Greeks eschew the Euro & resort to grassroots currencies

[Perspicuo]

Euros discarded as impoverished Greeks resort to bartering
http://www.theguardian.com/world/2013/jan/02/euro-greece-barter-poverty-crisis

In this bustling port city at the foot of Mount Pelion, in the heart of Greece's most fertile plain, locals have come up with a novel way of dealing with austerity – adopting their own alternative currency, known as the Tem. As the country struggles with its worst crisis in modern times, with Greeks losing up to 40% of their disposable income as a result of policies imposed in exchange for international aid, the system has been a huge success. Organisers say some 1,300 people have signed up to the informal bartering network.

 

[Derec]

Using grass roots as currency? I doubt that will work better than using leaves.

“If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .”
“Fiscal policy!" whooped Ford Prefect. “Fiscal policy!"
The management consultant gave him a look that only a lungfish could have copied.
“Fiscal policy. . .” he repeated, “that is what I said.”
“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.”
“If you would allow me to continue.. .”
Ford nodded dejectedly.
“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”
Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.
“But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut."
Murmurs of alarm came from the crowd. The management consultant waved them down.
“So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances."
The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.

 

[dismal]

I don't get the point.

I can see why the nation of Greece might want to ditch the Euro, but these people appear to be doing nothing but swapping a more useful currency for a crappier one based entirely on some sort of naïve utopianism.

 

[Togo]

Native utopianism is subject to fewer short-term fluctuations than the Euro. Rather than using a currency that may massively increase or decrease in value depending on a decision made far away by people they've barely heard of, they're basing their transactions on the idea that the person they're trading with will still be around next week. Generally, this isn't worth it because their own private currency is more likely to become worthless than a state-backed currency, but in this particular situation I can see why.

 

[dismal]

Native utopianism is subject to fewer short-term fluctuations than the Euro. Rather than using a currency that may massively increase or decrease in value depending on a decision made far away by people they've barely heard of, they're basing their transactions on the idea that the person they're trading with will still be around next week. Generally, this isn't worth it because their own private currency is more likely to become worthless than a state-backed currency, but in this particular situation I can see why.

You think this made up local currency which is, by the way, pegged to be equal to one Euro, is going to be more stable and secure than the Euro?

On a completely unrelated note, will you sell me your car for 35,000 dismos?

 

[Axulus]

Native utopianism is subject to fewer short-term fluctuations than the Euro. Rather than using a currency that may massively increase or decrease in value depending on a decision made far away by people they've barely heard of, they're basing their transactions on the idea that the person they're trading with will still be around next week. Generally, this isn't worth it because their own private currency is more likely to become worthless than a state-backed currency, but in this particular situation I can see why.

Where are you getting the idea that the decisions will *massively* increase or decrease the value of the euro? It has been a very stable currency compared to most other currencies. The most stable currencies include the yen, the USD, the Canadian Dollar, the AUD, the Swiss Frank, and the British pound.

 

[Axulus]

Wouldn't a more stable way to create currency just be to create IOU certificates or gift cards? "The bearer of this certificate can exchange it for 10 euro on demand with business X", or "the bearer of this certificate can redeem it for 10 euro worth of goods/services from business X." At least then there would be some contractual value to the currency. I'm not understanding what, if any, enforcement mechanism exists with the currency they've created.

 

[Nice Squirrel]

And yet they didn't go to Bitcoins.

 

[dismal]

Wouldn't a more stable way to create currency just be to create IOU certificates or gift cards? "The bearer of this certificate can exchange it for 10 euro on demand with business X", or "the bearer of this certificate can redeem it for 10 euro worth of goods/services from business X." At least then there would be some contractual value to the currency. I'm not understanding what, if any, enforcement mechanism exists with the currency they've created.

Why not just use Euros?

If we dust off our old economics text books and look at the functions of money (store of value, median of exchange, etc, etc) wouldn't the Euro be better on all dimensions than a made up currency pegged to the Euro?

 

[arkirk]

Euro bankers are responsible for this, not the average Greek. This grassroots currency is definitely only a temporary phenomenon...necessary for people to continue to keep themselves fed, clothed and housed. In order to survive, people must eat pretty much every day. This is the residue of Euro capitalism's utopian loan policies. They were loaning to a black box and not actually the people of this country. That is obvious. When the black box comes up empty, whose fault is that?

It is not difficult to see how this happened. It looks like haircut time for a lot of Euro bankers. Somewhere there has to be some Greeks who are flush with Euros. Billions were pumped into the country. The money does not just evaporate. Traces of it in the form of credits or actual Euros must exist somewhere. In the meantime, it does no good to look to this temporary situation as if it were a solution to their problem. The stubbornness of the Euro bankers indicates the problem will persist till there are negotiations or the government in Greece finds a solution. In the meantime...they are doing what they can to continue to maintain some semblance of civil order.

 

[Axulus]

Wouldn't a more stable way to create currency just be to create IOU certificates or gift cards? "The bearer of this certificate can exchange it for 10 euro on demand with business X", or "the bearer of this certificate can redeem it for 10 euro worth of goods/services from business X." At least then there would be some contractual value to the currency. I'm not understanding what, if any, enforcement mechanism exists with the currency they've created.

Why not just use Euros?

If we dust off our old economics text books and look at the functions of money (store of value, median of exchange, etc, etc) wouldn't the Euro be better on all dimensions than a made up currency pegged to the Euro?

Because they don't have enough euros and are unable (or perhaps unwilling) to access traditional forms of credit. Non-traditional forms of credit, such as gift cards and personal IOUs, may help keep commerce moving.

 

[arkirk]

Why not just use Euros?

If we dust off our old economics text books and look at the functions of money (store of value, median of exchange, etc, etc) wouldn't the Euro be better on all dimensions than a made up currency pegged to the Euro?

Because they don't have enough euros and are unable (or perhaps unwilling) to access traditional forms of credit. Non-traditional forms of credit, such as gift cards and personal IOUs, may help keep commerce moving.

Where are the billions of Euros that were poured into that country? Why does that escape discussion?

 

[Axulus]

Because they don't have enough euros and are unable (or perhaps unwilling) to access traditional forms of credit. Non-traditional forms of credit, such as gift cards and personal IOUs, may help keep commerce moving.

Where are the billions of Euros that were poured into that country? Why does that escape discussion?

They've already been spent. There also billions of euros leaving the country because of a high probability of a Grexit and debt default.

 

[dismal]

Why not just use Euros?

If we dust off our old economics text books and look at the functions of money (store of value, median of exchange, etc, etc) wouldn't the Euro be better on all dimensions than a made up currency pegged to the Euro?

Because they don't have enough euros and are unable (or perhaps unwilling) to access traditional forms of credit. Non-traditional forms of credit, such as gift cards and personal IOUs, may help keep commerce moving.

Why don't they have access to Euros? Those are currently the legal tender of the country they inhabit.

If your point is there is no control that prevents them from making up this money where they previously had none and spend it to acquire things I think this would be considered a flaw in a currency not a feature.

But if you disagree I'll make you the same offer I made Togo. 35,000 dismos for your car.

 

[Bronzeage]

Because they don't have enough euros and are unable (or perhaps unwilling) to access traditional forms of credit. Non-traditional forms of credit, such as gift cards and personal IOUs, may help keep commerce moving.

Where are the billions of Euros that were poured into that country? Why does that escape discussion?

They were sent back to pay the interest on the loans the Greek government made to keep the government in operation.

Most socialist countries have a high tax rate and a high government service rate. Greece tried to have a high service rate and a low tax rate. That's not exactly right. Greece has a high tax rate and a low tax collection rate. They have always used barter and cash transactions to avoid paying taxes. It has finally caught up with them.

 

[Axulus]

Why don't they have access to Euros? Those are currently the legal tender of the country they inhabit.

Because they are impoverished. Unemployment is at great depression levels. Their financial system is in tatters - few can obtain loans.

If your point is there is no control that prevents them from making up this money where they previously had none and spend it to acquire things I think this would be considered a flaw in a currency not a feature.

I think what we are seeing is really nothing more than an alternative form of credit because access to traditional credit is so limited due to the broken financial system mentioned above. Sometimes IOUs are used like currency and can become an alternative form of currency.

But if you disagree I'll make you the same offer I made Togo. 35,000 dismos for your car.

And can the dismos be traded for your goods/services? What is the exchange rate?

 

[Derec]

Because they are impoverished. Unemployment is at great depression levels. Their financial system is in tatters - few can obtain loans.

Sounds great. Perhaps the US poor can do the same thing and issue themselves an alternate currency pegged to the dollar to make themselves richer. I can't see any flaw with that plan ...

And can the dismos be traded for your goods/services?

Presumably so, but the only thing standing behind them is full faith and credit of dismal.

What is the exchange rate?

Presumably pegged to the dollar. But we have seen in Venezuela how well such pegging goes.

 

[Jayjay]

I have a feeling that the bartering system in Greece has a lot less to do with utopian ideals or alternative currencies, and a lot more to do with tax avoidance.

 

[arkirk]

Where are the billions of Euros that were poured into that country? Why does that escape discussion?

They've already been spent. There also billions of euros leaving the country because of a high probability of a Grexit and debt default.

WHERE THEY WERE SPENT? When you spend fuel, you burn it and convert it irretrievably into something that is not fuel. When you spend money, it remains money and where it gets spent it resides till it is spent again. If the Greek government spent that money on and with its people, it would reappear in the economy for another round of spending...either in terms of durable improvements or social improvements that should result in increased economic activity. I am tired of watching money vanish from the surface of the earth...and seeing innocent parties paying for this speculative hoarding phenomenon with hunger, unemployment and desperation. The problem is exchanging money for nothing. That devalues the money and creates shortages.

 

[dismal]

Because they are impoverished. Unemployment is at great depression levels. Their financial system is in tatters - few can obtain loans.

This is not a problem caused by your currency. Though admittedly if you can print some currency up *and* find someone to take it you can be less poor. But the person who takes it in exchange for goods runs a substantial risk of becoming more poor.

But if you disagree I'll make you the same offer I made Togo. 35,000 dismos for your car.

And can the dismos be traded for your goods/services? What is the exchange rate?

Yes, if you offer me enough dismos I will be happy to give you some goods/services. The exchange rate floats with the market - I'll send you some nice certificates and you can trade them for as many Euros, Dollars or Zlotys as the market will allow.