That's really scary actually (for the Greek people). I do remember an FT article talking about issuing government IOUs in lieu of another currency, but that's all I heard of it.
Surely you'd be readying another currency incase all these deals go south.
Serious question: How were they ever going to print such a currency? I don't know the mechanics of printing money but AFAIK they only print 10 euro bank notes currently and it's not like you could pay De La Rue with IOU's that they've just printed for you. So did they even have enough money to print their own currency?
Easily. The physical portion of base money is the smallest portion and can be handled last of all.
As soon as the bank accounts get "bailed in" to the new currency, the FX rate for the new currency would drop and have a market value that De La Rue or Securency could take to the foreign exchange.
That is of course, if you believe such a thing is the possible outcome. I have a lot of faith in the Euro and ECB and don't assign a high probability to Grexit.
Easily. The physical portion of base money is the smallest portion and can be handled last of all.
As soon as the bank accounts get "bailed in" to the new currency, the FX rate for the new currency would drop and have a market value that De La Rue or Securency could take to the foreign exchange.
That is of course, if you believe such a thing is the possible outcome. I have a lot of faith in the Euro and ECB and don't assign a high probability to Grexit.
Interesting...
You may not know the answer, but I'll ask anyway - is this how Argentina did it in the 90s?
Argentina had its own currency before and after the debt problems of the 1990s. It was the peg vs USD which broke. This is unlike the situation in Greece, where debt is denominated in Euro (as opposed to in Drachma which is pegged to Euro, which would be the Argentinian analog). If Greece cannot borrow sufficiently in Euro from foreign 'investors', and yet needs finance sourced internally via printing in large part, it will have to create a new currency and force the populace to accept it as payment by the government for services and require that this currency is used when tax is paid (haha..tax being paid!! chortle).
Thanks, DeepState. I understand that the situation is somewhat different (i.e. 'shared' vs own currency), but my question was around printing of paper currency in its most literal sense, rather than the 'printing' which is referred to commonly in the media (being the expansion of a Reserve Bank's balance sheet).
I guess to state it more generically - if a country defaults, does it issue a new currency (in a logical sense), capitalise the banks, then use this to print the physical currency?
Or perhaps I've completely misunderstood the response - apologies if I have.
Perfect, this is the point I was missing.If a country defaults, it does not immediately mean it has to issue a new currency
Perfect, this is the point I was missing.
Following on from this, my understand is that the only real triggers for issuing a new currency would be:
- hyperinflation (Germany post WW1)
- removal from the EU (Greece currently)
Am I missing any?
Thanks again.
Currency is one weird fish/fowl. And yet our financial system rides off it. When you look at this stuff, it is genuinely horrifying in its fragility.
Yes, you had Weimar and you've had Cyprus (kinda). I suspect there are other sorts of situations where currency gets flipped around. One route is not to issue a new currency but to adopt an existing one from elsewhere. For example, much business is done in USD within countries whose official currency often has the word 'peso' at the end of it. It is also arguable that when convertibility to gold was removed, that the outcome was a new currency....the US changed its notes to reflect that, for example.
Currency is one weird fish/fowl. And yet our financial system rides off it. When you look at this stuff, it is genuinely horrifying in its fragility.
I read FOFOAs blog and sleep well at night
It is only in my latter years that I have begun listening to financial commentators and thought I would hear some profound wisdom but not so. I am sure he does more than read statistics and change official interest rates but what are the risks of lower interest rates in Aust. when other major economies have near zero? Please.RBA Guv Stevens speech to the Anika Foundation reads pretty much that a lower AUD is all that's left in the tank to rebalance the economy. Lower interest rates are reaching a point where benefits of additional cuts are decreasing and risks may not be worth the benefits available. Market pricing ~20% chance of a further cut and that's it.
Parts of Sydney and Melbourne are over priced but nowhere else in Australia of significance. Price growth not extraordinary so I consider country wide house bubble as a fear rather than a reality.Inflating even more the RE bubble;
Parts of Sydney and Melbourne are over priced but nowhere else in Australia of significance. Price growth not extraordinary so I consider country wide house bubble as a fear rather than a reality.
Over valued relative to?
Say, debt securities and equities.
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