By Charles T.M.J. Dube

IN our last instalment, we were able to demonstrate how local dollars (L$s) were expanding disproportionately to foreign dollars (F$s) and yet our currency was externally denominated, causing disequilibrium.
We linked the L$s to deficit financing through TBs which we made synonymous with RTGS balances proxy.
You will recall that in one of our earlier instalments, we explained how banks were able to create money using the formula:
M= 1/R , with R as the reserve ratio.
We indicated that where depositor Tawanda could deposit US$10 000, if the Reserve Ratio was 20 percent, commercial banks could be able to lend, redeposit and relend many times over until they could increase the initial deposit by a multiple of five, which would increase the money in circulation, M1 to US$50 000, with the
US$40 000 representing L$s.
Thus, apart from the RTGS balances, L$s are also increased through money creation and this money creation is not restricted to F$s only as money is also created from the L$s.
It is important that, for prosperity’s sake, we call a spade-a-spade and trace the current problem to when it first surfaced.
Financial institutions are very sensitive and so are the behaviours of the banking public.
When uncertainty creeps into the banking sector, most of those banked start panic withdrawals.
Let us begin by assuming there are no RTGS balances and that the US$10 000 indicated above could be all our notes and coins.
You will notice due to money creation by banks, bank deposit balances will have increased to US$50 000 and yet the actual tangible cash will only be US$10 000.
So, if all the owners of the US$50 000 go and queue at the bank to withdraw, there would not be enough money to give them as the notes and coins are only US$10 000.
And yet under normal circumstances, without any panicking, the US$10 000 cash would be sufficient; just as the RBZ Governor, Dr John Mangudya, was saying that the US$860 million cash we broke down into US$100 million cash at banks, US$160 million in Bond notes, plus US$600 million in circulation would be sufficient for our purposes vis-a-vis the US$1,5 billion in RTGS, if it were not for market indiscipline.
The RBZ uses the Bank Use Promotion Act to address the indiscipline by which it takes steps to prevent cash hoarding by businesses and individuals alike instead of banking it.
From our earlier discussion with the governor last week, one can again tell that the present cash shortages are a reflection of the lack of confidence in the system, with everyone wanting to get his/her cash from the bank and keep it or keeping that which he/she could have banked.
By now I have probably stretched it enough and you the reader can now put together a whole series of scenarios and know how to behave in the market for the good of us all.
l There is market indiscipline with people not banking and also rushing to withdraw their monies from banks.
There is also externalisation and hemorrhaging of both the Bond note and the US dollar from our economy by foreigners and locals alike turning them into tradable assets and not medium of exchange.
l L$s>F$s. We have more local dollars than we have foreign dollars despite the fact that our currency is externally denominated.
This we have attributed to money creation by banks and deficit financing through TBs and/or RTGS transfer balances.
We have said this could be addressed through Government rationalising or consolidating its expenditure.
We have also suggested quick-win-forex-saving quick-win-import-substitution projects and export/Diaspora remittance expansion. We need to act in terms of balancing L$s and F$s.
Passing through Eastgate and Roadport, one notices crispy new Bond notes, US$s in various denominations and other currencies, all obviously not the result of hassling through trade and picked from different corners of the market, but most probably from some vault/safe and in serially related batches.
These people trade undisturbed at all and in utmost peace.
Where exactly are these currencies, including ours, coming from and from whose vaults, having been sourced how?
As a country, we have the capacity not only to contain, but to provide answers to all this and we cannot afford to allow the country to get into round two of the last fall of up to 2008 with our eyes wide open.
Those who must act to bring things to normalcy must do so and not watch the country go to the dogs.
I have never bothered to withdraw cash for the last four months, but my last visit to my bank last Friday just to get a bank statement was quite a nightmare.
The bank had a long queue stretching outside the banking hall, with security-controlled guided entries reminiscent of the bearer cheques era, such that your first hurdle was to get inside and your second to get served or get what you want.
While I used my grey hairs and aggressiveness to get inside, after waiting for 30 minutes without getting any help, I had to surrender and get back to my office without getting the bank statement.
Before I had been hardly 10 minutes in the bank, this woman was shouting to boos and grumblings that the money was now exhausted (mari yapera).
Interestingly, a customer care officer of the bank rang me on Monday asking me how I found the bank’s service and my simple answer was that not only had I not been served within 10 minutes as per their claim in bold letters in their bank, but could not, even after staying for 30 minutes.
So what exactly am I trying to say?
Market and fiscal indiscipline are our biggest let downs.
We will not be able to get out of our predicament until we are able to openly talk against these things and/or even name and shame.
Thousands lost life and limb for us to get our independence.
Others lost families, property, opportunities as well as mental and physical health.
We cannot afford to have corrupt people feeding from the trough at the cost of our present resourcefulness and future of our children.