Morning Caffeine 4-26-2012

Posted from Diigo. The rest of my favorite links are here.

Comments
  • Ramanan April 26, 2012 at 9:13 am

    “Most countries that use the dollar get around this problem by minting local coins: Ecuador uses the dollar as legal tender but mints centavo coins. The government guarantees that anyone who wants to exchange 100 Ecuadorean centavos for a genuine United States dollar can do so.

    But that requires confidence in the local government, something that is in even shorter supply here than coins. Zimbabweans say they want no legal tender issued by their government.”

    Lol!

    Curious about taxes in Zimbabwe.

  • Ramanan April 26, 2012 at 9:17 am

    “But United States coins seldom circulate more than 100 miles beyond the country’s borders because of their weight and high shipping costs.

    Most countries that use the dollar get around this problem by minting local coins: Ecuador uses the dollar as legal tender but mints centavo coins. The government guarantees that anyone who wants to exchange 100 Ecuadorean centavos for a genuine United States dollar can do so.”

    Interestingly this is how the concept of a currency board started. When Britain was ruling a good part of the world, it set up currency boards in various countries – which would later become the central banks of those nations after independence.

  • beowulf April 26, 2012 at 4:59 pm

    Ramanan, so if Zimbabwe made the call to Mumbai and hired you to run their dollar currency board how would that work? And while we’re on the subject, if President Ron Paul hired you to set up a gold currentcy board, how would that work? ( and no, there isn’t a citizenship requir. For WH jobs. ) :o)

    • Ramanan April 26, 2012 at 6:54 pm

      I am not a fan of Ron Paul.

      Public institutions are welcome to hire me as long as I have my freedom of speech. There’s simply no return to gold standard because it wouldn’t work.

      • Michael Sankowski April 26, 2012 at 9:41 pm

        “There’s simply no return to gold standard because it wouldn’t work.”

    • beowulf April 26, 2012 at 11:02 pm

      Haha I didn’t expect the bright, shiny distraction in my query to be Ron Paul! My genuine question was how currency boards work, and how they would work in a US context ( I’m no fan of the gold standard, just curious about the mechanics of a currency board).
      I mentioned Paul only b/c the last time I mentioned currency boards was here.
      http://monetaryrealism.com/why-i-voted-for-ron-paul/

      • Ramanan April 27, 2012 at 1:14 am

        A currency board superficially has many differences from a fixed exchange rate – such as promising convertibility to the anchor currency etc, full convertibility on the current and capital account but in reality is not much different from a fixed exchange rate.

        It is thought that currency boards have no independent monetary policy but that is a myth. The central bank can easily target interest rates different from the anchor currency within a wide limit. The ability finally comes down to how strong the country’s external situation is.