are more interested in bonding with politicians than in exposing them. Americans are encouraged to believe that the media will serve as a check and a balance on the government. Instead, the press too often volunteer as unpaid pimps, helping politicians deceive the public. In 1936, New York Times White House correspondent Turner Catledge said that President Roosevelt’s ‘first instinct was always to lie.’ But the Washington press corps covered up Roosevelt’s dishonesty almost as thoroughly as they hid his use of a wheelchair in daily life.”
Andrew Cuomo should leave Intel alone: "New York Attorney General Andrew Cuomo announced on November 4 that he is suing Intel for antitrust violations. Cuomo’s lawsuit is a mistake. He should drop it for two simple reasons. First, Intel’s alleged behavior is pro-competitive, not anti-competitive. Second, Cuomo has severely underestimated the extent of the relevant competitive market. The primary charge against Intel is that the chipmaker has given out billions of dollars in payments and rebates to its customers in exchange for exclusivity agreements. Dell alone received nearly $2 billion in 2006. Cuomo calls this practice ‘bribery.’ But in economic terms, this is exactly the same as lowering prices — and lower prices always help consumers.”
Utter folly: British army tells its soldiers to 'bribe' the Taleban: "British forces should buy off potential Taleban recruits with “bags of gold”, according to a new army field manual published yesterday. Army commanders should also talk to insurgent leaders with “blood on their hands” in order to hasten the end of the conflict in Afghanistan. The edicts, which are contained in rewritten counter-insurgency guidelines, will be taught to all new army officers. They mark a strategic rethink after three years in which British and Nato forces have failed to defeat the Taleban. The manual is also a recognition that the Army’s previous doctrine for success against insurgents, which was based on the experience in Northern Ireland, is now out of date. Addressing the issue of paying off the locals, the new manual states that army commanders should give away enough money to dissuade them from joining the enemy. The Taleban is known to pay about $10 (£5.95) a day to recruit local fighters.... Britain’s early experience of handing out cash in Afghanistan proved abortive. About £16 million in cash was given to farmers to stop them growing poppy crops for the heroin trade, which helps to fund the Taleban. The money is believed to have had little impact on the opium yields." [They tried "Danegeld" once before in their history but found that they still had to fight in the end]
British speed camera INCREASES crashes: "A motorway speed camera responsible for raking in more than a million dollars in fines has been blamed for increasing accidents since it was installed. The camera, which monitors a busy stretch of the M11 near London, results in 9000 tickets a year, but figures released by police show crashes have risen by a quarter at the site. A Freedom of Information request made by campaigners who oppose what they see as revenue-based penalty tickets also showed casualties have almost doubled since 2001 when the camera was set up. Paul Pearson, who runs motoring website penaltychargenotice.co.uk, said: 'No wonder they haven't removed the camera that is causing these accidents. 'It is just raising too much money and they clearly want to keep it there.' The data showed that in the five years before the camera was installed, there were 13 accidents and 14 casualties in the area. In the following five years, the number of accidents rose to 16 and casualties to 24." [In the usual British way "safety" is the rationale for such cameras but that is clearly not the real motive]
British rail travel: "A tour of the worst stations in the country was never going to be a glamorous or uplifting assignment. Pretty soon it turned into an exercise in extreme travel. Mine was an odyssey of wind-swept platforms and urine-soaked floors. Old ladies struggled over footbridges, travellers shivered in the elements as they waited to get home. They talked of parking rage and waiting for taxis in the rain. Many refused to use the fetid facilities. It became a journey of headaches and hunger; inedible food provided from vending machines. There was the stench of disinfectant, rubber floors that gave the feel of hospital waiting rooms, peeling paint and pigeons picking through litter. Disgrace, dismal, dreadful, dingy: just some of the words my companions used to describe the stations. Britain deserves better. Surely the country that developed the first railways should aspire to an infrastructure worthy of the 21st century, not a dilapidated relic of what it had 100 years ago? Anyone who spends enough time on our trains runs the risk of falling out of love with the railway."
My Twitter.com identity: jonjayray. My Facebook page is also accessible as jonjayray (In full: http://www.facebook.com/jonjayray). For more blog postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena
List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here or here or here
The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)
Posted by JR at 1:40 AM