There’s something I’ve been wondering about lately and using Google I can’t find if it’s been tried before. So I’ll ask your opinions. And if my idea is colossally stupid then go ahead and mock me. Yeah, I’ll lose all self confidence, get divorced, and end up homeless if you do, but don’t let that stop you.
OK, in threads about problems in the eurozone it’s brought up that other countries in similar situations have the ability to devaluate their currency but ez countries can’t do that.
So my question is, could any of them do dual currency? For example, let’s use Ireland. They bring back the Irish Pound but also keep the Euro. They value one Pound = one Euro. The value of currency is now lower in Ireland than in the rest of the ez, they pay off their debts quickly, and then abolish the Irish Pound again.
Would something like that work? Is there any merit to my idea? Just curious.
Brazil had a dual currency in the 90’s. To combat inflation they introduced a second currency that was pegged to the dollar. So there is some successful precedent for the idea of duel currencies.
But that’s sort of the opposite of your idea (the new currency is meant to keep its value rather then be devalued). I think trying to introduce a devalued currency in Greece would have the problem that no one voluntarily accept money designed to fall in value.
Say you owe me 10 Euros. When you try to pay me in 10 Irish Pounds, I’m going to refuse and demand you repay me in Euros. Especially since I know the reason you wish to pay me in Irish Pounds is that 10 Irish Pounds are, or will soon be, only worth a fraction of 10 Euros.
I suppose you could pass a law saying I was obligated to accept the Irish Pounds at parity with Euros, except that’s the exact same thing as passing a law saying you don’t have to repay me.
What about countries with control over their currency who devalue it when they get too far into debt. Other countries still accept the devalued currency even if they bitch and moan about it.
In that case the bond was originally denominated in a given currency when it was issued. The terms of the bond are being met, even if the bonds real value is less then when it was created. If Greece declared they were going to pay their existing bonds in some new currency, that wouldn’t be true. They’d be breaking the terms of the bond and effectively defaulting.
I just read there’s a new proposal on the table whereby if the EU considers a member country is being irresponsible, it can declare the country bankrupt and assume control of the country’s fiscal policy. Not sure how that would fly with the teeming masses if implemented.
I only heard that they were considering that for Greece. At any rate I can’t see any country giving up that much sovereignty. They’d probably quit the EU first.
Nah, with the troubles starting to snowball, it’s something they’re starting to consider for any member. It was in our newspaper today. A Reuters story, but I can’t find a link to it. Just in the kicking-around stage right now though.
When you think of money, you usually just think of, well, money. Money is money.
But when thinking of different currencies, money isn’t money. A euro is a honey badger and a US dollar is a porcupine (or whatever).
So, if you borrow 12 porcupines from me, and the loan agreement says you must pay me 14 porcupines, then the only way to repay the loan is to give me 14 porcupines. Honey badgers just will not do.
