Time for something different
[Dave Birch] Who knows what is going to happen with respect to Greece and the euro. I have no more idea than anyone else. But I do hope that if the Greeks decide to ditch the euro, they don't turn the clock back by printing drachma notes and minting drachma coins. On the contrary, I hope that given the seriousness of the situation that hey tap the zeitgeist for more radical monetary experimentation. Back in 2008, I wrote a piece for SPEED magazine on why Zimbabwe should have rebooted its monetary system by becoming the world's first mobile money economy.
In order to rebuild Zimbabwe and return it to prosperity, something will have to be done about the currency. A recent article in the Times of South Africa neatly set out the three alternatives open to the country to stabilise its currency. Steve Hanke, the author, began by pointing out that the hyperinflation is because of, and not despite of, the central bank. Since the Reserve Bank of Zimbabwe has no choice but to issue currency when instructed to by the government, this system can never deliver the monetary stability that is required to improve the lives of the citizens. Therefore, to reboot the Zimbabwean economy, the central bank’s currency should be scrapped and the circulating medium of exchange provided by either dollarisation, a currency board or what is known as “free banking”.
I looked at each of these possibilities and explained how the new (at that time) mobile money platform of M-PESA could be used to deliver the free banking alternative and therefore a cost-effective and stable currency. Zimbabwe chose another route (but didn't come up a solution to the "big problem of small change" which is why you get chewing gum as change in Zimbabwean shops).
Many Zimbabweans use coins from neighboring South Africa. But that presents its own difficulties. South African coins — the currency is the rand — are in short supply. Complicating matters, the rand, like most currencies, fluctuates against the dollar, making prices tough to fix.[From Using U.S. Dollars, Zimbabwe Finds a Problem - No Change - NYTimes.com]
I've written before about why Greece should reboot with a hard e-Drachma instead of physical notes and coins, and I still have some hope that the powers-that-be might listen to common sense on this one. But there are other experiments under way in Greece right now, because people are exploring local and alternative forms of money, such as the "tems" currency.
No one may hold more than 1,200 tems in the account "so people don't start hoarding; once you reach the top limit you have to start using them."
And no one may owe more than 300, so people "can't get into debt, and have to start offering something".
Businesses that are part of the network are allowed to do transactions partly in tems, and partly in euros; most offer a 50/50 part-exchange.[From Greece on the breadline: cashless currency takes off | World news | The Guardian]
So with a set of perfectly viable possibilities (mobile money, hard e-drachma, local currencies) in place, why on Earth would the Greek government waste money (and, more crucially given the dynamics of a euro exit, which has to be done literally overnight, time) on printing and minting.
De La Rue (DLAR.L) has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source told Reuters on Friday.[From UK banknote printer readies for Greek call - source | Reuters]
Of course, even with these contingency plans in place, it will still take time to re-introduce a physical drachma, and it will still cos a fortune to change everything from ATMs to vending machines.
So how long does it take to plan and introduce new notes and coins? "I don't think you could do it much faster than four months," says Mark Crickett, one of De La Rue's consultants.[From BBC News - What if Greece had to get a new currency?]
Mark is a top guy, and I can personally attest to his expertise since Consult Hyperion has worked with Mark and his team before, so I'm sure he is correct. But if they had asked me this question, I'd have been tempted to answer "why bother?". This isn't the 20th century. Greece doesn't need drachma notes and coins. All they have to do is announce that they will introduce the e-drachma from midnight tonight and have done with it. Euros would remain legal tender, and all the euro notes and coins in circulation would carry on in circulation. But all government payments would be in e-drachma (which would be just another currency as far as banking software is concerned) and, crucially, the government would demand that all tax revenues and other payments to the government be in e-drachma only. Sorted.
If they did this, it really wouldn't take very long for the mobile operators, retailers, PSPs and others to get together viable cash alternatives. The drug dealers and politicians could carry on with their bundles of 500 euro notes but the general public would just use phones, prepaid cards and so on.
These are personal opinions and should not be misunderstood as representing the opinions of
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