And there goes Zimbabwe…
from The Wealth Watchman:
Well, well! Just as the Christmas season approaches, it seems a rather big deal on the currency scene has just gone under the radar. For the US was just outmaneuvered in yet another currency deal that has major implications going forward.
This deal wasn’t a surprise to those who’ve been paying attention, but it wasn’t set in stone either, and a lot of planning went into it. Now finally, having hammered out the details, the announcement has been made, as this headline hit the wire just a few days ago.
Yes, Zimbabwe and China finally hammered out a deal to fast-track the Yuan for use in Zimbabwe’s general economy. This is important for China, but even more so for the troubled south-central African country.
For years, Zimbabwe has been an utter basketcase, plagued with human rights violations, fraud, hyperinflation, and economic maladies galore. It seems the sly, old dictator, Robert Mugabe, having completely train-wrecked his country, was truly desperate to salvage his decrepit legacy. After all, unemployment in that country had recently reached an utterly mind-blowing 80% of their populace!
Can you imagine a populace even functioning with just 1 in 5 having gainful employment? They were literally barely surviving in many cases.
Something had to be done. Thusly, several years back when Mugabe heard about China’s African strategy:involving the investment of over $40 billion in Chinese capital to create close working relationships, by building infrastructure(in exchange for trade and currency usage), Mugabe was keen to get involved.
The man personally made over 13 trips to visit the Chinese PM, and was able to secure a loan package worth $1 billion dollars, in order to build thermal power plants in Zimbabwe, and jumpstart Zimbabwe’s economy. China’s leadership agreed to a tentative deal to fund the plant’s construction, but Beijing knew that the faltering country would need more alternatives, and special help going forward.
Beijing also knew the timeless life truth: that everyone who borrows becomes slave of the lender, and the lender(who has the capital and the leverage) will always end up making the rules. This is especially true if the borrower comes upon hard times!
And that’s where the real value of the loan came in…
Yuan Foot in the Door
We’ve already looked at how the US/UK banking establishment’s power is a money power, which comes through having the premiere currency used in world trade(the US Dollar). The Eastern Bloc, Eurasia, is now moving to counteract the Western bankers, in trying to unite a geopolitical/currency/trading regime between Asia and Europe. It is the most ambitious geopolitical project perhaps ever undertaken.
Many steps toward that ultimate goal have been made in the last few years alone, and this newest debt-forgiveness deal is very much a part of that process. Right now, Zimbabwe is using a basket of currencies to help its citizens trade and transact, in order to help avoid currency turbulence. They no longer really use their own former currency, the Zimbabwe Dollar(or “Zim Dollar”), as that currency was literally hyperinflated to a status about 3 notches below toilet paper.
Up until now, that currency basket included the US Dollar, the Great British Pound, and the South African Rand. Now though, the African country will allow their citizens to take payment from Chinese tourists directly in Yuan. This is key, because China is the largest loan partner in the country now, and will only take a larger share of the trade going forward.
In this new deal, China will forgive about $40 million of the $1 billion owed them, in exchange for acceptance and facilitation of the Chinese Yuan in the Zimbabwe economy. It also allows the Zimbabwe government to repay their Chinese loans using the Chinese Yuan that flow into its country.
That’s a good deal for Zimbabwe, who’s troubled economy could use the debt forgiveness, but it’s also a great deal for Beijing, since it secured this new huge foothold in central Africa, by giving up just 4% of its loans to Zimbabwe. Not too shabby.
Africa now does trade business with China in excess of $200 billion a year, a very sizeable chunk, and much of Africa is now looking to the East to hopefully step forward into the 21st century.
“Wait, Watchman, I don’t get it. Sure global currency share is important, but what could Zimbabwe possibly possess to make the Chinese want to secure trade/currency deals in the first place? What’s the real prize in all this?”
Ah, shield brother, I’m very glad you asked that, because as you’ve already guessed, the Yuan convertibility agreement is just icing on the cake. The real prize for China in Zimbabwe is much more crucial than that…
In the last 10 years, Zimbabwe’s economy and hyperinflation became so bad, that many turned to an old tradition just to survive: gold panning. Much of the panning done was illegal as well. However, when people are literally starving, they’ll do anything to survive. It is believed that the number of those who panned for gold last year, was between 100,000 and 300,000 souls.
That is true suffering.
The reason they could turn to gold panning though, is that Zimbabwe’s soil is rich in gold deposits, and enough gold could be found each day to keep each worker alive. It’s not just gold that the country has a rich reserve of. They also have the motherload deposits of diamonds, platinum, coal, copper, nickel, tin etc. For instance, Zimbabwe’s platinum deposits alone are the 2nd biggest in the entire world.
You name it, Zimbabwe’s got it.
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