Copycat currencies

Page 2 of 3<123>
June 27th, 2016 at 1:45:01 PM permalink
Fleastiff
Member since: Oct 27, 2012
Threads: 62
Posts: 7831
Quote: Nareed
. Take grain, for example. A bad harvest means deflation. A good one inflation.
Which is what commodity futures and options on futures are for.
Price insurance. A hedge against risk, a sponge to absorb price swings.

I agree that manipulation of gold and silver is less easily achieved but I've not ever seen any one bite into a penny except in the old movies.
June 27th, 2016 at 2:57:38 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: Ayecarumba
I am surprised Japan is #2 on the list. I thought their economy has been withering for some time, and folks have a real disdain for banks resulting in a lot of cash sitting in shoe boxes, or buried in backyards for safekeeping. Shouldn't the rise in electronic transactions correlate with a fall in circulated currency, as people use less folding money? Yet the highest per capita circulating currency values belong to countries with a high number of adopters of electronic banking services.


I think you have the wrong idea about Japanese culture. Japanese have a deep distrust of banks. Now that the central bank interest rate has dropped to zero percent, many Japanese are afraid that the next step will be to follow Sweden into Negative Interest rates and banks will institute fees to cover their costs.

Japan has far more 10,000-yen banknotes (~$90) than the USA has Benjamins in circulation,

http://www.asahi.com/ajw/articles/AJ201604050028.html

Quote: By TAMIYUKI KIHARA/ Staff Writer

Japan to print 180 million more 10,000-yen bills in fiscal 2016
April 5, 2016 at 14:45 JST

Japan will print an additional 180 million 10,000-yen ($90) banknotes in fiscal 2016 from a year earlier to meet the rising demand as an increasing number of Japanese households are tucking the bills away at home.

According to the Finance Ministry’s plan, the Bank of Japan will print 1.23 billon 10,000-yen banknotes, worth 12.3 trillion yen, during fiscal 2016 through March 2017, a 17 percent increase from fiscal 2015.

Demand for 10,000-yen notes, the largest bill, has been steadily rising while that for smaller denominations is shrinking. The ministry’s plan calls for reducing the number of new banknotes for 1,000-yen and 5,000-yen bills.

The annual number of 10,000-yen banknotes printed by the BOJ was kept at 1.05 billion for five years through fiscal 2015.
...
The increasing demand for 10,000-yen bills, despite the widespread use of credit cards and other forms of electronic payment, is attributed to the trend of Japanese households tucking away assets at home instead of investing them or keeping them in banks.



The Swiss have a 1,000CHF banknote (i.e. Swiss Francs) worth $1,022 at present exchange rates. It is the most valuable banknote in fairly wide circulation. This huge banknote is roughly 2/3 of the value of Swiss banknotes and they are circulating over 42 million of them for a country of only 8 million people. But as many people regard Swiss franc as a hedge against inflation (it was backed by gold until fairly recently) many of these notes are held outside of the country.
June 27th, 2016 at 3:23:26 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: AZDuffman
Greece is really stuck, like a person with high credit card debt and few work skills. They really need to get out of the Euro and just keep inflating their currency if they can.


No one else beside AZDuffman has really weighed in on Greece. As I said earler Greece only has $7.535 billion (=6.78 billion EUR) in foreign reserves as of March 2016. That is a mere €642 per person. Not really much to back a physical currency.

Of course, they could just issue a drachma and use the Nixon line in 1971 that the U.S. dollars are backed by the “full faith and credit” of the U.S. Government. Of course, Nixon was comfortable in assuming that there was not a significant number of people who could afford to say "If there is no gold backing for the dollar, then no thank you".

However, if you say the "new drachma" is backed by the “full faith and credit” of the Greek Government you may get laughter.



As I said earlier the old drachma exchanged at 3.40751 drachmas per 1 Euro cent. Maybe the new drachma should be set at 1 new drachma = 1 Euro cent. In addition make it entirely an electronic currency. The physical Euros in the country can be used as "legal tender" as long as they last. The 25 million tourists are free to spend hard Euros if they desire, and in fact would probably receive discounts for spending cash instead of charging.

The question is would the economy grind to a halt?
July 9th, 2016 at 1:12:20 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: AZDuffman
Greece is really stuck, like a person with high credit card debt and few work skills. They really need to get out of the Euro and just keep inflating their currency if they can.


You know Mexico had it's currency average annual 37% devaluation in 17 years between Aug 31, 76 when it was fixed to Dec 31, 1993.
Since the New Peso was released, it has devalued closer to 8.5% annually, but in fits and starts. Sometimes it maintains its value for years at a time, but eventually it drops..

Is this the only way? To devalue the currency at a rate at which income and investments cannot possibly keep pace?
July 9th, 2016 at 2:34:38 PM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: Pacomartin
You know Mexico had it's currency average annual 37% devaluation in 17 years between Aug 31, 76 when it was fixed to Dec 31, 1993.
Since the New Peso was released, it has devalued closer to 8.5% annually, but in fits and starts. Sometimes it maintains its value for years at a time, but eventually it drops..

Is this the only way? To devalue the currency at a rate at which income and investments cannot possibly keep pace?


It could be why Mexico remains poor. Mexico always seems to be over dependent on exports to the USA. Some of this may be changing, in the auto industry for one place. But they still need to work on internal consumption and other markets. Why can't they get it more together. Pre-1840s, Mexico was in some ways more strong than the USA. But then they developed at a fraction of the pace of the USA. Central American countries are so small that they will always get hooked on trade with either the USA or South America. But Mexico is large enough to go it alone if they had to. Is it that American's taste for Mexican exports means it is just easier to sell here? Maybe it is corruption? They do show that you cannot devalue your way to prosperity.
The President is a fink.
July 9th, 2016 at 3:27:19 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: AZDuffman
Pre-1840s, Mexico was in some ways more strong than the USA. But then they developed at a fraction of the pace of the USA.

That is debatable. You could certainly make that case for New Spain

The population of USA in 1810 was 6 million free and 1.2 million slaves. Roughly half a million people lived in the 46 towns of 2500 or more people, with ~100K in New York and ~50K in Philly and Baltimore.

The population of New Spain was 5.5-6.0 million but with great cities that had been inhabited for over 300 years by Spaniards. The real de a ocho, (Spanish peso de ocho), is a silver coin, of approximately 1.5" diameter, worth eight reales, that was minted in the Spanish Empire after 1598. Its purpose was to correspond to the German thaler. The Spanish dollar was the coin upon which the original United States dollar was based, and it remained legal tender in the United States until the Coinage Act of 1857.

But you can't really talk about "Mexico" until the Mexican War of Independence (September 16, 1810 -September 27, 1821) . The War was a thousand times more violent than the American War of Independence, and afterwards the newly independent nation went into profound economic depression.

Initially the government of Mexico was, The Regencies, The Empire, and First Federal Republic (1824–January 28, 1835) of which Santa Anna was President 4 different times. The Texas Revolution (October 2, 1835 – April 21, 1836) began only months after the First Republic ended and the Centralist Republic was born.

Quote: AZDuffman
It could be why Mexico remains poor. Mexico always seems to be over dependent on exports to the USA. Some of this may be changing, in the auto industry for one place. But they still need to work on internal consumption and other markets.


Massive devaluation is more of the rule of thumb for currencies.

On January 30, 1968, the Jamaican dollar was introduced and was worth about US$1.30. Now it is worth less than a penny as 126 JMD ~ US$1. That's a devaluation of roughly 160 to 1 since 1968.

But the Mexican peso has devalued by roughly 1500 to 1 since 1976. It dropped 250:1 until 1993 when three zeros were cut off to form the new peso, and 6:1 since then.

The new Brazilian Real was introduce 1 July 1994 (just months after Mexico's new peso). It was meant to be at parity to the dollar but devalued to roughly 3.2 reals to the US dollar today. So in that sense it handily beats the 6 to 1 devaluation of the Mexican peso.

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).

I guess it is a general question about emerging markets. Is this massive devaluation absolutely necessary?
July 9th, 2016 at 3:34:45 PM permalink
Fleastiff
Member since: Oct 27, 2012
Threads: 62
Posts: 7831
Quote: Pacomartin
However, if you say the "new drachma" is backed by the “full faith and credit” of the Greek Government you may get laughter.
Yes.


Quote:
The question is would the economy grind to a halt?

If the Mexican peso went belly up, the Mexican economy would continue since there is an existing system of Mordita and Drug Cartels. Mexicans would just have to deal with bigger bites and more violence with more policing and garbage services being performed by the Narco Traffickers.

If the Greek Drachma goes belly up, there would be rioting and demonstrations about national insults, but the economy would continue until someone stepped in to rescue foreign investments from being nationalized. There are already enough make work and no work jobs in Greece that no one particularly cares how many are unemployed or uselessly employed. The problem is that Greece does not have enough drug smuggling to sustain itself.

Turkey used to be the Poor Man of Europe, but is no longer "European" in thought or deed; just in press releases.

Greece is now the Poor Man of Europe and like the poor anywhere does not want to hear about Greek Austerity Budgets but prefers to hear about Foreign Austerity Budgets so that Foreigners can afford Foreign Bailouts of the Greek economy. Meanwhile the Greeks will riot in the cities and loll in countryside, but not cut the bloated government jobs or actually work for a living.
July 9th, 2016 at 6:56:40 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: AZDuffman
It could be why Mexico remains poor. Mexico always seems to be over dependent on exports to the USA.


About 21% of the value of Mexican banknotes is in denominations less than 500 pesos. That is very little cash to share among the majority of the poor people in Mexico. The lowest value the pesos has hit so far is 19.1754 pesos to USD. Say the peso is pegged at 20 to 1. and the US$20 bill is declared legal tender in Mexico (=400 pesos).

Without the peso devaluing at some percentage every few years, making exports cheaper, the finance should become cheaper in Mexico as it has a stable currency. If even 8% of the US$20 banknotes drift into Mexico by spending from tourists and businessmen, the US$20 will exceed in value the smaller banknotes.



Quote: banxico.org.mx

Circulación de billete Millones de Piezas, Saldos
494: 20 pesos (polímero)
506: 50 pesos (polímero)
579: 100 pesos (Familia F: papel y polímero)
819: 200 pesos
1792: 500 pesos
82: 1000 pesos


Date Pesos/USD Days Value 500 pesos
Mon, Jan 3, 1994 3.11 $160.92
Sat, Dec 24, 1994 4.89 355 $102.30
Wed, Dec 28, 1994 5.10 4 $98.04
Wed, Feb 1, 1995 6.50 35 $76.92
Sat, Mar 11, 1995 7.59 38 $65.90
Sat, Nov 11, 1995 8.14 245 $61.44
Tue, Jun 16, 1998 9.05 948 $55.27
Tue, Sep 1, 1998 10.03 77 $49.86
Thu, Feb 27, 2003 11.06 1,640 $45.21
Thu, Oct 9, 2008 12.12 2,051 $41.26
Fri, Oct 10, 2008 13.04 1 $38.34
Fri, Jan 16, 2009 14.11 98 $35.44
Tue, Mar 3, 2009 15.07 46 $33.18
Fri, Jul 24, 2015 16.10 2,334 $31.07
Thu, Dec 10, 2015 17.02 139 $29.38
Tue, Jan 19, 2016 18.21 40 $27.46
Sat, Feb 13, 2016 19.18 25 $26.08
July 14th, 2016 at 11:31:38 PM permalink
Fleastiff
Member since: Oct 27, 2012
Threads: 62
Posts: 7831
Greeks to hire dogs to sniff out Euros that are being held out of the banking system by tax dodgers and currency speculators.
July 15th, 2016 at 2:36:50 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
Quote: Fleastiff
Greeks to hire dogs to sniff out Euros that are being held out of the banking system by tax dodgers and currency speculators.


Italy's tax police say passengers prefer to be sniffed by a labrador, than an alsatian.




12 August 2012

Police cracking down on tax dodgers smuggling cash out of Italy in their shoes, underwear and even cigarettes have announced a steep increase in seizures, thanks in part to the use of labrador dogs trained to sniff out bank notes.

In the first seven months of 2012, police at ports, airports and border crossings seized €41m (£32m) – up 78% year on year – from travellers trying to avoid creeping austerity taxes in Italy. The haul covers 570kg of silver and 88kg of gold ingots, including 50kg found in a hidden compartment under the seat of a car driven by an Italian food store owner as he tried to cross into Switzerland at Ponte Chiasso.


The dogs are trained to react only to 40 or more banknotes. "That way they ignore people carrying up to €10,000, which you are allowed to travel with undeclared," said the trainer. The assumption is that the €50 is the banknote of choice for ATM withdrawals by Euro-zone citizens rather than the $20 like it is in America and Canada.
Page 2 of 3<123>