DailyDirt: In Money, We Trust (Sometimes)

from the urls-we-dig-up dept

Thu, Jan 5th 2012 5:00pm — Michael Ho

Money is an interesting concept. Government institutions create a supply of money and try to control the value of it within some acceptable ranges. But when the value of money goes out of control, the solutions for getting it stabilized seem a bit illogical. Still, if you can get enough people to switch their faith from one money to another, it seems to work. Here are a few more stories on the topic of money and currency.

It's intriguingly difficult for any country that currently uses the euro to try to stop using it and switch to some other form of currency. So difficult, in fact, there's a $400,000 prize for anyone who can figure out a process that would actually work and not create monetary chaos. [url]
Some Brazilians are using locally-printed currencies instead of its national reais -- such as the capivari, which is just one of the 63 local kinds of money. The capivari is a printed bill (with a picture of a rodent on it!), equal in value to the reai, but retailers give customers discounts for using capivaris (making these local bills into fancy coupons, essentially). [url]
Last year, the IMF's Dominique Strauss-Kahn proposed an alternative to the dollar in central banks' foreign currency reserves. A system of special drawing rights (SDRs) for central banks would be priced according to international trade instead of any single nation's currency. (It's not an entirely new idea, but it's never caught on.) [url]
In Vietnam, there's a penalty for posting prices in dollars instead of the local currency. The local currency suffers from high inflation rates, so they might want to look into Brazil's monetary history for some lessons.... [url]
To discover more stuff on economics, check out what's currently floating around the StumbleUpon universe. [url]

As always, StumbleUpon can also recommend some good Techdirt articles, too.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: brazil, capivari, currency, dollar, dong, euro, money, real, sdrs, vietnam
Companies: imf

18 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Anonymous Coward, 5 Jan 2012 @ 5:10pm

The euro is never going away. It would be like all of the states in the US suddenly changing the dollar for their own currency. Way to difficult and would drop us back to the third depression.
[ link to this | view in thread ]
Michael Ho (profile), 5 Jan 2012 @ 5:14pm

but is it possible for 1 country?
I don't think the euro is going anywhere either, but is it possible for a single country to stop using it? What if Greece really wanted to back out of the EU and stop using the euro? Is it even possible?

I guess it would be similar to asking "what if Alaska wanted to stop using the dollar?" -- but there are additional complications for the US states b/c states are tied to the federal gov't much more than any EU member is tied to the EU.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

Anonymous Coward, 5 Jan 2012 @ 5:38pm

L'affaire DSK
Last year, the IMF's Dominique Strauss-Kahn proposed an alternative to the dollar in central banks' foreign currency reserves.

�What Really Happened to Strauss-Kahn?� by Edward Jay Epstein, The New York Review of Books:

May 14, 2011, was a horrendous day for Dominique Strauss-Kahn, then head of the International Monetary Fund and leading contender to unseat Nicolas Sarkozy as president of France in the April 2012 elections. Waking up in the presidential suite of the Sofitel New York hotel that morning, he was supposed to be soon enroute to Paris and then to Berlin where he had a meeting the following day with German Chancellor Angela Merkel. He could not have known that by late afternoon he would, instead, be imprisoned in New York on a charge of sexual assault. He would then be indicted by a grand jury on seven counts of attempted rape, sexual assault, and unlawful imprisonment, placed under house arrest for over a month, and, two weeks before all the charges were dismissed by the prosecutor on August 23, 2011, sued for sexual abuse by the alleged victim.

[...more...]

(Source picked more at less at random from the top Google results....)
[ link to this | view in thread ]
HRHaig (profile), 5 Jan 2012 @ 5:53pm

A new economic stimulus strategy?
I had an interesting conversation a few weeks ago about the "tax the rich" initiatives that were going around. One suggestion about how to get the money hoarders to spend and stimulate the economy was to simply print more money and devalue their stash. This would discourage people from stockpiling money in their bank accounts unnecessarily. I'm sure it's not as simple as that, but an interesting idea none-the-less!
[ link to this | view in thread ]
LDoBe (profile), 5 Jan 2012 @ 6:28pm

Re: A new economic stimulus strategy?
I'm pretty sure that devaluing the dollar would penalize the poorest segments of the population first. If you think about it marginally, then someone who makes, say, $100 a month experiences a much harsher effect from their $100 reducing in value by $0.01 per dollar than a millionaire who makes $300 million a year.

It would be cutting off your nose, to spite your face. While the poor may lose less money in absolute terms, their real wealth will suffer astronomically compared to the richest people. Is it worth taking money away from the most impoverished?

Economies require at least one relatively stable element to trade on. If the currency becomes too unstable, nobody will want to use it because the fair value of exchanges for goods and services can't be determined accurately (or in the case of hyperinflation, the value of currency isn't even able to be approximately determined)
[ link to this | view in thread ]
Anonymous Coward, 5 Jan 2012 @ 6:50pm

If any country wants to stop using a currency they can do what Brazil did.

Create a virtual currency(URV) and after a while switch to it.

Brazil changed its currency from Real (R�is, 1790�1942) to Cruzeiro (1942�1967) to Cruzeiro (novo, 1967�1986) to Cruzado (1986�1989) to Cruzado novo (1989�1990) to Cruzeiro (1990�1993) to Cruzeiro real (1993�1994) to Real (1994�present).

https://en.wikipedia.org/wiki/Brazilian_real
http://colnect.com/en/banknotes/lis t/page/1/country/3981-Brazil

NPR - How Fake Money Saved Brazil
[ link to this | view in thread ]
Anonymous Coward, 5 Jan 2012 @ 6:56pm

Just use Bitcoin as competition for the dollar. It should help stop some of the secret printing of trillions of dollars, too.
[ link to this | view in thread ]
Michael Ho (profile), 5 Jan 2012 @ 7:20pm

Re: Brazil..
I referred to Brazil's plan to stop hyperinflation, but countries like Greece have a different problem. If they announce that they're switching from the euro, then there would likely be a massive kind of bank run on Greek banks....
[ link to this | view in thread ]
Rekrul, 6 Jan 2012 @ 12:18am

Isn't the euro the miracle currency that was supposed to unite and unify the world's payment options? Why do they now want to stop using it, after putting so much effort into ramming it down the world's throat?
[ link to this | view in thread ]
mike allen (profile), 6 Jan 2012 @ 2:05am

Re:
It is costing Germany and France too much to keep countries like Greece afloat. that's the real reason.
[ link to this | view in thread ]
Richard (profile), 6 Jan 2012 @ 2:16am

Re: but is it possible for 1 country?
It is possible for one country - that country is Germany. No other country can leave the Euro because no-one will willingly swap Euros for a new national currency that will end up weaker over time (and there is no way to force them). The Germans, on the other hand will likely figure that the new Mark will be stronger than the Euro - and so will happily exchange their Euros for marks.

Once Germany leaves then it may become possible for another country to go (eg the Netherlands). Basically the Euro can be dismantled from the top down - but definitely not from the bottom up.

I am amazed at the way politicians, TV pundits, economists etc carry on talking about Greece leaving the Euro as if it was actually practically possible - these people really have no brains - or don't use them (same as on other issues we discuss here I suppose!).

Of course Greece may default but leaving the Euro is not an option - and even if it were it wouldn't help - they would just turn into Zimbabwe - as it was when it still used its own currency.

Remember Zimbabwe got out of its worst phase by abandoning its own currency and switching to the use of foriegn currencies such as the US dollar, pound sterling or South African rand.
[ link to this | view in thread ]
Richard (profile), 6 Jan 2012 @ 2:20am

Re: Re: Brazil..
Further to this - it's easy to switch from a bad currency to a new one - but switching from a strong currency to a weak one is impossible.
[ link to this | view in thread ]
HRHaig (profile), 6 Jan 2012 @ 8:12am

Re: Re: A new economic stimulus strategy?
Wages would probably adapt to the changing value of the currency, so it would be the money that's just sitting around that'll feel it the most.
[ link to this | view in thread ]
Anonymous Coward, 6 Jan 2012 @ 11:07am

Re: Re: Brazil..
What you didn't mention was that Brazil is already house of 60 something alternative currencies today, many of them successful ones at what they were created for(stimulating the local economy).

http://www.thewebofhope.com/alternative-currencies/
http://juggernautcometh.com/blog/? p=634
http://www.worldchanging.com/archives/003575.html
http://www.transaction.net/money/
http:// socialter.fr/when-the-poor-districts-create-their-own-currency/
http://www.neweconomics.org/categor y/tags/alternative-currencies
[ link to this | view in thread ]
Anonymous Coward, 6 Jan 2012 @ 11:12am

Re: Re: Re: Brazil..
Capivari an alternative currency that displaces locally the more strong Real in Brazil says you are wrong.
[ link to this | view in thread ]
Anonymous Coward, 6 Jan 2012 @ 11:17am

Re: Re: but is it possible for 1 country?
Greece may not be able to distance itself from the Euro suddenly, but they can create their own virtual currency that is pegged to the Euro and start using that locally.

Brazil had the same problem their own money was no good and people kept buying dollars and trading in dollars, but they changed all that using virtual currencies.
[ link to this | view in thread ]
Michael Ho (profile), 6 Jan 2012 @ 11:39am

Re: Re: Re: Brazil..
The phenomenon of Brazil's 60+ local currencies seems like one that needs much more study. I'm skeptical that these local currencies aren't prone to massive fraud and tax evasion -- which would seem to undermine the national government's authority. Perhaps taking the national gov't out of macroeconomic decisions is better, but I'd like to see much more detailed studies of what is actually going on in Brazil and how these local currencies actually work.

If a network of local currencies actually can exist without significant drawbacks to the larger national economy, then it might serve as some kind of instrument for countries like Greece to move away from the euro. Greece would have to start creating a whole bunch of local currencies while still saying that the national govt upholds the euro. If the local currencies really flourish, then Greece could someday introduce a new national currency based on some aggregation of the local currencies. It would be like applying the "special drawing rights" concept of the IMF on a national level instead of an international level....

Perhaps it's time for me to write this plan up and try to get that $400,000 prize! :P
[ link to this | view in thread ]
Anonymous Coward, 7 Jan 2012 @ 1:59pm

Re: Re: Re: Re: Brazil..
Hmmm...Greece doesn't need to create several alternative currencies, they create just one, valid in all their territory while keeping parity with the Euro until the day they can say goodbye, or they could allow the creation of several alternative currencies.

About fraud and tax evasion, that is not a problem, the problem is circulating money locally and those things do exactly that and as long as there is trust in the currency it doesn't matter what it happens in other places, people evading taxes will spend more locally, and people who actually commit fraud are people who in some situations actually create wealth from nothing just like banks.

Money is for the most part a psychological thing, the important part is production of goods and services no matter how it is done even for free would work if people would do it, in the end you can only have what has been produced you can only enjoy a service if it is being offered and there are many ways to achieve that, if there was not countries with no economies would never become "developed", in China today you can see that happening, people producing things for little to no money, but producing the things and evolving their society despite a number of factors.

Quote:
If a network of local currencies actually can exist without significant drawbacks to the larger national economy, then it might serve as some kind of instrument for countries like Greece to move away from the euro.

Well that network of local currencies actually already exist and is more or less reasonably understood. It is called global economy where every country has their own currency, whatever happens in that scale you can be assured it probably will happen on smaller scales too, maybe with one or two surprises along the way.
[ link to this | view in thread ]