Gold News

For whom the bell tolls

Hyper inflation and social breakdown in the 21st century...

THE GREAT MAJORITY of people reading this article will live in well-ordered societies, where the bulk of our problems can be contained within the good order of the rest of our lives.

   Indeed, from this position it seems easy to couch one's views and criticisms of others from within this secure framework. But look away from the civilized parts of the earth to those where there appears to be a veneer of civilization – such as Zimbabwe.

   A despot rules, but he is old and no doubt once he offends the people sufficiently the Democratic process will enable the voters to replace him and his party with a reasonable opposition. They, no doubt, will repair any damage done.

   Such is our faith in Democracy and the decency of our neighbors. But oh that it were true, even to a small extent.

   The truth of the matter is that it is possible to watch a nation decay beyond basic human decency. I write this in the context of Zimbabwe, most especially its platinum mines and their future. The events in Zimbabwe have decidedly affected the future of the South African-owned platinum mines belonging to Anglo Platinum and Impala Platinum (Zimplats), both already facing the potential appropriation of 51% of their shares.

   The author began visiting Zimbabwe in 1981 when the US Dollar fetched One Zimbabwean Dollar. There was then a semblance of good order and morality, despite the growing greed of President Mugabe. The beauty of this country is intoxicating, and it was then the bread basket of Africa.

   In the previous 30 years Zimbabwe had been developed from bush into a wealthy nation, prior to it being handed over to the Zanu-PF by the British government. But today, after more than two decades of rapacious assault and the collapse of the economy, more than 1,300 shop owners and business managers have recently been arrested as part of a crackdown on firms accused of flouting government-imposed price controls.

   The inflation rate in April was 3,714% and is now believed to be well beyond 5,000% and headed towards 1.5 million per cent. The real exchange rate to the US Dollar is currently running at about 250,000, although it has gone higher, much higher.

   Mugabe had earlier ordered companies to restore prices to their June 18th levels after a sudden surge of inflation trebled or quadrupled prices within a week. This has already created a serious shortage of goods on shelves and forced some businesses to close rather than continue operating at a loss.

   Zimbabwe's industry minister, Obert Mpofu, ordered businesses a fortnight ago to halve the prices of all goods and services in a bid to curb spiraling inflation. But the edict has been widely ignored. Many manufacturers say the government-set prices mean they cannot cover their costs and have stopped production, leading to widespread shortages of basics such as cooking oil and salt. President Robert Mugabe, unable to stem the rise of what is the world's highest rate of inflation, warned last week that his government would seize and nationalize firms found to be profiteering.

   In imposing the order, shops sold their goods at these low prices to the police and to those who could afford them, emptying the shops of stock, which then found its way onto the black market. There goods are sold at the far higher ‘black market’ price – often twice the legal price set by the Zanu-OF government.

   Of course, nationalizing companies doesn’t give them money to buy goods to fill the shelves, particularly a government that cannot afford to import fuel and soon electricity.

   It is thought that this potential shutdown of the economy may force Mugabe and his henchmen to step down from power and their source of wealth.

   The Southern African Development Community (SADC) is preparing a dramatic plan to rescue the shattered Zimbabwean economy by extending the Rand monetary area into Zimbabwe. Tomaz Salamao, formerly the Prime Minister of Mozambique and now the SADC executive secretary, is drafting the plan. It would also include the South African and Botswana reserve banks pumping millions into the Zimbabwe reserve bank.

   The aim of these measures would be to stabilize the exchange rate of the Zimbabwe Dollar and curb inflation so that the country could buy foreign exchange and continue importing essential goods.

   But to get the rescue package, President Robert Mugabe would first have to agree to fundamental political reforms in the negotiations with the opposition Movement for Democratic Change (MDC), which were snubbed by Mugabe this week. A superficial knowledge of Mugabe’s history would affirm that such plans are doomed to failure, because he would have to sacrifice his closest supporters – currently about 5,000 strong or more – plus his sources of wealth and therefore his own position of strength.

   Despite the fact that it is a last, desperate plan, Mugabe lacks the concern for his people that would be required for this solution to work. Recent history and the collapse of the economy and the suffering this is causing testifies to this.

   With his henchmen able to buy the US$100 for Z$25,000 and sell for Z$3 million – making 1,200% profit with no risk – their source of revenue would disappear immediately if such a plan were implemented. With that profit would go Mugabe’s power.

   With this in mind, this writer on precious metals looks at the remaining economic crown jewels, the Platinum mines – most particularly Zimplats of Impala and Angloplat’s new mine. With the recent law requiring these companies to pass ownership of 51% of their Zimbabwean subsidiaries to Zimbabwean ownership, it is only a matter of time before these resources are lost to both companies as a source of future income. This comes despite the Mugabe promise of being able to avoid such loss of control if infrastructural developments were undertaken by the mines.

   The moral capacity to keep such promises has gone from the Zimbabwean government. Plus there is now the presence of a willing Chinese government investor. So the mechanics of taking the deposits and the mines away from the South African mining companies is simple.

   We therefore suggest that any investors in Anglo Platinum or Impala Platinum consider writing off the contribution that their Zimbabwe investments may have – either now or in the future – when assessing the shares' values.

   And as you can see, genuine hyperinflation is usually accompanied by moral turpitude.

   For the full report, please visit and subscribe to

JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

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