Zimbabwe's stock market has plummeted by more than 99%, which is really not a currency pot

Gelonghui

2024-04-24 21:21Posted on the official account of Guangdong Gelonghui

The history of world finance has been added to the rich and colorful stroke!

Can you imagine that a country's stock market can suddenly fall by 99.95 percent? It is equivalent to 10,000 yuan suddenly turning into 5 yuan, and it will go to zero......

At first glance, it sounds incredible, but at first glance, the name of the country: Zimbabwe.

Oh, that's not unusual!

Even, the topic suddenly became magical.

No, is there still someone speculating in Zimbabwean stocks...

01 The clash of white and black

Zimbabwe has not always been as poor as it is now.

On the contrary, it used to be wealthy.

In 1888, the British businessman Ross led a team from the South African colony north to the primitive tribes and discovered a large amount of gold mines.

He did everything possible to persuade the local chiefs to sign a treaty and get the right to open the mines.

Subsequently, Roth succeeded in obtaining territorial rights from the British South African Company, which gave him the right to recruit troops, distribute land, and open banks.

And this large area of land, also named "Rhodesia" by the British after Roth, covers today's Zambia, Zimbabwe and other countries.

In order to connect the colonies of South Africa and Egypt, the colonial companies began to build railways, which directly promoted the development of local industries.

In 1911, the British government divided Rhodesia into north and south with the Zambezi River as the boundary.

In 1922, Southern Rhodesia held a referendum refusing to join the Union of South Africa and became an autonomous British colony, with a cabinet of white immigrants.

Caricature of Rhodes' colonization of Africa

Initially, the natives realized that they had been deceived and launched an armed resistance, resulting in casualties on both sides.

Everyone realized that no one could drive anyone away, so in 1930, the colonists and the Great Tribes negotiated a land distribution bill:

The land was divided equally between the indigenous people and the colonists, of which 40% was shared by the tribes, 40% was private farms of the colonists, 5% could be purchased and operated by the Buraku people, and the remaining 15% was used as a nature reserve.

Some people think that the civilians are too miserable, and the colonists are too bad, and they take 40% of other people's land at once.

If you look at it from a personal subjective point of view, this is true, after all, the British came to colonize and make a fortune, not to engage in charity.

But objectively, the local area was still a primitive commune system at that time, and the natives had no habit of working at all, and large tracts of land were deserted. When whites arrived, productivity increased dramatically by just building a few canals.

In the 50s, Rhodesia had gold mines and various small metals, and was also rich in grain, known as the "bread basket of Africa", which shows how fertile the local land is.

Both the indigenous people and the colonizers, especially the former, are living a more affluent life than before.

In the circumstances, the bill was relatively fair.

Population is the most intuitive data.

At the time of the enactment, the combined population of the indigenous people of all tribes was less than 300,000.

After receiving the medical technology brought by the British, the death rate of the local Buraku people plummeted and the birth rate skyrocketed. By 1965, the Buraku population had reached 4.5 million, and today it is more than 15 million......

A 15-fold increase in population means at least 15 times higher food production and, of course, 15 times higher consumption.

And this was the trigger for the collapse of Southern Rhodesia.

The Buraku population has skyrocketed uncontrollably, and the population is growing at a rate much faster than productivity progress.

In order to feed more children, the locals have resorted to overgrazing, which has even led to a decrease in the productivity of the land.

Of course, it doesn't matter if you are poor, and the natives have lived poorer days.

The key is to be afraid of contrast.

At the same time, white farmers are getting richer day by day by taking advantage of new technologies from the outside world, introducing new crops, and employing local sharecroppers.

The eyes are red.

Everyone thinks that it must have been the original bill that allocated the most fertile land to whites.

More crucially, the local white descendants saw Rhodesia as their homeland and unilaterally declared independence in 1965 in order to get rid of their "home" British. Not only was sovereignty not recognized, but it was immediately subject to economic sanctions.

Moreover, the right to vote in the constitution of the new government is linked to property.

The 66 seats in the parliament were, of course, all white, but symbolically reserved for eight large tribal leaders.

You know what it means with your feet.

Discontent grew, leading to the outbreak of civil war.

In 1980, with the support of the superpowers, the blacks triumphed, elected their own president, Robert Mugabe, and renamed the country Zimbabwe.

But the blacks could never have imagined that they had won the war, but they also ushered in hell.

02 The regression of civilization

When Zimbabwe was established in 1980, it was a stable, mature economy with a GDP per capita of US$947.

At that time, 40 percent of the country's farmland was controlled by 5,000 white farms, which mainly produced tobacco, beef, sugar, cotton, and corn.

These farms account for 40 per cent of the country's GDP and 60 per cent of foreign exchange earnings.

As soon as Mugabe came to power, he began to expel whites, and all farms were handed over to blacks.

Don't think too much about it, but not for civilians, but for cronies who are extremely loyal to you - soldiers and members of the ruling party.

But these people, it's okay to charge on the battlefield, even if you give them the farm, they don't bother to run it.

Even if you want to run a business, you don't have the technology.

In this situation, there was a massive exodus of white descent. Not only did they leave, they took a lot of money and equipment with them.

Just three years later, the farms and construction sites that had only been developed in the local area for decades began to be rapidly abandoned.

At the same time, in order to curry favor with voters, Mugabe has also significantly increased spending on social welfare such as health care and education.

In short, at the beginning, the black brothers who finally turned over were quite happy.

In 1982, GDP per capita was as high as $1,094.

But it is clear that the country's revenues are dwindling, expenditures are rising, and more importantly, the new leader is still at war with his neighbors, and the treasury can be held for a few years.

A short period of economic upswing was followed by a collective decline of the entire country.

By 2000, Zimbabwe's GDP per capita had fallen to $565.

Mugabe is a political master, and he is especially good at throwing the blame, saying that all our difficulties are caused by rich white people.

Before 1980, you said that, and that made some sense. As a result, 20 years have passed, and this is still the reason.

But there is no way, the civilians are still convinced.

In 2001, the local government jumped on the bandwagon and launched a more radical land reform program, announcing the gratuitous expropriation of white people's land for redistribution and prohibiting white people from owning private wealth.

This is tantamount to extermination—not only against whites, but also against domestic agriculture.

Between 2001 and 2010, the number of white people fell from 200,000 to 10,000, agriculture collapsed completely, unemployment soared to 80 percent, and the southern African "bread basket" was transformed into a severely food-deficit country.

Food shortages are an important cause of hyperinflation, which in turn leads to a deteriorating situation in all walks of life, especially in agriculture, thus forming a vicious circle.

Zimbabwe is rapidly becoming the most hyperinflationary country in the world.

What about inflation? Mugabe's idea is simple: print money.

But obviously, other countries have an accurate and definite anchor for printing money, does Zimbabwe have it?

Soon, the Zimbabwean dollar snowballed, from a month to a week, to a day, and then to a few days.

In just a few years, the denomination of banknotes issued by the Reserve Bank of Zimbabwe has rapidly grown from 100 yuan, 1,000 yuan, and 10,000 yuan to 100 million yuan, 1 billion yuan, 10 billion yuan, and 100 billion yuan.

In January 2009, a large banknote of 100 trillion Tianjin yuan was issued, which also set a record in the history of human currency.

Count how many zeros there are

Although the situation is difficult, it is not impossible!

Simple, Mugabe sent a document: ordering the relevant departments not to release inflation data in the future.

What? You say that foreign countries have authoritative statistics? I don't even admit it, you say a hammer.

At the same time, the government also declared that it was illegal to sell things at a higher price.

But this is useless, the currency depreciates hundreds of times a year. If you don't let the price increase, I won't sell it at most.

Normal market order, accelerated collapse.

There are people in Zimbabwe who use money to paste walls, use money for firewood, use money for toilet paper, and all sorts of things.

There are more strange policies, not to mention, some are quite sensitive......

It is clear that Mugabe's government knows nothing about the economy and even has a misunderstanding of the normal social order.

In June 2015, seeing that the national currency was unsustainable, even if you printed a few hundred more zeros, it would be useless, and the local government announced that the national currency would be abolished, and all transactions would be carried out in the currencies of neighboring and large countries.

But this ...... The root problem is not currency at all, you can't use any currency.

Mugabe is not so much a ZZ family as a tribal chief in a suit.

During his 37-year reign, his national income fell and he suffered miserably, but his family lived in poverty and luxury.

While the people lined up to buy bread, the "royal kids" showed off their famous cars and private jets every day, and drank drinks for thousands of dollars a bottle.

For example, Mugabe's son, Robert Jr., never hid his wealth, posting his $14,000 crocodile leather sneakers, two Rolls-Royce, and diamond-encrusted Rolex watches on Instagram......

Another example is his nephew, who drives a $20.13 million Land Rover Victoria Beckham, who spent $65,000 on a week's vacation in the Seychelles......

In 2017, even the most loyal army could not stand it, and the 93-year-old Mugabe was overthrown and went into exile.

As a result, the new president has a darker heart than the old president, and the people on the road are called "crocodiles".

Or rather, he is just a young version of Mugabe, just look at his operation.

In 2019, in order to squeeze more oil and water out of the poor, the government announced that it would raise the price of oil to the equivalent of 24 yuan.

Good guys, the poorest country on earth, but using the most expensive oil in the world.

Civilians, of course, complained, that the new president's approach was as simple and crude as his predecessor's: simply shutting down the Internet.

I don't let you say, doesn't it mean that there are no complaints?

In fact, no matter who is in power, the situation in Zimbabwe will not change substantially, and vested interests need to maintain the status quo.

Poverty and corruption still haunt Zimbabweans like ghosts, and there is still no light in sight.

03 Epilogue

After telling the story, finally go back to the Zimbabwean stock market.

Although Zimbabwe's agriculture has collapsed, the mining industry is still there, and this thing doesn't need people to farm, and the black buddies said they liked it very much.

Ore exports generate about $1 billion in foreign exchange earnings per year, accounting for about 60% of its total export value.

The following is the trend of the Zimbabwe Industrial Index in the past year, from 130,000 points to 2.92 million points, an increase of 22 times.

Let's talk about why it rose so sharply before.

The main reason is similar to the stock market of other countries, which is brought up by inflation. Since money is not valuable, it is natural for money to be transferred from monetary assets to other assets such as stocks in order to preserve its value.

Of course, this kind of rise does not mean that investors make money.

The stock market has risen 22 times, but the currency has fallen even more, and it is actually in the red.

Why has it risen so dramatically in recent months? because the government says it wants to carry out a sixth monetary reform.

This time, we understand, you can't print money indiscriminately, let's do the gold standard!

This is naturally good for stabilizing the market. But the experience of the past few decades has been really scary, and combined with the delay in conversion and the market's lack of understanding of the new currency, more investors have flocked to the stock market to avoid risk.

The country's stock market, which is not large, rose by 330% in the first quarter of this year alone.

Why did it suddenly collapse again? Or because of the currency.

On April 5, the Zimbabwe Gold (ZiG) was officially launched, replacing the Zimbabwean dollar, which has lost 80% of its value this year, with an initial exchange rate of 13.56 yuan to 1 US dollar.

The next trading day, the stock market plummeted.

Obviously, what Zimbabwean dollar, what Zimbabwe index, compared with gold, is it matched?

Zeroing out the stock market is exactly what ordinary people in Zimbabwe want to see.

At least in theory, the gold standard could alleviate the hyperinflation that had accumulated over the years.

But only theoretically.

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