Zimbabwe tried backing its money with actual gold, and it still lost half its value in six months because nobody trusts the government.
It's a common belief in 'hard money' circles that returning to a gold standard would instantly stop hyperinflation. This evidence shows that without fixing the underlying policy that forces the government to print money, a gold backing is essentially a cosmetic fix that the market will quickly see through.
<p>Predicting Currency Breakdown in Dollarised Frontier Economies: <span>Evidence from Zimbabwe 2016–2024</span></p>
SSRN · 6284918
This paper investigates the relationship between broad money supply (M3) and the parallel market exchange rate in Zimbabwe over the period 2016-2024. Using quarterly data on M3 and the Old Mutual Implied Rate (OMIR) as a proxy for the true parallel market rate, we find a statistically robust relationship between M3 growth and currency depreciation across multiple specifications. The OLS regression in levels yields an R² of 0.973 (p<0.001); the first-differences specification, which addresses pot