December 14, 2013
On September 27, 2013, a few days before we began our safari in Botswana and the Okavango, we had an opportunity to visit Victoria Falls in Zimbabwe. Normally, these sorts of trips visit Victoria Falls in Zambia; but our safari was during the “dry season” and more water flows on the Zimbabwe side than the Zambia side during the dry time of the year. So, we took a day trip to Zimbabwe and the Falls from Livingstone, Zambia. Livingstone is named after David Livingstone, who, in 1855, was the first European to see Victoria Falls (he named it after his Queen). During the wet season the Zambian and Zimbabwean sides of the Falls combine to produce what is believed to be the world’s largest contiguous sheet of falling water, over a mile wide and 354 feet high, rivaled only by Iguazu Falls in South America.
But, beyond photographing the Falls, my trip to Zimbabwe had another mission: Money. Zimbabwean dollars. Not only does Zimbabwe’s Victoria Falls have the world’s largest sheet of falling water, Zimbabwe has also issued the world’s largest sheets of dollar bills. Not in physical dimensions, but in volume — in the number of “000’s” on its bills.
A good friend of mine, Mike, is a collector of money from around the world. So, before I left Florida, he handed me a $5.00 bill saying,
“Dick, I collect currency from around the world and if you get a chance, when you go to Zimbabwe, see if you can exchange this $5.00 bill for some of their dollars. They’ve had a lot of inflation, their currency is worthless, but it may come back. Their dictator won’t be there forever. So I’d like to add some Zimbabwean money to my collection.”
Now I’m not into money collecting and hadn’t paid much attention to Zimbabwean hyper-inflation. But when we got to Victoria Falls, I learned that foreign currencies were legalized as official tender for bill paying in 2009 and now the American Dollars are the country’s “official” currency.
However, Zimbabwean street vendors hawk Zimbabwean dollars. So I turned to David, our guide and asked for his help. It took me longer to send Mike an email of our negotiations than it did to complete the transaction. But this is the email I sent him that night from Livingstone:
“Today, at your request, in the sovereign country of Zimbabwe, we were able to negotiate a currency exchange on your behalf. This is my last day of the web until I return to Johannesburg, so I thought you would like to know. In exchange for your US $5.00, We obtained the following Zimbabwe currency:
“• 20 billon $ note
“• 10 billion $ note
“• 5 billion $ note
“• 250 million $ note
“• 100 million $ note
“• 10 million $ note
“I hope I don’t get mugged on the way home1”
When I returned to Florida, I learned that maybe we could have even done “better!” Check out Amazon.com, where Zimbabwean $100 Trillion bank notes are being sold for $11.48! Oh, well!
Bargain hunting is always exciting; but bargain-hunting for Zimbabwean currency is not the prime-time theme of today’s story.
This story is about “Faith.” Not religious faith as we normally think of it; a different kind of faith, but a very deep and important kind of faith – one that will become clearer as we proceed. I’m motivated to write this story by what’s been going on in Washington. Earlier this month, the Republicans and Democrats in our House of Representatives overwhelmingly passed a bill providing for our country’s budget for the first time since 2009 and included a good chance at setting the debt ceiling so we wouldn’t default on our country’s obligations. The Christian Science Monitor reported:
The agreement is “a turning point in that Republicans are recognizing that shutdown politics is a loser, which a lot of them didn’t understand before,” says John Pitney Jr., a congressional expert at Claremont McKenna College in California. “We’re in a period of lowered expectations where avoiding Armageddon looks pretty good.”
You may recall a few short months ago, there were threats of not merely shutting down our government, there were threats of not paying our debts.
In 1951 I was working on a business degree from the University of Wisconsin. I took a course in “Money and Banking.” Those were the years that America’s currency was backed by silver and gold, and gold was valued at $35 an ounce. You could take a “silver“ certificate to the bank and actually get silver for it. We were comfortable with our money and so was the world. We discussed countries that didn’t back their currencies with precious metals as we did, but those discussions were merely “entertainment” for us and our instructor.
Then, in 1973, during the Nixon Presidential Years, the idea that our currency should be backed by precious metals gave way to simply the idea that our currency was “legal tender” – Fiat Money – it had value because our government said so. We’re not alone. Today all the world’s currencies are Fiat Money.
Fiat money is currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves.
You can check out Forbes’ take on Fiat Money in its 2013 article, All Money is Fiat Money where the author points out:
“Switching to a gold-backed currency regime does not mean switching away from fiat currency, it means switching to a fiat currency system where the money supply is linked to a commodity.
“This is one of those things where our instincts fight our good sense. We want to believe things have intrinsic value, whereas value in a marketplace is determined by supply and demand, not anything intrinsic. It’s scary to think that the US dollar is backed by “nothing”, until you realize that any currency system is backed by “nothing”, or rather by the same thing, which is a common agreement to use the currency.”
The “value” of Fiat Money rests solely in the faith of the people using it for payment of their purchases and for their businesses and for their debts. For Fiat Money to work, it must be backed by faith in the currency’s issuing country, the country’s stability and, in reality, the country’s morality. Loss of that sort of faith happened to Germany after World War I, and in the minds of historians, led to the rise of Hitler and World War II. It happened to Zimbabwe in the last decade, resulting in the country’s financial collapse. If you check the history of American currency, we had similar issues with our dollars and “greenbacks” during the Revolution and the Civil War, and in a lesser way, when we went off the gold standard during the Nixon years.
That’s what made the world nervous a few months ago when some politicians promoted the idea that it’s okay if our country didn’t pay its debts; thus, there was no reason for Congress to raise our debt-limit ceiling, which was necessary for us to meet our obligations.
But, if we won’t pay what we owe we all know it’s bad for us. Our country is no different on this point, and the debt ceiling increase is necessary for our country to continue to pay what we already owe.
In the minds of many around the world, and at home, it looked like we’d soon be on our way to join Zimbabwe, where everyone lost faith in its government, its currency collapsed, and no one could live on a cool million, or billion or even a trillion. That would have been a disaster far beyond our personal discomfort. Not only are many foreign governments investors in America‘s bonds and expect us to pay our debts, but by 2008, at least 17 countries pegged the value of their currencies to the American dollar – thus a collapse here could trigger a larger, maybe even a worldwide, monetary collapse.
What the House of Representatives did this December was to make a political statement that‘s an indication that our country will stand behind its obligations, that our currency is worth the continuing confidence of the world. We, and the rest of the world could have “Faith” in the solidarity of the American Dollar. “It’s doing what the American people expect us to do,” the Christian Science Monitor reported that House Speaker John Boehner of Ohio said, arguing for the bill on the House floor. “And that’s coming together and finding common ground.”
Yes, the politics are not over or gone, but we have a yuletide gift from our House of Representatives, a gift of Faith for each of us and for those around our globe. Maybe, finally, we can trust our liberal and conservative elected representatives to work together to compromise and solve problems, preserve the value of our currency, and avoid a financial collapse like Zimbabwe suffered.
But there is more.
As important as it is for each of us to have Faith in our government, there is another, more personal message hidden in the lessons from Zimbabwe. We are each ruled by our own personal internal governments – our internal moral codes and our consciences. How we run our lives sets the value for our very personal Fiat Currencies, unsecured by precious metals, fancy cars, or other things of intrinsic value beyond what we do – and these very personal Fiat Currencies – what we do and how we choose to live – provide the basis for others to value us and have Faith in us. That may be the most valuable message from Zimbabwe for us all.
OUR SAFARI VIDEO: