Sunday, July 12, 2015

Andrew Lainton — Varoufakis is Wrong – Once an Electronic Drachma is Created The Market Will Quickly Supply the Currency

Yanis is quite right to emphasize the difference between ending a currency as for example Argentina did against the Dollar, and creating a new currency from . However he seems to think that no transfers can take place until the physical currency is in circulation, as if the currency itself which is what what has value. However cash is simply a contractual IOU, a note of assets and liabilities, a note of a debt.… 
Providing the public can pay its taxes don’t need physical currency. For those that cant or wont use electronic payments – like some pensioners and those without bank accounts – the market has found a solution. You can buyt in almost any country the world electronic payment cards preloaded with electronic currency. We know that Visa has already set up its systems to allow for a new Greek only Euro. This would be bound to trade at discount becoming a new Dracma for reasons I have explained. Therefore as soon as any Greek Government is fored to create electronic currency to jointly provide liquidity to its banks and pay wages the market within days would be issuing such cards.
Decisions, Decisions, Decisions
Varoufakis is Wrong – Once an Electronic Drachma is Created The Market Will Quickly Supply the Currency
Andrew Lainton

4 comments:

Unknown said...

Problem with Lainton's analysis is that he assumes a ubiquity of card readers. My guess is that even in a large metropolitan area like Athens, only a subset of retailers would likely have the card readers and clearing abilities.

From what I read, in Greece, a majority of transactions are still done with paper and coin. I believe that Greece has the largest per capita usage of Euro currency in the EU. This is the major reason that the ECB's action have led to a near collapse of the Greek economy.

So the analogy to Iraq, was probably not too far off the mark.

NeilW said...

"So the analogy to Iraq, was probably not too far off the mark."

It's way off the mark.

As I keep saying all Greek Euro notes have a Y serial number and all Greek Euro coins are in Greek. They all represent liabilities on the balance sheet of the Bank of Greece.

So you keep using the same paper money as you did before! And the mint in Athens continues to print and strike as it did before.

This is a non-problem dreamt up by Europhiles.

Unknown said...

Neil,
If done your way, I would agree with you. However, there may be legal issues with this approach. There would have to be an implicit agreement by the ECB. There will have to be a way to prevent transport across the borders, For outside Greece, the Greek Euros would be confused non Greece Euros, leading to lots of acrimony.

Because of this issue, the Euro printing issue may have to be done differently. The printing dies may have to be modified etc, I believe your approach was mentioned in the AEP article before YV resigned.

NeilW said...

'However, there may be legal issues with this approach."

How. Where's the enforcement mechanism?

There is no law without enforcement. The Greeks stick two fingers up at the Eurozone and squash any attempt to stop them in the Greek parliament and courts (which are still sovereign even under the EU).

We're talking about a country that has been squashed under foot. Worrying about upsetting the ECB is the last thing on the list.

To keep the ATMs working you just print Euros and coin Euros with the same dies and plates you have now until you can come up with a new design. Then you swap them.