On April 5th Zimbabwe Announced its New Gold Backed Currency and while this might have seemed like a positive financial development for the country I discovered today that the Zimbabwe Stock Market was utterly destroyed over the weekend after it’s announcement. Dropping insane 99.95% when the market opened on the Monday. I can’t call that a Stock Market Crash, it is nothing short of a Stock Market Destruction.
Source
Many Doomers have often warned that this is the way things will go with us -- some news breaking late on a Friday or over a Weekend and then on Monday morning it’s all gone and too late. This pretty much just happened in Zimbabwe as a result of the new Gold Backed Currency – ZiG – just being announced. The question I have is WHY?
A naive investor would say this new currency is a good move for financial stability so confidence in business (and thus the Stock Market) might be good after such a development. It is difficult to find out exactly what’s going on because the only articles I can find on it are Mainstream and for the Alt-Channels it probably isn’t big enough news. However for me, I find this fascinating and want to know more.
It does appear that during the Hyperinflation the Stock Market was experiencing a Melt Up so it might make sense that if the Hyperinflation was being stopped with the introduction of Sound Money then the Melt Up might stop too...and all those stocks which were being ridiculously inflated as people tried to get out of the Hyperinflating Currency would also stop Melting Up. But still, a 99.95% drop in an instant? It’s just too much to make sense of.
Another possibility is that this is due to the way the stocks themselves are trading. The ZiG is going to be used for Stock Market trading (by mandate) and yet it hasn’t launched yet. Maybe this is a quirky valuation issue and the Mainstream are just smashing Zimbabwe with negative press because they can. If this is the case then the stock market should pick up again in a few days after the ZiG actually launches.
Does anyone have some ideas about what is really going on here? Is this the sort of market reaction that other countries will (or would) have if they tried to return to some kind of Sound Money? This appears to be a Cautionary Tale of some sort, but I’m just not sure what the moral of this story actually is?
Zim Blood in the Streets, time to buy!
Putting my Tin Foil fedora on I'd speculate that TPTB turned their Wall Street computer algos to teach the ZimG government not to use gold to back their fiat. "You guys know why Saddam Hussain and Muammar Gaddafi now swims with the fishies."
Yes, it does seem like it could be a punitive measure in some way. There is no way that TPTB would be happy with the ZiG and would want it to fail. Wiping out the stockmarket would be a strong message.
That is really bizarre. It must come down to implementation of the new currency. I think done correctly this type of scenario is unlikely to repeat itself, and other countries like Argentina may be paying attention to these developments. Fascinating in a bad way...
Yes I think we all need to pay attention so that we know what to expect should similar circumstances happen in other places. I can't say it won't repeat itself since I don't really understand what (or why) it's happened.
I don't really know too much about it, but the latter scenario that you posted seems the more likely choice to me. It's probably nothing but the MSM is blowing it up into some huge thing.
Indeed. I don't trust the MSM reporting on this at all. I'll have to remember to follow up in a couple of weeks to see if more information comes to light.
Good luck!
This is what I saw on Bloomberg, it sounds like a rip the band aid off move and reset stock values to align with the zig.
I understand the rip-the-bandaid-off element to this, but there is no way that I would equate "end market volatility and stabilize asset prices" to be the same as wiping 99.95% capitalization off your stock market overnight.
That's not aligning stock prices to the ZiG...it's aligning them to Zero.
It’s nearly impossible for us here to get a real story on what is going on and why. If you find out I’d love to
Hear it
For sure. I'll try and remember to follow up in a few weeks.
Thank you
Damn that's pretty crazy I have no clue but would love to find out eventually when things play out and hopefully for the best !BBH
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Wow! What is happening to Zimbabwe?!!!!
time to buy the dip?
Interesting, It's worth watching for sure!
!pimp
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So sad to hear what happened to the currency if this country. They are obviously in trying time.
I hope their financial and economists experts come up with a viable solution for this.
It's gone wrong a lot, a lot of people's money is gone, but at the moment it's a nice upward curve for those people, put money in it, it's going to go up a little bit from here.
I guess Zimbabwe didn’t plan well for the stock market to be destroyed after a few days of launching