Those are all valid concerns. Still: 1) I'm arguing against the status quo case, not the full conversion case - I'm for that too
2) the government is in a much better bargaining position with respect to domestic creditors; it can say, for example: "creditors who accept new currency as partial payment will be paid first," it can say, "the state will not enforce eviction notices against people who pay their rent in new currency," it can say, "businesses who accept new currency will be privileged in bidding for government contracts." 3) capital controls are good 4) if capital controls could limit the flight of Euros to a slow bleed, the flight of the Euros would not be a bad thing. When the Euros are gone, you have an own-currency domestic economy, without the government having to take responsibility for parting people from Euros. As Euros were displaced by new currency, the government would gradually let go of responsibility to keep Euros in circulation. On Mon, Jul 18, 2011 at 3:00 PM, McDonough, Terrence <[email protected]> wrote: > I have thought about this possibility in the Irish case. The problem is that > domestic creditors could still demand payment in Euros if the Euro remained > an alternative legal currency. As the New Punt depreciated, domestic Euro > denominated debts would become more expensive to pay, transferring income > from debtors to creditors. Euros would also leave the country in > anticipation of future forcible conversion, limiting the supply and forcing > up their value, necessitating capital controls. > > If you have to print a new currency and introduce capital controls you may as > well switch currencies. This would not be as difficult as often feared. > Ireland has a Euro printing press and could issue the new currency in the > denominations and sizes of the Euro with some small changes to differentiate > the new bills from Euros. A one to one exchange rate can allow easy > transformation of bank accounts and credit card transactions. This means the > middle classes can function without cash in the transition period. The > earliest printed currency can be issued as social security payments with > banks in middle class areas waiting for later tranches. > > A substantial amount of the government's euro debt would have to be defaulted. > > Terry > > Message: 35 > Date: Mon, 18 Jul 2011 12:40:26 -0500 > From: Robert Naiman <[email protected]> > Subject: Re: [Pen-l] what about a dual-currency system for Greece? > To: Progressive Economics <[email protected]> > Message-ID: > <calmnhnr5gxsjoyg-c9h5vdum33ubrnunprxemkhnekbpenh...@mail.gmail.com> > Content-Type: text/plain; charset=ISO-8859-1 > > I certainly agree that Greece should (at least partially) default on > its Euro-denominated external debt; my proposal does not address that > issue. My question remains: should not Greece consider issuing its own > domestic currency as a means of reflating its domestic economy? Isn't > it the case that it is not necessary to ban Euros from Greece in order > to do so? > > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > > -- Robert Naiman Policy Director Just Foreign Policy www.justforeignpolicy.org [email protected] _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
