How long does it take to introduce a new currency?

Wintergerst says introducing a new currency typically takes at least six months, and sometimes as long as two years. Artists must draw the notes, security experts then add anti-counterfeiting measures such as watermarks and special inks, and bank officials need to plan how much of each denomination is needed and get the money to banks.

“The most challenging thing was to establish efficient distribution and make sure the new currency was available everywhere,” said Boris Raguz, head of the Treasury Directory at Croatia’s central bank, who in 1993 oversaw the introduction of the country’s currency, the kuna, after the breakup of Yugoslavia.

That is from Matthew Campbell and Alex Webb.  Here is a declaration signed by 246 Greek professors — can you guess what it says?

Comments

There are 246 economics professors in a small country like Greece? No wonder they're in trouble.

Heh.

Are they all economists? If so, I like your comment very much.

Socialist propagandist might be literal translation, but basically.

Ninety-eight of them from the Athens University of Economics and Business.

I seriously doubt that the current Greek administration was foresighted enough to see through these details.

Looks like status quo wins.

Herr Cowen still refuses to review Varoufakis's work. "A Modest Proposal for Resolving the Eurozone Crisis"

His program is based on massive amounts of loss-making investments from the EU (in a country that is designed to be as anti-investment as possible), that Greek politicians will channel to their cronies.

It's a barely-disguised call for the Europeans to continue funding the Greek clientist state.

Call us back when Greece is not last in the Eurozone in The Index of Economic Freedom and also not ranked most corrupt by Transparency International.

So now, it's really,really true: Greek debt is worth less than everybody pretended it was, like US CDO's in 2008. Why can't the 'Greek crisis' end the same way the US crisis did?

They voted for themselves and their future, rather than arguments that - no matter the circumstances - mysteriously align with the interests of big business, every.single.time.

Can I has some koch money?

East Germany introduced the Ostmark in about a month, but they did it by modifying existing Reichmarks.

Exactly -

1) Direct Bank of Greece to keep printing euros, but overstamp “Hellenic Republic internal use only, not recognized by the ECB.” Send the army to the printing plant, if necessary.

2) Decree “Greek euros” to be accepted in settlement of some or all types of debts and contracts.

3) Inject “Greek euro” capital into banks as necessary.

4) Fill the ATMs, open the banks. Existing deposits can only be withdrawn as “Greek euros.” Greek euros will of course trade at a big discount to old euros, representing a haircut.

5) After suitable preparation in a few months, swap “Greek euros” for drachmas.

You forgot about Step 4b: Mandate that Greek euros trade at par. Send the army to the shops and banks as necessary.

Euros stuck inside of Greece don't trade at par now, they are worth more outside Greece!

The new 'Greek euro,' a/k/a G-euro, a/k/a 'gyro,' would trade at a big discount against the euro but have the advantage of being a) available in Greece and b) convertible.

I'm not saying this is a good idea since it ruins people, leads to totalitarian measures, possible civil war, external conflict, but simply that's how you do it if it's deemed unavoidable...

I agree that motivated governments could get the job done much faster.

Also, who is to say that the drachmas phased out when the Euro was adopted were destroyed. There might very well be a huge warehouse full of stockpiled drachmas in some suburban warehouse in Athens or something like that ready to be redeployed now.

And, Greece is not the biggest country (10 millionish people), so the number of bank notes that have to be printed would be much smaller than in the Euro-zone as a whole or the U.S.

Also, in the short term, counterfeiting isn't the world's biggest risk and cash transactions are still less common than they used to be. Monopoly money would do the job just fine for a few months.

It ain't that simple, MT.

See section headed 'Reintroducing Drachma Notes'

http://www.nakedcapitalism.com/2015/07/why-the-greek-government-rejects-a-grexit.html

Sorry, not buying anything by Susan Webber / Yves Smith. Too many disaster scenarios which never panned out came from that broad.

Somehow I doubt noodling around with the software so that the Euro symbol on bank statements is replaced with a drachma symbol is an insuperable 'IT issue', but that's not my trade.

You didn't even read the section scribed by a contributor-someone [like myself] who's run an ATM fleet.

Fuck off, you ninny.

scribed by a contributor-someone [like myself]

No clue who you are or what you do or if you do what you claim you do. And I do not care.

I read the section, by the way, and the bulk of the verbiage is irrelevant. Also, the sort of argument offered is vintage Yves. The smart money says the 'contributor' is the blog moderator.

"It ain’t that simple, MT."

The linked article says: "Wintergerst says introducing a new currency typically takes at least six months". So, Greece uses locally printed Euro's with a stamp for 6 months and then convert over to a new note sometime between 6 months to 2 years.

You didn't read it either.

How long to get an ISO code for the New Drachma?

Technically there isn't an ISO code for the currency. All you need is a letter to follow ISO-3066 country code (GR) to represent the currency. There is even an argument for re-instating GRD since significant time has elapsed since it was last used, although my money is on GRN. I would expect issuance over the weekend of a default. As for printing money, do you not think there is not already contingency in place for this. De La Rue will be rubbing their hands in anticipation!

So early polls show that No won. Can Greece fuck off to the Eurasian Union and become Putin's problem?

If it were to join the Eurasian Union, it would have the luxury of being its richest member. In the long run, I expect Greece to become an asset to it were it to join.

Or they could just use Euros or other currencies. Of course capital controls and (potentially) seizing bank deposits puts the government squarely at war with practical alternatives.

I think the often ignored point is that the Left really does want its own currency to inflate... much easier to spend, spend, spend that way. It's just a matter of getting from A to B... try for Euro inflation and debt forgiveness first, then on to a new national currency.

For Ecuador, there was no need for the following - 'Artists must draw the notes, security experts then add anti-counterfeiting measures such as watermarks and special inks....'

It did take at a minimum of six months though, at least officially - 'The US dollar became legal tender in Ecuador March 13, 2000 and sucre notes ceased being legal tender on September 11. Sucre notes remained exchangeable at Banco Central until March 30, 2001 at 25,000 sucres per dollar.' https://en.wikipedia.org/wiki/Currency_of_Ecuador#2000_Dollarization

The Greeks can most certainly use the euro as long as they wish- it isn't as if a number of Balkan countries don't have at least a decade of experience in this area. But not being a member of the eurozone brings with it the same disadvantages that a place like Montenegro experiences, due to having no currency of its own at all - https://en.wikipedia.org/wiki/Montenegro_and_the_euro

Yes, but Greece has a severe and rapidly worsening primary budget deficit. Without more euros from Frankfurt, the Greek government can't pay pensions or civil servants. They will immediately need to print dracmas (or something) to avoid "austerity on steroids." At that point, Gresham's law takes over and euros will disappear from Greece.

They'll get austerity on steroids if they print drachmas. We should enjoy the next few months. Looney left politics in action.

How's that supposed to work?

You can't possibly believe that somebody hasn't already set up the printing presses and paper for this eventuality. They've probably been set up with an escrow account in euros, too.

"can you guess what it says?" If it's written by academics, it says "Give us the money".

Let me guess, they destroyed the old drachma printing plates.

Had to be melted down and shipped to Germany as a condition of the most recent injection of capital...

Really? How cute!

Some time ago, I read an account of the introduction of a new currency in Slovakia at the time of the Velvet Divorce. It took a few days in the central bank with a rubber stamp.

Each Euro member has unique coinage. Sorting the vault cash and shipping the foreign-origin coin to the central bank in return for reserves on deposit at the initiatory exchange rate cannot take that long. As privately held coin dribbles in, banks can exchange it for Greek-origin Eurocoin at the spot rate.

The bills are identical in design, but the point of origin is indicated in an alphabetic code on the back. The vault cash can be sorted similarly with the foreign-origin Euros shipped out and the remainder (with the "Y" code) stamped by tellers as a mnemonic aid.

A question: what would happen if the Central Bank of Greece would decide, unilaterally, to print as many Euro bills as the Greek bank system and/or the government need ? After all, the Central Bank of Greece routinely print Euros,
so there wouldn't be any material difficulty in doing so. Of course, that would make other countries in the Euro understandably very unhappy, but what could/would they do ?

They could withdraw from circulation all notes with the "Y" code on the back.

"They could withdraw from circulation all notes with the “Y” code on the back." How, if the supply is being perpetually replenished by the Greeks? Do you mean they could just refuse to treat Y notes as legit currency? If so, bingo! The Greeks have their new currency. Meantime anyone anywhere in the world with Y notes would be less than enchanted with developments.

How, if the supply is being perpetually replenished by the Greeks? Do you mean they could just refuse to treat Y notes as legit currency?

Yes, of course.

Wouldn't this all be more exciting if the Greeks shared a land border with Germany?

Another similarity with Puerto Rico/the US.

Is the German Navy sailing through the channel as we speak?
Is the Russian Navy sailing through the straits?
Is China going to build Greece a few new islands?

Has Russia secretly printed an emergency currency for Greek use?

What will Turkey get up to?

How many economists to does it take to influence the outcome of a referendum ?

So when will the banks reopen? Will the Greek people ever be able to get their remaining Euros out?

Do you suppose that Russia has already printed currency for Greece?

The Greeks appear to have other ideas in mind:
http://www.telegraph.co.uk/finance/economics/11719688/Defiant-Greeks-reject-EU-demands-as-Syriza-readies-IOU-currency.html

Last I heard, betting markets had it going 66-75% Yes. Did they swing to No in the 24 hours before polls opened, or just get it wrong?

I would guess Greek participation on the betting markets was minimal, and therefore the predictive value rather low.

>Top Syriza officials say they are considering drastic steps to boost liquidity and shore up the banking system, should the ECB refuse to give the country enough breathing room for a fresh talks.

>"If necessary, we will issue parallel liquidity and California-style IOU's, in an electronic form. We should have done it a week ago," said Yanis Varoufakis, the finance minister.

Here we go..

How does this end any other way than drachmas and austerity, whether Greeks like it or not?

Or, EU folds and kicks the can down the road.

I find it hard to believe that the Eurozone folds at this point, it would simply lead to other nations stamping their feet and demanding more from other EU countries.

They need to simply present the same terms that they have presented before, and then need to insure that the ECB stops the ELA, there is no reason to continue sending resources to a nation that has said they do not wish to do what is required to be part of the Eurozone.

They need to quit 'presenting terms'. The Euro project has produced a disaster in Greece. No use prolonging it. National currencies, please.

Tyler,
Leaving aside legal issues, from a technical perspective can't Greece use e-money as the immediate basis for introducing a new currency, by redenominating the euro deposits and liabilities of Greek banks as 'new drachma'? Hard currency euro notes would circulate as a parallel currency, at an informal exchange rate with e-deposits set by supply and demand.

OK, let's say you really wanted new currency, and only care about speed.

I would be that the people who sell the printers, the plates, or the paper have some sample plates available.

Or ask to borrow the money of a country that has little interaction with Greece...say Fiji or Guatemala.

Question: Is it intrinsically necessary for a new drachma to radically depreciate in value on the first day of trading regardless of initial exchange rate?

This is just silly - I lived in Slovakia when they introduced their own currency (they had been in a currency union with the Czech republic). They simply stamped a mark on a certain percentage of bills that said they were legal tender only in Slovakia. Likewise, electronic deposits were similarly divvied up.

The two currencies were at parity at first for ease of transition, but then the Slovak one devalued. Ended up being a huge boon for the Slovak economy, as they had been trapped in a currency union at an unrealistic fixed rate.

New currency, if enough will start using a currency some will always follow and the you have a circle. The leader monkey dance and the rest dance so I would say it depends on how many there gonna go for a new currency and how many there start follow that.

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