Can one be a
millionaire with only a thousand shillings?
By MUNGAI KIHANYA
The Sunday Nation
Nairobi,
29 March 2009
Mark Marubu says he has figured out a quick way to become a millionaire;
nay, a trillionaire. He writes: “I am planning to buy 10 trillion
Zimbabwean dollars and deposit them in a bank. If I wait until one Zim
dollar equals one Kenyan shilling and then convert, do you think it is
viable?”
Now one Kenyan shilling today will buy about 500,000 Zimbabwean dollars
in the foreign exchange markets. Thus Mark will need about Ksh20 million
to purchase the Z$10 trillion. With Ksh20 million, he is already a
millionaire! Why would he want to put the money in this risky venture?
May be he expected it to be a lot less in Kenyan money…a few thousand
bob, perhaps.
At this exchange rate, Ksh1,000 will get Z$500 million: now that’s an
enticing proposition - becoming a multimillionaire from just a thousand
bob! The question is: why and when would we expect one Zim dollar to be
equal to one Kenyan shilling?
A nation’s currency becomes “stronger” when that country’s exports
increase in comparison to the imports. For that to happen, there must be
a stable government in place.
The bigger question is whether the exchange rate will reach one Zim
dollar to one Kenyan shilling: I doubt it. What is more likely to happen
is a change of currency.
Currently, a loaf of bread costs about Z$10 million in
That, by the way, is equivalent to “only” Ksh150 billion.
To get out of that conundrum, the Central Bank may issue new currency
notes to replace the existing ones at the ratio of, say one new dollar
to Z$500,000. Consequently, the price of bread would change from Z$10
million to a more reasonable New-Z$20. Thus Mark’s Z$500 million becomes
New-Z$1,000.
Clearly, the new exchange rate would be one Kenyan shilling to one
Zimbabwean dollar, but that wouldn’t make Mark a millionaire: he’d still
have a thousand bob worth of Zim dollars in the bank!
*****
Mark had a second question: “... if I drill a hole on the ground and
continue until I emerge from the other side of the world, at which point
will I stop falling (assuming once the hole is complete I jump and come
off the other side of the earth)”
The answer depends on what you mean by “falling”. If you mean
“travelling downwards”, then that stops at the centre of the earth…then
you start “climbing” out to the other side.
If by “falling”, you mean “travelling away from the entry point”, then
it stops at the exit.
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