Saturday 31 December 2016

I "promise" to pay the bearer on demand!

The statement on Zimbabwe (and many other countries) paper money which says "I promise to pay the bearer on demand" is actually a paradox. This is so, because if you present paper money (and or coins) to the bank expecting to be paid on demand you actually receive another set of paper money in return (if not the same type of notes) of equal value.

Don't expect to be paid in gold, foreign currency or some type of commodity, even if the country is operating on the gold standard or under a currency board. So then why put such a statement on paper money? In my opinion, I suspect the statement acts as a device enhancing the "legal tender" aspect of the money in question (moreso because it is signed by the Central Bank Governor).

Let's assume you get paid "on demand" by the central bank. Will the statement also apply on coins also considering that the statement appears on notes only? It's a tricky question. Because paying "on demand" is not practiced in reality, it is speculative to infer whether coins will also be paid "on demand." Maybe from the outset the statement wasn't intended to mean literally being paid "on demand" hence placing it on coins was not necessary at all.

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