Copycat currencies

The numbers in Greece are interesting. They said some €40 billion have left the banks’ coffers since December. As the world waits to see whether Greece and its creditors can hammer out a bailout worth up to €86 billion, staving off a panicked outpouring of the country’s cash remains a paramount concern. ATM withdrawals are limited to €60 as people were emptying the ATMs.

All the banknotes of the Greek drachma were worth less than €9 billion at the end of the year 2000 when Greece qualified to to join the Eurozone. The most valuable banknote was worth the equivalent of €30 in drachmas. Now that Greeks have access to huge denominations of Euro banknotes , I wonder how much of the €40 billion that left the banks was taken out in cash form.

Sweden, which has a population about 10%-15% smaller than Greece only has about €6 billion in banknotes as of this month.

I don't quite understand this international monetary stuff, but I assume that in order to transfer sums of money abroad illegally one must first get their hands on paper currency and then smuggle it out. Its value may be different in the destination country but the fear is that its value in the domestic country will be governmentally manipulated to zilch or close to zilch. So emptying an ATM and going to a money broker makes sense to the Greeks since they sure don't see the Greek's accepting severe austerity measures. They know their own people.

Quote: Fleastiff

I don't quite understand this international monetary stuff, but I assume that in order to transfer sums of money abroad illegally one must first get their hands on paper currency and then smuggle it out.

Well how do you get paper currency?

The measures announced by Greece are much stricter than those put in place by Cyprus in March 2013. Withdrawals from ATMs in Cyprus were limited to 300 euros a day, while in Greece they are 60.
Payments abroad of up to 5,000 euros were not subject to any restrictive measure from Cyprus.
Parents could transfer money for living expenses up to 5,000 euros per quarter, as well as tuition fees, to their children studying abroad.
Cypriots traveling abroad could use credit or debit cards to pay for hotels and other expenses, with a limit of 5,000 euros a month.
They could also carry up to 1,000 euros in cash with them per person, per journey. G

Greeks can’t use their cards abroad. Effectively, they can’t travel outside Greece unless they have a bank account overseas.

Quote: Pacomartin

Were you at the Cyprus Popular Bank Public Co Ltd which operated in the UK under the trading name ‘Laiki Bank UK’ ?

Quote: Wizard

After the show I had a lot more respect for Bitcoins. Still, I would feel a lot better if there was a credible government agency regulating them. After Cyprus, there is no way I would trust any country in southern Europe to do it. Call me an elitist, but I want some Germans on the staff.

The Wizard had a lot of money taken from his account in Cyprus.

Italians are more than likely to want to move Euros to Swiss Francs. Hence the massive number of Swiss Franc CHF banknotes in circulation.

1000 CHF 41.79 billion francs
200 CHF 9.49 billion francs
100 CHF 11.18 billion francs
1 EUR ~ 1.08 CHF

http://www.zerohedge.com/news/2016-08-01/china-moves-forward-sdr-issuance-august

"The World Bank and the China Development Bank will issue private sector or “M” SDR in August."

Currently, the value of an SDR is based on a basket of four currencies: the euro, Japanese yen, pound sterling, and the dollar. Now with the Yuan to be added.

100 Chinese Yuan Renminbi ~ US$15 ~ £11.40 which seems ridiculously small for the largest banknote of a world currency
Even the Mexican 500 peso note is worth $26.50

You would think they would have at least a 200 Yuan banknote by now, if not a 500 Yuan banknote.

The USD/MXN close:18.97 but was down from a high this month of 19.898 . In the summer of 2008 the ratio was 10:1 so now it is perilously close to 20:1. Generally the ratio varied near 10:1 from 1999-2008.

Florida has had senators from opposite parties since December 31, 1980, but Connie Mack III was a Republican senator for two terms from January 3, 1989 – January 3, 2001 . He introduced the S. Rept. 106-354 - INTERNATIONAL MONETARY STABILITY ACT OF 2000.

I have mentioned this Act before, but Senator Mack felt that it was in the best interest of the USA to offer to Latin America an exchange program. Essentially, any Latin American government who was interested could fix the exchange rate between their country's currency and the USD, and we would sell them the replacement bills at production cost and they could dollarize. The host country would have some requirement to institute Anti Money Laundering Laws.

Dollarization is possible without such an offer, but it is very expensive for the host country since they are acquiring banknotes at face value. Commie Mack noted in 2000 that Ecuador is in the process of dollarization right now. El Salvador, Guatemala, and Costa Rica are all considering dollarization. Argentina remains a candidate for dollarization. The bill would encourage countries to consider dollarization during periods of relative stability, when it is most likely to be successful, rather than during periods of economic crisis.

The Act talked about "Is official dollarization right for all emerging market countries?
The answer was: "This issue is not addressed by the bill. The bill merely removes the obstacle of the seigniorage transfer to the United States. Countries would still refrain from official dollarization if they did not think it was in their best interests. In addition, if a country thinks official dollarization is in its best interests but the Secretary disagrees, the Secretary could refuse to rebate seigniorage.

The Act talked about "What does the United States gain from the bill?"
The answer was: " Bad monetary policy and devaluations abroad have been a source of volatility and slow growth in our export markets. At present the United States exports more to the 31 million people in Canada than to the 500 million people in all of Latin America. Dollarization should result in faster economic growth and more purchasing power in Latin America, thereby creating larger markets for U.S. goods. In addition, dollarization should reduce currency risk, thereby helping U.S.
investors. And by helping foreign governments strengthen their economies it would reduce the need to use U.S. taxpayers' money to bail out countries due to sudden currency-related economic problems.

Ecuador did dollarize because of financial crisis. The official dollarization was 25,000 sucres to $1 and the largest bill was 50,000 sucres. El Salvador also dollarized without a financial crisis. But the motivation for El Salvador was simply that so much of the economy was dependent on reparations sent from workers in the USA, that it was actually costing them more to have their own currency,

Mexico and Brazil were obviously not mentioned in the Act, because as the two largest economies in Latin America dollarization would likely be a political hotbed.

Much of Latin America is already dollarized on an unofficial basis. Unofficial dollarization means that, despite the existence of a national currency, people often use the U.S. dollar for everyday transactions, bank deposits, and lending, and governments often issue debt denominated in dollars. Official dollarization means a country eliminates its own paper currency and adopts the U.S. dollar as legal tender.

As a practical matter, if Mexico were to dollarize, it would probably be sufficient to secure US treasury bonds to back the coins and bills up to 200 pesos as they are a relatively small amount of the Mexican money in circulation (less than 25%). Only the 500 and 1000 peso notes would have to be replaced with US banknotes as the 500 pesos banknote represents the majority of the value of currency in circulation.

Quote: Pacomartin

But look at Argentina! Since 1970, thirteen zeroes have been dropped from the Argentine peso, so what was once one of the wealthiest country in the world has had devaluation that makes Mexico's look paltry in comparison. The current Argentine peso (introduced 1992) is also referred to as peso convertible since the international exchange rate was fixed by the Central Bank at 1 peso to 1 U.S. dollar and for every peso convertible circulating, there was a U.S. dollar in the Central Bank's foreign currency reserves. It now exchanges at 14.7 ARgentine pesos to the dollar (considerably worse than Mexico's 6 to 1).

There was a popular Argentinian musical group of dancers that recorded a youtube video and some songs. As a musical group they achieved local fame but were disbanded by 2012 due to copyright issues, sexual assault issues and other internal problems that ended their status as the number one group in the country.

I have an electronic acquaintance who recently posted a photo of several CDs. One was the "Los Watchuross" and the price of the CD was 217.00. Now I don't know what currency that was but at those prices the music had better be good.

Note: Sorry Pacho, I think I spelled the group's name wrong but my Spanish/Portugese is not so good.

Quote: Fleastiff

I have an electronic acquaintance who recently posted a photo of several CDs. One was the "Los Watchuross" and the price of the CD was 217.00. Now I don't know what currency that was but at those prices the music had better be good.

Note: Sorry Pacho, I think I spelled the group's name wrong but my Spanish/Portugese is not so good.

Los Chalchaleros? I thought they broke up before 2012, as they were very old.

217 Argentine pesos would be about US$15.

Argentines speak Spanish. Only Brazilians speak Portuguese.