Guardian – one of the very few things Yanis has said I will disagree with
Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.
To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.
Yanis is quite right to emphasize the difference between ending a currency as for example Argentina did against the Dollar, and creating a new currency from scratch. However he seems to think that no transfers can take place until the physical currency is in circulation, as if it is the currency itself which is what what has value. However cash is simply a contractual IOU, a note of assets and liabilities, a note of a debt. I will you with whatever backs the note – in modern currency terms the work done to produce goods and services to pay the taxes that balance exactly the government spending that brings currency into circulation, and ensures that the IOU retains its value.
Providing the public can pay its taxes don’t need physical currency. For those that cant or wont use electronic payments – like some pensioners and those without bank accounts – the market has found a solution. You can buy in almost any country the world electronic payment cards preloaded with electronic currency. We know that Visa has already set up its systems to allow for a new Greek only Euro. This would be bound to trade at discount becoming a new Dracma for reasons I have explained. Therefore as soon as any Greek Government is forced to create electronic currency to jointly provide liquidity to its banks and pay wages the market within days would be issuing such cards. Print on them the domination stored and don’t allow change except in other smaller cards – how is that any different from cash? Hence you don’t need any more a fleet of Jumbos to create a currency – just state electronic payments and the market will swiftly supply it.