It's been a year since I have practically no money in Fiat (official money like the dollar or another currency issued by the state) and whenever possible I keep replacing the metical (official Mozambican currency) with Bitcoin Cash. This situation has led many people, even my wife, to question why I do this.
...a good question after all because whenever possible I substitute the metical for Bitcoin Cash?!
To answer the question I went back in time to explain the hyperinflation that happened in our neighbor Zimbabwe.
The History of the Zimbabwe Dollar
The Zimbabwean dollar was the country's original fiat currency that came into circulation in the year 1980 until 2009, it was designated by the code ZWD and abbreviated as Z$ and issued by the Central Bank, the Reserve Bank Of Zimbabwe.
Zimbabwean dollar was one of the world's most undervalued currencies reaching hyperinflation of over 231000000% in 2008, and had one of its largest banknotes a 100,000,000,000,000 (100 trillion) Zimbabwean dollar bill. At present the country's national money only has a numerical value and is not used to buy anything with it.
With the collapse of the Zimbabwean dollar, which at the time of its adoption in the country in 1980 was quoted 1:1 with the US dollar, the country was left without an official currency and the country had to recur in foreign currency for using in the territory, and then adopted the US dollar, the South African rand, the euro, the Botswana Pula and the pound sterling.
...in other words, the country was left without its national currency and hostage to foreign currencies in its own territory.
Moving on...
Due to the collapse of the country's economy, at the time one of the strongest in Africa, in July 2007 Zimbabwe began to issue bills of 200,000 Zimbabwean dollars, which despite the number being so large the value was not even enough to buy a kilogram of rice. Two years later, the country started to issue 1 trillion dollar bills that were separated into 10, 20, 50 and 100 trillion Zimbabwean dollar bills, and this was money with practically no real value in the market and could often be seen thrown away on the streets of the country's capital Harare.
The one hundred trillion dollar bill, launched in 2008, was the highest value ever issued in the world.
The hyperinflation registered in Zimbabwe became so out of control that the Reserve Bank of Zimbabwe tried to cut three zeros in the currency first, it was not enough to cut, then more ten zeros and even so the situation continued chaotic and could not be controlled. The phenomenon of hyperinflation was so high that it was compared to what happened in Hungary right after World War II.
The Zimbabwean dollar was officially discontinued in 2015 and all of it converted into an astronomical ratio to the US dollar at a ratio of 35 quadrillion to 1 US dollar, causing every Fiat (Zimbabwe dollar) to go out of circulation and enter foreign currency into the territory.
Why Zimbabwe's Hyperinflation
Zimbabwe entered a recurrent crisis that peaked in the year 2000 and pulled the entire economy with it, causing a profound and unprecedented hyperinflation, largely because of the lack of employment, extreme poverty, that led to shortages of fuel, food products and even foreign currency was completely scarce in the territory.
The government, in an attempt to combat hyperinflation, froze prices thus giving more maneuver to the black market, police authorities conducted raids on anyone who opposed their decision and arrested everyone involved. At the time, led the state, presided over by President Robert Mugabe, to conduct a monetary reform as a way to fight the high rate of super inflation, but this measure had no effect.
Mugabe, when he came to power after intense tension with the West conducted by the British government, carried out a privatization of the elephants to prevent their extinction and increase the production of ivory. It is noteworthy that tourism was once one of the best attractions of Zimbabwe (contributing with taxes to the state) and bringing many people to the country, but with the embargo everything came to a standstill.
What Causes Hyperinflation
After this history of hyperinflation in Zimbabwe, we can easily see that a country's economy reflects a lot on the country's currency, if the economy is strong we will have a strong currency. But this currency does not have a limited supply and more fiat money can always be requested whenever necessary and in the process cause hyperinflation.
...let's understand how currency issuance works.
First the Government has to regularize the manufacture of banknotes and then the direct injection of money into the economy. These processes take place with the authorization of the central bank that puts it into circulation and another entity or the same as the factory.
For the production and issuance of the currency, an extraordinary authorization from the council of state is required, and the central bank defines the amount of money produced for the concession of the contract.
...this money is not produced anyway!
It is necessary to control this value and ensure that the amount produced is in coordination with the wealth produced in the country as economic growth is also rising. Therefore, it's no use making more money if a country's wealth doesn't match up to justify emissions.
In other words, if the Central Bank issues more money uncontrollably, it can cause hyperinflation, as people have more money on hand but what they need to buy (consumer goods and services) remains the same.
This flood of new money in the market can cause the devaluation of money and the sudden increase in prices, which will undoubtedly lead to a hyperinflationary crisis!
Bitcoin Cash solves problems caused by hyperinflation
As we saw above, money needs a strong economy to be of value, and its unlimited supply can cause unprecedented hyperinflation:
Bitcoin Cash fixes this, mainly because its supply is capped to only 21 million coins which are anti-inflationary as its emission decreases over the years and consequently its scarcity, causes a positive impact on the market.
The will of people moves the market and its consequent appreciation has a lot of meaning because the world is looking for something to protect themselves from money that is worthless, that is, the purchasing power is not reflected in the value on the hands.
To finalize...
The example of hyperinflation in Zimbabwe is one of the many examples that lead money to have a sharp devaluation, but we also have recent cases where many of our brothers in Venezuela are also suffering from this unprecedented scourge that causes people to suffer, the greatest affected.
There is no point in injecting money into the market if the same country is not producing wealth to justify it.
Using Bitcoin Cash many people can replace FIAT money and keep Bitcoin Cash in their walletS, over time this same value gains value and protects the owner from possible inflationary problems. I do that, but I understand why I'm doing , my financial health is very important and the future is one for decentralized currencies that really work in everyday life:
BCH is digital currency for the humanity
It's not controlled by anyone: so people can store, send and receive money without worries of getting banned during years.
P.S: Article purely educational not financial advice.
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