I'm looking to settle a bet. What's wrong with the above plan?

At the moment the Zimbabwean dollar is worth pretty much nothing. 1 USD will buy you millions of Zimbabwean dollars. If you invest money in Zimbabwean dollars now then wait for the currency to recover to something close to its previous value, so 1 USD will only buy you hundreds or thousands of dollars, will you be able to sell that currency back and profit massively?

Do you really believe the Zimbabwean dollar will be worth anything within a reasonable amount of time?

It does make a nice birthday gift, a suitcase with millions of Z$.

Bad plan. The most likely outcomes are:

a) The country will collapse completely under Mugabe

or

b) There will be some kind of revolution and a new dictator will be put in to power

I don't see any hope for a democratic solution in the country, unless Mugabe dies, which doesn't seem likely unless he's killed in scenario b).

Both of these scenarios are bad for exchange rates, and may even lead to a complete change in currency being used in Zimbabwe. Thus leaving you holding either continuously depreciating currency or one that doesn't exist any more.

It could work, in theory. You'll have a couple of problems though:

1. How long it's going to take for the ZWD to start increasing in value. It's currently still losing about ZW$500k per day against the Pound and it's not showing any signs of slowing down.

2. Where would you keep it? I'd love to have a suitcase sitting there with 6 million dollars in it, but you just know that someone isn't going to understand and will break into your house to nick it. They'd be really disappointed and that'd be funny, but you'd be out of pocket with insurance premiums to replace the window and anything else they buggered while they were in.

Just for a bit of info:

Live rates at 2009.03.25 09:38:09 UTC

The Zimbabwe government redenominated the ZWD again on February 2, 2009 at a rate of 1,000,000,000,000 old ZWD to 1 new ZWD.

The current rate as of 5 minute ago was

1.00 USD

=

186.610 ZWD


But it'll be double that this afternoon probably

Anyway, I can't imagine being able to profit from the Zimbabwean currency. If there was a coup/revolution/change of government that brought about stability, I would imagine the currency would be revalued again or trading would be suspended (if it hasn't been already) - either scenario would leave you with a load of worthless paper.

Don't listen to me though, I know jack all.

Quote from Dajmin :

It could work, in theory. You'll have a couple of problems though:

1. How long it's going to take for the ZWD to start increasing in value. It's currently still losing about ZW$500k per day against the Pound and it's not showing any signs of slowing down.

2. Where would you keep it? I'd love to have a suitcase sitting there with 6 million dollars in it, but you just know that someone isn't going to understand and will break into your house to nick it. They'd be really disappointed and that'd be funny, but you'd be out of pocket with insurance premiums to replace the window and anything else they buggered while they were in.

Well, you could always get insurance on 6 million dollars (conveniently forget to mention the ZW part), and have them pay the value of 6 million US$. That would be the quickest way to make the value of the ZWD go up... A lot.

In theory it works, but in practice there are a number of scenarios which are likely to happen, the most likely being that the unit of currency will be replaced once the country goes tits up or because of a revolution.

Best way would be to invest money into Zimbabwean companies as the low dollar would give more of a controlling stake, however this practice only really works in more developed nations were the industry is good or has a history of a strong industry. For example, I remember being told about an American businessman who invested a lot of money into foreign companies, mainly in Germany, during the Wall Street Crash in 1929 (?). Within 5 years he had made of $10 million, which considering it was the mid to late 30’s was a shed load of cash.

They already replaced the currency a year or so ago because it was down to the tune of something like 500 billion ZWD to the USD. It's in a totally mental spiral and while it may be slowing down, it's not ready to turn around quite yet.

Just to point out - the 1 trillion dollar notes aren't legal tender for that long...

Buy Zimbabwean dollars in hope that the exchange rate will recover? It might but not for along time.

Looking to wallpaper a room? Its cheaper to use Zimbabwean dollars than buying wallpaper!

The fact that Zimbabwe pretty much now trades in US Dollars, and Gold means the Zimbabwe currency is almost worthless. I imagine it's possibly a dead currency. But your theory is just what people do - trading currencies. If the currency traders thought the Zimbabwe Dollar had futyuer prospects they would pile into buying up all off it. They aren't so you can assume 99% think you plan is a bad idea

However at the rate the Fed is printing US Dollars it is a very very real reality that Americans could be facing the very same hyper-inflationary problems Zimbabwe has gone through. I am not joking!

It's so far gone that the currency will just get scrapped - if it ever gets replaced, they'll replace it with New Zimbabwe Dollars (or whatever they decide to call it), and the old ones will remain at the same ridiculous exchange rate.

Like many has already said, the idea is well thought out, and has worked many times. But the country you are going after isn't looking good as far as the currency coming back.

My dad, and alot of his buddies have done the currency trading before and have made quite a few bucks from it. They actually discussed Zimbabwe not too long ago, and concluded it was just a currency that will most likely be scrapped (like most said above).

I have a better idea, amp: Buy a lottery ticket.

Just thought I'd point out Mugabe has made it illegal for Zimbabwe banks to trade with British people and you're not allowed to take currency out of the country (they will search you as you leave), so your plan would only work if you could find somewhere to store it in the war zone country.

Given Mugabe is still forcing white owners out of their farms which in turn means the crops fail (the white farmers leave with the knowledge of how to farm the land, every reclaimed farm from white owners has failed) even though various courts have said it is an illegal practise means financially Zimbabwe and their currency is ****ed.

If you tried this just 10-20 years ago it would have worked as Zimbabwe was the most prosperous country in Africa. Now their currency costs more to print than it is worth. In fact, it cost me more to write this post than 1quadrillion Zimbabwean dollars.

not a good idea, before the world war our country has a money called pengő(don't realy know how can write it in english) before the ww if you have one million pengő you could buy little house or a little field, after the ww you could buy from that money a box of match, then they intrudeced the forint, and thats what we using today
(oh, and the bigest inflation in history was in my country you can read more in here)

It does sound like a plan worth trying. But if their currency sucks at the moment, and you try to convert all that money into a different currency, won't you loose a lot of money?

The currency will probably be scrapped as they start to drift towards the USD/ZAR.

I beleive that they've now switched to the US dollar anyway. I know they also trade Gold on the street for food

I'd say you're better off buying stocks at the end of the year when things start to recover. I know there is still risk involved, but I find it hard to believe that you couldn't make a nice sum investing in companies when things start to go back up, there are some great deals out there right now.

Quote from UncleBenny :

I'd say you're better off buying stocks at the end of the year when things start to recover. I know there is still risk involved, but I find it hard to believe that you couldn't make a nice sum investing in companies when things start to go back up, there are some great deals out there right now.

end of the year?

Well I can't see anything actually recovering until next year at the earliest, I'm still going start buying before that though.

Ok, thanks for the replies everyone

Quote from UncleBenny :

Well I can't see anything actually recovering until next year at the earliest, I'm still going start buying before that though.

Some can't see any recovery Could be decades. We can hope not but some of the figures being released are of Great Depression levels, if not worse.

I am certainly quite bullish on certain things, but it is going to be a long hard road.

Now I need to find some sand to put my head in

Quote from P5YcHoM4N :

Just thought I'd point out Mugabe has made it illegal for Zimbabwe banks to trade with British people and you're not allowed to take currency out of the country (they will search you as you leave), so your plan would only work if you could find somewhere to store it in the war zone country.

It's not that hard. I've got a Hundred Trillion dollar note sitting in front of me right now, and a couple of 50 billion notes at home. You can buy them for a few quid on the Zambian border, or just get them off eBay.

Cunning idea but the money printed at the moment has an expiry date of just a few months. They banking system has collapsed now anyway - they're pretty much all trading with bread and stones.