Wednesday, October 19, 2011

Fantastic Idea!

Prize announced for painless euro death plan

Wanted: a plan for the painless death of the euro. The reward: a quarter of a million – sterling, of course. Those in need of spare cash amid troubled economic times could do worse than apply for a new prize set up by Lord Wolfson, who is offering £250,000 to the person who comes up with the best plan for winding up the euro in an orderly way.

Posted by watchman @ 12:15 AM (1356 views)
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5 thoughts on “Fantastic Idea!

  • I can’t see a painless way of breaking up. Creating the euro was a carefully planned process. Banks and businesses spent billions converting their accounts and IT systems; and today thanks to rapid advances in computing, the systems are far more complex. They had years to plan it in advance.

    Any change back has to be carefully planned in advance. Of course, as soon as word gets out that Greece is planning to switch back to the drachma, cash will flee the country and head straight into German banks. So capital controls are required during the transition phase. You can’t take more than €5,000 out of the country without government approval. (Cue more kickbacks for corrupt Greek civil servants.) Give businesses six or twelve months to change their IT systems to handle the new currencies.

    To give banks extra time to impose capital controls on their customers, the announcement of the transition will have to take place on a bank holiday. The only days which are common bank holidays to all 17 eurozone countries are New Year’s Day and May Day. Merry Christmas.

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  • Would’nt it be easier to just get this long awaited “cashless society” conspiracy over and done with?

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  • drewster,

    I don’t think you can impose capital controls overnight – the process of imposing them would take too long and people would realise what was going on – so the carefully planned process method is probably a non-starter.

    A country could exert its sovereign right to break with the ECB and regain control over its own currency. The euro banknotes all have country identifier letters in the serial numbers, and the coins all have national symbols; so for example, Greek euros could become a separate currency to the rest of the eurozone over the course of a weekend.

    And once one nation walks that route, others are likely to follow.

    The potential flashpoint with this is that with a succession of nations kissing goodbye to the ECB, who then picks up the tab for the central bank’s liabilites?

    I am more than a little suspicious that the federalists are keen to build the ECB’s liabilities to such a height as to make it virtually impossible to disband the bank, and with it, the eurozone.

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  • tom,
    The banknotes are the least of the problems. Cash makes up only a small fraction of the money in existence; most money is in electronic form in bank accounts. In the US, the total of banknotes in circulation is $853.2bn (source), or slightly less than half a European bailout. Fixing the IT systems would take much longer.

    I can’t see a simple painless way out without bank runs, a collapse in confidence in the Greek economy, and a sharp drop in their standard of living.

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  • Don’t think the IT issue would be that horrendous – on the first day, the banks would probably need to be closed for adjustment, but basic retail banking could probably resume the day after

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