By Richard Dunbar, Investment Solutions, Aberdeen Asset Management
For the past few years, I’ve had on my desk a 10 trillion dollar note from Zimbabwe. I’ve used it in presentations, along with notes with similar numbers of zeros from Germany in the 1920s, to demonstrate what debasement of a currency really looks like.
Sadly, this week heralds the end of the Zimbabwe dollar. The Reserve Bank of Zimbabwe has announced that it is beginning the process of ‘demonitising’ the currency. In using the 10 trillion dollar note to make a point, little did I realise how much worse things could get: the Reserve Bank will pay a flat five US dollars for Zimbabwe dollar balances between zero and 175 quadrillion dollars. This is currency debasement on a scale that makes the Weimar Republic look like the gold standard of monetary probity.