So it seems like everyone is talking about Greece, and how might Greece exit the Euro so that it can devalue its currency and begin to end its deep recession. If you want monetary policy and commentary, check out these articles:
I don’t know if Greece will be part of the European Union in six months (my guess is no), but I’m not going to take that bet.
More interesting to me is something found in this passage:
Printing and distributing new notes would be no easy feat. In 2003 the US-led coalition managed to do it in Iraq in less than three months. But that required the efforts of De La Rue, a British speciality printer, a squadron of 27 Boeing 747s and 500 armed Fijian guards to ease the process.
I’m more interested in how exactly they will, possibly overnight, physically switch their currency from the Euro to the Neo-Drachma. Well, it might be as easy as putting a stamp on the banknotes, which has been done for hundreds of years, but recently in the former Czechoslovakia:
Thus, the Czech government and the [Czech National Bank] decided on January 19, 1993 to separate the currency. After secret negotiations with the Slovak side, the separation date was set as February 8, 1993, and the Czech-Slovak Monetary Union ceased to exist less than six weeks after it came to being.
“The separation was publicly announced on February 2. Starting with February 3, all payments between the two republics stopped and border controls were increased to prevent transfers of cash from one country to the other. During the separation period between February 4-7 (Thursday through Sunday), old Czechoslovak currency was exchanged for the new currencies. The new currencies became valid on February 8. Regular Czechoslovak banknotes were used temporarily in both republics and were distinguished by a paper stamp attached to the face of the banknote. The public was also encouraged to deposit cash on bank accounts prior to the separation since a person could only exchange CSK 4,000 in cash. Business owners were not subjected to this limit. Coins and small denomination notes (CSK 10, 20 and 50 in the Czech Republic and CSK 10 and 20 in Slovakia) were still used after the separation for several months. Nevertheless, such notes and coins only accounted for some 3% of currency in circulation each. On the other hand, the notes of CSK 10, 20 and 50 accounted for some 45 percent of the total number of banknotes. The stamped banknotes were gradually replaced by new Czech and Slovak banknotes. This process was finished by the end of August 1993.”
Source: Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia, by Jan Fidrmuc, Július Horváth, June 1998
So to physically make the currency change, the Greek government (which doesn’t exactly have the reputation for quick and speedy service) might have to do the following:
- Design & agree on the stamp
- Print up these stamps
- Distribute stamps throughout Greece
- Freeze all outgoing transfers
- Announce the currency change
- Offer to stamp bills for the next “X” days (where “X” is less than five or so days)
All without a run on the banks or civil unrest in a very short amount of time. We live in exciting times, and if I had some spare change (sorry) I would go to Athens to cover and photograph a currency exchange.
Coincidentally, when I was looking up stamped banknotes, I found this Depression Scrip from Fostoria, Ohio (above) and from New Philadelphia, Ohio (below).
Depression scrip was used during the depression era (1930’s) as a substitute for government issued currency. Because of the banks closing temporarily and the lack of physical currency, someone had to come up with another form of currency to keep the economy going and a way for trade to continue. Therefore the old idea of local currency was reborn. Paper, cardboard, wood, metal tokens, leather, clam shells and even parchment made from fish skin was used. At one point, the U.S. Government considered issuing a nation wide scrip on a temporary basis. But that idea was quickly shot down by the Secretary of the Treasury William H. Woodin. Instead, the U.S. Bureau of Engraving and Printing was tasked with increasing their printing of new Federal Reserve notes.
