- Registration time
- Last login
- Online time
- 1223 Hour
- Reading permission
HOW GREECE CAN REPLACE THE EXPENSIVE EURO WITH COST-FREE EURO-EQUIVALENTS AND PROSPER|
LET US SAY THAT THE SUPPLY OF EUROS DECREASES TO THE POINT IT CANNOT SUPPLY THE NEEDS OF THE GREEK ECONOMY . . . WHAT NEXT?
There are many possible answers to this question.
One answer that has not been sufficiently explored is to review the role of the National Bank of Greece, as if it were Greece's ECB or Federal Reserve Bank, and that it is faced with a liquidity shortfall due to some natural or manmade disaster. The view of the National Bank of Greece (NBG) as an interactive issuer of credit, not just cash, may solve the problem at source.
Let us take for an example the bank account of Mr. Strepsiades, and has € 10,000 in his bank account, which true to form now exists in The Cloud or Nephelai, when the Greek government decided it had to print its own Drachmas at a 1-to-1 exchange rate with the Euro.
What the bank would next do is create two parallel accounts for Strepsiades. One in Drachmas, and one in Euro-Equivalents. Thus, his initial € 10,000 creates 10,000 Drachmas, which Strepsiades would be asked to choose if he wants to remain as Drachmas or as Euro-Equivalents. Since he believes that the Drachma will devaluate against the Euro, he would most likely choose Euro-Equivalents, in which case, 10,000 Drachmas will be debited from his account, and credited as Euro-Equivalents. So too for every income he receives that he deposits into the bank, he can turn them into Euro-Equivalents at the prevailing Drachma-to-Euro exchange rate, which is to be determined on a day to day basis by the National Bank of Greece. Now, when he needs Drachmas to buy a piece of furniture with, for example, he can withdraw from his Euro-Equivalents account, and have it converted into Drachmas at the latest official exchange rate. This ensures that the purchasing value of his deposits will have the same purchasing power of an Euro, without his owning any euros, and without the National Bank of Greece having to borrow tens of billions of Euros, pay billions of Euros of interest on, when all it functions in the Greek economy is merely as a dummy variable. All official transactions will and must be denominated in Drachmas, as the Euro will cease to circulate in the Greek domestic economy, and whatever Euros the country has will be used by the National Bank of Greece to settle its accounts with foreign countries, including its trade balance and capital accounts.
This, combined with the imposition of import tariffs to protect Greek producers from unfair competition from other countries, will ensure that the people will finally be able to produce that it needs, and if it gets to be pretty efficient at this, there is always the opportunity for Greece to export them to earn some foreign currency reserves in the process, thereby paving the way for its return to normal international commerce.