To best explain why money printing is bad here is an analogy. Let us say you buy a loaf of bread that is not sliced each morning. You then proceed to cut and divide it among your family members. When you cut it into 5 slices each member gets a slice. That slice represents one-fifth of a loaf of bread. What happens when you cut that loaf of bread into 10 slices? Well, each slice is now about one-tenth of the loaf. While technically you are still handing out slices of bread each slice is now only one-half of the original slice in terms of size. When you decide to divvy up the bread into 20 slices you get even less per slice. It still is a slice but it represents less and less value.

Government money printing is a lot like that too. Printing money does not create wealth or increase the GDP of a country no more than cutting a loaf of bread into thinner slices increases the size of a loaf of bread. The more money the government prints in a short period of time, the less it is worth. So why do governments like the Zimbabwean government do it? Why would they do something we all know it’s bad? Well, they do it for a couple of reasons:

  • It is a cheap form of tax that the population might not even notice. If you have $1 ZWL in your pocket and the rate is 1:1 you have US$1 in your pocket. When the government prints another $1 ZWL eventually the rate moves to $2 ZWL per $1. You now suddenly have US$0.50 instead of US$1. Most people just assume that their money lost value. That’s not true, look at it from the other side of the equation, the government had US$0 before they printed money. Now they have $1 ZWL which is equal to US$0.50. They actually taxed and stole from you without you ever knowing!
  • Economics is hard to understand even when you are a University Graduate. It is incredibly easy to gaslight and the entire nation into believing that someone else is responsible for the economic harm brought on by your wanton money printing. Half of Zimbabwe does not even know how they are being taxed through money printing
  • seigniorage-you see even the U.S. government makes a profit when they print notes like the US$100 because it might only cost them US$50 to make that note. The rest is just pure profit. In Zimbabwe, it is even much cheaper. Some bureaucrat just enters numbers into a computer and the government makes money. It’s an incredibly addictive and easy way to make money.
  • To fund government spending. The government of Zimbabwe loves to spend in order to remain popular. Chiefs, MPs and many stakeholders need cars. Civil servants need paid.
  • To pay off debts. Yes governments have debts too

The Zimbabwean dollar in 2022

On 1 January 2022, the Zimbabwean dollar was officially trading at $105.6896 ZWL per US$1 based on the so-called auction rate. As of today, 14 December 2022, the auction rate showed the Zimbabwean dollar trading at $671.4466 ZWL on the same said auction. Going by this it means the Zimbabwean dollar has lost over 500% of its value. Confusingly the auction rate is no longer the official rate. After so much pressure, the government switched to using the Willing Buyer Willing Seller rate (WBWS) which currently stands at $668.9843 ZWL.

Buy USD Airtime

Ironically things have been rather more stable in the black market world. When the year began the Zimbabwean dollar was trading at $200 ZWL per US$1 and now the rate has moved to around $900 ZWL per US$1. While that looks worse in absolute terms it only represents a movement of 350%. It makes the Zimbabwean dollar one of the worst-performing currencies in the world. But how did we get here? Why did the Zimbabwean dollar lose so much value in 2022? Was it because of saboteurs and economic terrorists? The simple answer is money printing. While the Zimbabwean government has refrained from physically printing bucketloads of money as like they did in 2008, they have tried to be clever by printing money in other ways. From its inception, the ZWL has been mostly an electronic currency, all the government needs to make more money is to enter zeroes into a computer. We know money is being printed because the Reserve Bank of Zimbabwe has publishes regular reports on this.