As Zimbabwe knocks another ten (yes, ten) zeroes off its currency,
the central bank governor, Gideon Gono, is optimistic that somehow this will do some good: so optimistic, in fact, that he’s reintroducing coins.
It won’t work, of course. Something else is needed, and Daniel Davies has a rather good idea: free banking. Basically, the state doesn’t issue currency: the banks do. In Zimbabwe, the banks, who include global giants like Barclays and Standard Chartered, have vastly more credibility than the government; what’s more, since their own assets would be denominated in their own currency, they’d have every incentive not to print money in a hyperinflationary spiral.
As someone who’s spent a lot of time in Scotland, this idea appeals to me for a non-practical reason, too: I like the variety of banknotes one finds when the notes are issued by a range of different banks. (For historical reasons, Scottish banknotes are actually issued by private banks: the Bank of Scotland, the Royal Bank of Scotland, and Clydesdalel Bank. The same is true in Northern Ireland, of Bank of Ireland, First Trust Bank, Northern Bank, and Ulster Bank.) This can make inter-national travel rather interesting at times, but it certainly makes the world a more colorful and heterogeneous place.
Of course the problem with Davies’s plan is that the Zimbabwean government would have to somehow rely on tax revenue or borrowings to meet its own expenses. Since that would be impossible in the short term, if the government accepted the scheme it would probably be consigning itself to collapse in so doing. Which makes the idea rather unlikely, even if it would be good for Zimbabwe in the medium term.