Greeks eschew the Euro & resort to grassroots currencies

[Loren Pechtel]

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.

The point is buried in the article: Tax evasion.

 

[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.

The point is buried in the article: Tax evasion.

Any form of cash usually works pretty well for that. You don't need to invent your own currency.

 

[Axulus]

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 it may be a problem resulting from lack of normal credit, a problem which this local currency can help remedy, a currency which is really nothing more than a set of IOUs traded only in this particular area. Because it is so local, it is largely based on trust that the underlying IOU will be honored.

Is the underlying mechanism of this currency really any different than the currency the Bellevue Collection in my area prints up - redeemable for goods and services at any Bellevue Collection shop, with an exchange rate of 1 "Bellevue Collection Dollar" equal to one USD?

 

[Bronzeage]

The point is buried in the article: Tax evasion.

Any form of cash usually works pretty well for that. You don't need to invent your own currency.

Cash evades taxes. Barter evades inflation.

 

[arkirk]

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.

The point is buried in the article: Tax evasion.

If you need to eat TODAY, you will pay for it with whatever crappy money you can get your hands on. I have already pointed to the fact that it appears to be a temporary phenomenon. I also pointed to the fact that there already was a lot of money that disappeared that didn't disappear from the taxes. I am aware that there is a lot of tax evasion in Greece. There also is a lot of unemployment. You can't accuse the unemployed of tax evasion no can you?

It is so easy to use the words naive utopianism to any plan to recover even the slightest semblance of normalcy. This is just so much bullshit...just another case of labeling something you feel you don't like.

 

[Draconis]

As far as I know, some of the Euros lent to Greece ostensibly to help keep things going were used to buy German weapons: this was part of the loan deal.

So Greece has some shiny new guns, and everything else going to pot.

 

[EricK]

This is all starting to look like bad news for comedians who will have to update their "What's a Greek urn?" joke again.

 

[Bronzeage]

The point is buried in the article: Tax evasion.

If you need to eat TODAY, you will pay for it with whatever crappy money you can get your hands on. I have already pointed to the fact that it appears to be a temporary phenomenon. I also pointed to the fact that there already was a lot of money that disappeared that didn't disappear from the taxes. I am aware that there is a lot of tax evasion in Greece. There also is a lot of unemployment. You can't accuse the unemployed of tax evasion no can you?

It is so easy to use the words naive utopianism to any plan to recover even the slightest semblance of normalcy. This is just so much bullshit...just another case of labeling something you feel you don't like.

Actually, you can accuse an unemployed person of tax evasion, because the most common form of tax evasion is unreported income. A person who does not report their income looks just like an unemployed person, except they have more money.

 

[bilby]

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.

Money is created by indebtedness; paying off debt destroys it, and it vanishes from the surface of the Earth. Writing off debt also destroys money. Indeed, it is reasonable to say that money IS debt.

If you work for me for 10 hours at $10 per hour, I owe you $100. That debt can be made physical, in the form of 10 $10 bills in your wallet; When you exchange that debt for $100 of goods, it is transferred to the vendor of those goods.

The point of money is that it allows you, and everyone else, to trade with confidence in the IOUs I gave you for working for me, and all the IOUs everyone gives everyone for doing stuff for them. But ultimately there is no difference between a contract that says "bilby owes arkirk $10" and a $10 bill, except that in the latter case, the government (usually by means of a reserve bank) underwrites the debt, and so the holder of the IOU gets paid even if bilby goes bankrupt - as long as the government doesn't go bankrupt first.

The total amount of money in existence goes up and down over time (mostly up). If money supply was fixed, and a dollar couldn't be created nor destroyed, then there wouldn't be any money - where would it have come from? It didn't evolve alongside Homo Sapiens or get created by Gods. The idea that all money remains in existence in some thieving bastard's Swiss account is fundamentally flawed. Some money that disappears from view does end up in such places; But far more vanishes because it truly ceases to exist, when debts are paid - or bad debts are written off.

 

[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.

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?

Potentially yes. And while I'd love to accept your offer, as I buy cheap vehicles and have a Greek (potential) sister-in-law who's family lives in Athens, I don't actually own a car. Public transport here is good enough that I don't need one.

The stability is a matter of perspective. If the local Greek currency is what you're paid in, then the Euro is pontentially massively unstable. What matters is not the stability between major currencies and the Euro, but rather between the Euro and whatever you're being paid in next week. From the international perspective it's the drachma or the Greek-only Euro or whatever would replace the currency in a Greek exit that is unstable, but from the point of view of people getting paid in that currency, it's the Euro that will move away from them. The effect is that any transaction involving owing Euros carries a massive FX risk, because the potential loss in paying off a euro-denominated debt overshadows every small transaction you make. Since every transaction means one person is taking on this risk, and we're talking small business people who often do a lot of informal transactions, I can see that it would much safer to put their faith in their relationships with people they know rather than risk taking on a Euro-denominated debt (aka here's your lumber, settle up at the end of the week). Because the guy you're trading with will be there at the end of the week, but the currency might not be.

 

[dismal]

Any form of cash usually works pretty well for that. You don't need to invent your own currency.

Cash evades taxes. Barter evades inflation.

Euros evade inflation reasonably well. Indeed, if the greeks dump the Euro for the specific purpose of being able to print buttloads of Drachmas to fund their deficit I imagine there would be many Greeks who hang onto their Euro notes.

I have been to countries where the dollar was more accepted than the national currency. I imagine you'd find this to be the case in Venezuela today.

Anyway, if inflation is the issue then the direction is wrong. You don't start using a local made up currency (and again, it's pegged to the Euro) to avoid devaluation of the Euro. You want the more stable, more accepted, more reputable, more controlled currency in this situation. In any situation, really, except if they start threatening jail time for using anything other than the local pelf. Which is not the case here since the Euro is in fact currently the national currency of Greece.

 

[dismal]

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?

Potentially yes. And while I'd love to accept your offer, as I buy cheap vehicles and have a Greek (potential) sister-in-law who's family lives in Athens, I don't actually own a car. Public transport here is good enough that I don't need one.

Well it it's a cheap vehicle my offer is only 25,000 dismos. If you don't it own it even less.

The stability is a matter of perspective. If the local Greek currency is what you're paid in, then the Euro is pontentially massively unstable. What matters is not the stability between major currencies and the Euro, but rather between the Euro and whatever you're being paid in next week. From the international perspective it's the drachma or the Greek-only Euro or whatever would replace the currency in a Greek exit that is unstable, but from the point of view of people getting paid in that currency, it's the Euro that will move away from them. The effect is that any transaction involving owing Euros carries a massive FX risk, because the potential loss in paying off a euro-denominated debt overshadows every small transaction you make. Since every transaction means one person is taking on this risk, and we're talking small business people who often do a lot of informal transactions, I can see that it would much safer to put their faith in their relationships with people they know rather than risk taking on a Euro-denominated debt (aka here's your lumber, settle up at the end of the week). Because the guy you're trading with will be there at the end of the week, but the currency might not be.

None of this makes any sense to me. Euros are currently the national currency of Greece. They are reasonably stable. Far more stable than any local made up currency is likely to be. If Axulus is correct and the "advantage" of Tems is people who don't have money can make them up any reasonable person can see where this will lead. People will make up Tems to the point where one would have to be an idiot to accept them and all Tems will be worthless.

If you list out the things someone wants from a currency Euros are better in every possible way than the local made up currency we are talking about here. More widely accepted, more usable to pay official debts, more difficult to counterfeit, more controlled in their supply, more likely to retain their value, etc.

 

[Derec]

This is all starting to look like bad news for comedians who will have to update their "What's a Greek urn?" joke again.

 

[Togo]

If you list out the things someone wants from a currency Euros are better in every possible way than the local made up currency we are talking about here. More widely accepted, more usable to pay official debts, more difficult to counterfeit, more controlled in their supply, more likely to retain their value, etc.

Ok, let's put it another way.

You want to buy a bike, that costs 200 euors. People generally take the bike now and pay at the end of the month. Next week, Greece drops out of the Euro, and everyone's pay is converted from euros to NewDrachma, which has an initial peg of one euro to the NewDrachma. Unsurprisingly, it's actually worth a lot less. You're now paid in NewDrachmas, but to get the euros you owe, you'll need to pay far more New Drachmas than you earn. Because of this risk, you're reluctant to buy the bike, and the seller is reluctant to sell you one.

So you could agree to do the deal in NewDrachamas. Except that you don't know if there will be a NewDrachama, or if you'll be on Euros or casino chips or whatever.

If you make up your own currency, however, then you can fix it as much as you like. Bikes cost 200 dismos. Shoes cost 50. You'll be able to get 4 pairs of shoes for the sale price of a bike, no matter what the politicians say. If you know the people you do business with, and you trust them to be around in a month's time, and you're likely to be buying stuff from eachother for the forseeable future, then this is a sensible enforceable contract that doesn't load one side or another with potential fx risk if there is a sudden change in the currency system.

 

[Derec]

Actually, you can accuse an unemployed person of tax evasion, because the most common form of tax evasion is unreported income. A person who does not report their income looks just like an unemployed person, except they have more money.

Reminds me of this classic scene from Breaking Bad:
Saul: It's the tax man. And he's looking at you. Now, what does he see? He sees a young fellow with a big fancy house, unlimited cash supply and no job. Now, what is the conclusion the tax man makes?
Jesse: I'm a drug dealer.
Saul: Wrong. Million times worse. You're a tax cheat. What do they do? They take every penny and you go in the can for felony tax evasion.

 

[dismal]

If you list out the things someone wants from a currency Euros are better in every possible way than the local made up currency we are talking about here. More widely accepted, more usable to pay official debts, more difficult to counterfeit, more controlled in their supply, more likely to retain their value, etc.

Ok, let's put it another way.

You want to buy a bike, that costs 200 euors. People generally take the bike now and pay at the end of the month. Next week, Greece drops out of the Euro, and everyone's pay is converted from euros to NewDrachma, which has an initial peg of one euro to the NewDrachma. Unsurprisingly, it's actually worth a lot less. You're now paid in NewDrachmas, but to get the euros you owe, you'll need to pay far more New Drachmas than you earn. Because of this risk, you're reluctant to buy the bike, and the seller is reluctant to sell you one.

So you could agree to do the deal in NewDrachamas. Except that you don't know if there will be a NewDrachama, or if you'll be on Euros or casino chips or whatever.

If you make up your own currency, however, then you can fix it as much as you like. Bikes cost 200 dismos. Shoes cost 50. You'll be able to get 4 pairs of shoes for the sale price of a bike, no matter what the politicians say. If you know the people you do business with, and you trust them to be around in a month's time, and you're likely to be buying stuff from eachother for the forseeable future, then this is a sensible enforceable contract that doesn't load one side or another with potential fx risk if there is a sudden change in the currency system.

I think when a country drops a currency the trade debts within that country would be swapped into the new currency. I highly doubt the greek bike stores required people to pay their bills in oldDrachmas in the days after they converted to the Euro.

And the risk of depreciation in the newDrachma for one pay period during a time transition is orders of magnitude less than taking on made up currency, which is hard to imagine has anything but a tiny probability of not ending disastrously for those holding the notes when the game of musical chairs ends.

And there is a large difference between barter and accepting a made up currency. When you barter, you get goods in return for goods. You are not taking a piece of paper I ginned up in powerpoint you are trading real goods for hope someone else will take that piece of paper for goods. Not an unreasonable assumption if the piece of paper is a Euro but a questionable one for a dismo or a Tem.

 

[bilby]

Ok, let's put it another way.

You want to buy a bike, that costs 200 euors. People generally take the bike now and pay at the end of the month. Next week, Greece drops out of the Euro, and everyone's pay is converted from euros to NewDrachma, which has an initial peg of one euro to the NewDrachma. Unsurprisingly, it's actually worth a lot less. You're now paid in NewDrachmas, but to get the euros you owe, you'll need to pay far more New Drachmas than you earn. Because of this risk, you're reluctant to buy the bike, and the seller is reluctant to sell you one.

So you could agree to do the deal in NewDrachamas. Except that you don't know if there will be a NewDrachama, or if you'll be on Euros or casino chips or whatever.

If you make up your own currency, however, then you can fix it as much as you like. Bikes cost 200 dismos. Shoes cost 50. You'll be able to get 4 pairs of shoes for the sale price of a bike, no matter what the politicians say. If you know the people you do business with, and you trust them to be around in a month's time, and you're likely to be buying stuff from eachother for the forseeable future, then this is a sensible enforceable contract that doesn't load one side or another with potential fx risk if there is a sudden change in the currency system.

I think when a country drops a currency the trade debts within that country would be swapped into the new currency. I highly doubt the greek bike stores required people to pay their bills in oldDrachmas in the days after they converted to the Euro.

And the risk of depreciation in the newDrachma for one pay period during a time transition is orders of magnitude less than taking on made up currency, which is hard to imagine has anything but a tiny probability of not ending disastrously for those holding the notes when the game of musical chairs ends.

And there is a large difference between barter and accepting a made up currency. When you barter, you get goods in return for goods. You are not taking a piece of paper I ginned up in powerpoint you are trading real goods for hope someone else will take that piece of paper for goods. Not an unreasonable assumption if the piece of paper is a Euro but a questionable one for a dismo or a Tem.

To be fair though, all currencies are 'made up', including the euro. The only difference is that you trust the euro more than you trust the Tem; and the reason for that boils down to the fact that you trust the ECB more than you trust Giorgos Papadopoulos from Panepistimiou Street (or whoever it is who is issuing Tems).

If you are an ordinary Greek citizen, and you know Giorgos personally, then it would be understandable if you trusted him more than you trust the ECB at this point in time. (Whether you would be logically correct to do so is not at issue; It would certainly not be a huge surprise to anyone that many ordinary Greeks today trust their friends far more than they trust the ECB).

 

[fromderinside]

Get some country, say the US, to back your revaluation of the Drachma to 10 Euros in Greece only. Now the fun begins.

 

[dismal]

To be fair though, all currencies are 'made up', including the euro. The only difference is that you trust the euro more than you trust the Tem

Right. Because I am not a fool.

(or whoever it is who is issuing Tems)

Here you make my point with great precision. I don't know who is out there issuing Tems and for what. I don't know who will be willing to take Tems and for what.

 

[Axulus]

Right. Because I am not a fool.

(or whoever it is who is issuing Tems)

Here you make my point with great precision. I don't know who is out there issuing Tems and for what. I don't know who will be willing to take Tems and for what.

That's because you are not a local where this currency is being circulated. Those who have this information are perfectly willing to give them a chance and use them as a medium of exchange.

If you lived in this area, you might very well know the business owners who are issuing them and accepting and trust their word that they'll honor them.

If someone offered me a gift certificate for some random group of small businesses in a different country, I probably wouldn't trust it either. However, if it was a gift certificate for the business just down the block, I would be far more willing to accept it as a type of payment.