by Nick Giambruno, International Man:
Having been a longtime listener of Tom Woods’ superb podcast, The Tom Woods Show, I was delighted when he asked Doug Casey and me to come on the show.
We had an in-depth discussion on our recent trip to Zimbabwe and some of the shocking things we found.
I think you’ll find our conversation below informative and entertaining.
Tom Woods: It’s a pleasure to talk to both of you.
Let’s start by talking about a place most people really aren’t thinking a lot about, but when they do, they think of hyperinflation… And that’s Zimbabwe.
Now, I understand you were recently in Zimbabwe. Have things improved since the currency stabilized?
Doug Casey: Well, I think they have improved a little bit.
I’ve been all over that country in the past. And there are some beautiful suburbs of Harare where the houses would be quite at home in Beverly Hills. But you can buy them for around ten percent of what they would cost in California. And your standard of living could be much higher. Where else can you get a maid for $100 a month?
The economy is on the edge of collapse again, because the government doesn’t even have the money to pay teachers, nurses—or almost anybody, for that matter. Well, that’s not such a big problem. You don’t have to pay those people. You have to pay the army. If you don’t pay the army, you’re asking for trouble anywhere, but especially in an African country.
Tom Woods: Nick, you told me in an e-mail that you met government officials there who are familiar with the work of famed free-market economist Ludwig von Mises. How can that be?
Nick Giambruno: Yes. It was like something out of the Twilight Zone. Actually, that was probably the most shocking aspect of the trip.
The country is an economic basket case that recently experienced hyperinflation. Yet the people responsible for that hyperinflation completely understand the difference between Keynesian economics and free market economics. They even quote Ludwig von Mises in their memos. It was quite astonishing.
Doug and I actually had the pleasure of meeting “the man who made everybody trillionaires,” Dr. Gideon Gono. He’s the former governor of the central bank. He told us he knew printing money would cause a hyperinflation. He, and everyone, knew perfectly well what they were doing.
It all goes back to what Doug was saying about the army. The Zimbabwe government was having problems with the army during the 2008–2009 hyperinflation. So, in order to placate the army, Gono was ordered to print money. So he printed. And that’s what it really boiled down to.
When we met him, we found we agreed on many economic issues. He’s a huge advocate of gold. That was a big surprise.
Tom Woods: Yeah, that’s a total surprise. It turns out that maybe we weren’t just dealing with the most crude form of economic ignorance imaginable, but rather a guy who was in an impossible situation being forced to do this.
So you’re telling me that this guy more or less understands money?
Nick Giambruno: Well, they’re not implementing free market policies yet. But they showed a genuine interest in doing so. And I think there’s a decent chance the country adopts gold as its official money.
They’ve been interested in using a gold backed currency or a gold standard since the 1990s. But we wanted to make it very clear they should not use a gold standard or anything like that. A gold standard, for those who don’t know, is when a government issues paper money and promises to redeem it for gold.
Well, nobody is going to trust Zimbabwe to keep that promise. So we told them to simply use gold as money.
And they seemed to understand that.
Doug Casey: Nick and I had a couple of meals with Gono and I met him one-on-one several times. And then, as I have with many ministers in various countries, I engaged in what has been a hobby of mine for the last 35 years. Which is approaching the guys that run backward Third World countries and giving them a plan to turn their country into a new Singapore, or a new Hong Kong. But to evolve much faster than those countries did.
Part of the plan is to have gold as money. Another part of the plan is to take 100 percent of all government assets of whatever type—parastatals, land, you name it—and initially put it into a big corporation. That way, the shares can be distributed pro rata to all the people in the country.
Then take maybe five percent of the shares public in New York, London, and Tokyo to generate several billion dollars of cash. This would give them a market value, and give the corporation operating capital.
I like to imagine I’ve come pretty close in some of the dozen countries where I pitched this. Perhaps one of these days we’ll get lucky…
Tom Woods: Doug, I have to ask you more about this. Economic historian and economist Robert Higgs came up with the phrase “regime uncertainty” to explain why business firms might have been reluctant to invest in the 1930s. In short, people don’t know what the government is going to do next week. They don’t know what the tax policy is going to be. They don’t know what new agency is going to be formed. So they hold back. They’re conservative.
Well, likewise under Obama, you don’t know if there’s going to be a carbon tax. You don’t know what’s going on. Again, this causes people to be more conservative and not want to invest.
Well, wouldn’t Africa be the ultimate case of this? I mean, it’s cronyism times a thousand. And from day-to-day you wouldn’t know what the government was up to. What would make me want to invest in Africa?I’ve been all over that country in the past. And there are some beautiful suburbs of Harare where the houses would be quite at home in Beverly Hills. But you can buy them for around ten percent of what they would cost in California. And your standard of living could be much higher. Where else can you get a maid for $100 a month?
The economy is on the edge of collapse again, because the government doesn’t even have the money to pay teachers, nurses—or almost anybody, for that matter. Well, that’s not such a big problem. You don’t have to pay those people. You have to pay the army. If you don’t pay the army, you’re asking for trouble anywhere, but especially in an African country.
Tom Woods: Nick, you told me in an e-mail that you met government officials there who are familiar with the work of famed free-market economist Ludwig von Mises. How can that be?
Nick Giambruno: Yes. It was like something out of the Twilight Zone. Actually, that was probably the most shocking aspect of the trip.
The country is an economic basket case that recently experienced hyperinflation. Yet the people responsible for that hyperinflation completely understand the difference between Keynesian economics and free market economics. They even quote Ludwig von Mises in their memos. It was quite astonishing.
Doug and I actually had the pleasure of meeting “the man who made everybody trillionaires,” Dr. Gideon Gono. He’s the former governor of the central bank. He told us he knew printing money would cause a hyperinflation. He, and everyone, knew perfectly well what they were doing.
It all goes back to what Doug was saying about the army. The Zimbabwe government was having problems with the army during the 2008–2009 hyperinflation. So, in order to placate the army, Gono was ordered to print money. So he printed. And that’s what it really boiled down to.
When we met him, we found we agreed on many economic issues. He’s a huge advocate of gold. That was a big surprise.
Tom Woods: Yeah, that’s a total surprise. It turns out that maybe we weren’t just dealing with the most crude form of economic ignorance imaginable, but rather a guy who was in an impossible situation being forced to do this.
So you’re telling me that this guy more or less understands money?
Nick Giambruno: Well, they’re not implementing free market policies yet. But they showed a genuine interest in doing so. And I think there’s a decent chance the country adopts gold as its official money.
They’ve been interested in using a gold backed currency or a gold standard since the 1990s. But we wanted to make it very clear they should not use a gold standard or anything like that. A gold standard, for those who don’t know, is when a government issues paper money and promises to redeem it for gold.
Well, nobody is going to trust Zimbabwe to keep that promise. So we told them to simply use gold as money.
And they seemed to understand that.
Doug Casey: Nick and I had a couple of meals with Gono and I met him one-on-one several times. And then, as I have with many ministers in various countries, I engaged in what has been a hobby of mine for the last 35 years. Which is approaching the guys that run backward Third World countries and giving them a plan to turn their country into a new Singapore, or a new Hong Kong. But to evolve much faster than those countries did.
Part of the plan is to have gold as money. Another part of the plan is to take 100 percent of all government assets of whatever type—parastatals, land, you name it—and initially put it into a big corporation. That way, the shares can be distributed pro rata to all the people in the country.
Then take maybe five percent of the shares public in New York, London, and Tokyo to generate several billion dollars of cash. This would give them a market value, and give the corporation operating capital.
I like to imagine I’ve come pretty close in some of the dozen countries where I pitched this. Perhaps one of these days we’ll get lucky…
Tom Woods: Doug, I have to ask you more about this. Economic historian and economist Robert Higgs came up with the phrase “regime uncertainty” to explain why business firms might have been reluctant to invest in the 1930s. In short, people don’t know what the government is going to do next week. They don’t know what the tax policy is going to be. They don’t know what new agency is going to be formed. So they hold back. They’re conservative.
Well, likewise under Obama, you don’t know if there’s going to be a carbon tax. You don’t know what’s going on. Again, this causes people to be more conservative and not want to invest.
Well, wouldn’t Africa be the ultimate case of this? I mean, it’s cronyism times a thousand. And from day-to-day you wouldn’t know what the government was up to. What would make me want to invest in Africa?
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