International bank Credit Suisse, an international bank based in Switzerland, has indicated that it would re-evaluate the currency of Zimbabwe to more accurately reflect the situation in this sub-Saharan country. Additional world banks are expected to shortly thereafter follow suit.
As of April 23rd, one U.S. Dollar (USD) is worth approximately 30,600 Zimbabwe dollars (ZWD). Unofficially, however, the actual exchange rate is more than 1000 times this amount. Stories in recent weeks have indicated that an unofficial rate of at least 25 million Zimbabwean dollars per U.S. Dollar exists in some commercial sectors. With an inflation rate of 100,000%, this unofficial exchange rate is already outdated.
In addition to taking the lead on reevaluating this currency, Credit Suisse has taken the unprecedented step of attempting to create a new standard in which to properly evaluate this overworked currency. Presently, currencies are frequently given abbreviations and expressed in ratios compared to other major world currencies. For instance, the Euro (EUR) is frequently compared to the United States Dollar (USD) in a ratio format. Presently, the EUR/USD equals approximately 1.54, indicating that 1.54 Euros equals 1 U.S. Dollar.
The catch? The new standard involves toilet paper (TP). Each unit of TP involves not a whole roll of the commonly used commodity, but rather, a single sheet from an unwound roll, which measures approximately four inches square and weighs barely a tenth of a gram.
Due to the pricing of various brands of toilet paper and the varying numbers of sheets per roll of toilet paper, Credit Suisse at first was at a loss in how to properly create such a ratio. After further consultation with World Bank officials, however, Credit Suisse decided to initially designate the initial ZWD/TP ratio to be 500/1.
Assigning the value of five hundred Zimbabwean dollars to one sheet of toilet paper, Credit Suisse officials surmise, is within the range of what the Zimbabwean dollar is presently worth. World monetary officials will allow the currency to “free float” in relation to toilet paper on international forex exchanges, allowing forex traders to continually determine the worth of the Zimbabwean dollar compared to toilet paper on an ongoing basis whenever the worldwide forex market is open.
Credit Suisse officials were quick to discount rumors that the new ratio would create a world run on toilet paper and deprive everyone of this valuable item. Friedrich Geist, the vice president in charge of foreign exchange at Credit Suisse, indicated that for now, the ZWD/TP ratio would only be electronically traded, which would prevent any type of demand or supply problems for the toilet paper market. However, he did indicate that if this new attempt at utilizing toilet paper is successful, other financial vehicles such as options, futures, and other similar hedging instruments could be used in conjunction with toilet paper.
Credit Suisse officials quickly discounted rumors that TP would be used in comparison to any other currencies, at least presently. A bank official, speaking only on the condition of anonymity, indicated that there was no truth to rumors that officials were also looking at creating a new standard for the Indonesian Rupiah. However, the official did confirm that this currency and others are presently under review.