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Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Wed May 16th, 2012 at 11:06:21 AM EST
[ Parent ]
Still need cash, but if the Euro is not removed as legal tender, the ATM machines can dispense Euro's until the banks have New Drachmas to put in the machines.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed May 16th, 2012 at 11:34:43 AM EST
[ Parent ]
If the Euro is not removed as legal tender, the drachma will not be accepted by anyone.
by Katrin on Wed May 16th, 2012 at 11:38:07 AM EST
[ Parent ]
So you are reckoning that all stores and shops will successfully collude in all defying the legal tender law, and no store or shop will break ranks and accept the New Drachmas in payment?

What about credit card transactions? With banks free to decide between transferring Euros or Drachmas to complete the transaction, I'd be very surprised if they choose to transfer Euros.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed May 16th, 2012 at 11:46:34 AM EST
[ Parent ]
If I have the choice, because both is legal tender, give me Euros. The drachma won't remain pegged to the Euro, it will become weak. Besides, I can use Euros to buy foreign goods, but don't believe I get them for drachmas. What do you think why there is a bankrun? People want to see their Euros in safety (and I bet you would do the same if you were Greek).
by Katrin on Wed May 16th, 2012 at 12:07:42 PM EST
[ Parent ]
However, as a seller, your choice would most often be between accepting ND or no sale.

Those wishing to convert ND's to Euros without having approved transaction to spend the Euros on would indeed have to pay a premium ~ that is, indeed, part of the point of a New Drachma reform, in addition to the government being able to spend ND's on direct employment programs ~ but the settlement rate for qualifying tax obligations and contracted payments would remain 1:1.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed May 16th, 2012 at 12:28:21 PM EST
[ Parent ]
But the one who has the choice is the one who pays, not the one who receives. Under the rules Bruce proposes, any tradesman who accepts payment in Euro would also have to accept payment in New Drachma.

In practice some tradesmen will refuse to accept ND, but most will accept them at a discount.

The thing is that if you take someone to court - over, say, a debt - he would be able to pay in ND rather than Euro, at no discount. So the creditor has a fairly substantial incentive to come to an arrangement.

What this means is that:

  1. Debt will be effectively rebased to ND retroactively.
  2. Large purchases of imported goods - automobiles, machine tools, large-scale engineering, etc. - will instantly transition to the ND footing going forward. But those are typically purchases that can be deferred for a month or two while the monetary system shakes out, without riots in the streets.
  3. Small purchases, such as going to the grocery store, will transition more gradually, as Euros remain viable means of payment at (or at least not greatly above) pre-crisis prices while the €-Mark/NDrachma exchange rate shakes out.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 16th, 2012 at 12:30:21 PM EST
[ Parent ]
The discount would probably be very high, because the obligation to accept ND is practically unenforceable. Only a small percentage of debts go to court and so on. I am not convinced. We could only hope that the ECB thinks it would work and starts to negotiate.
by Katrin on Wed May 16th, 2012 at 01:30:15 PM EST
[ Parent ]
Shops & stores can make lease payments in Neo Drachmas. Shops can make VAT tax payments in Neo Drachmas if they accepted payment in Neo Drachmas. Shops can make utility payments in Neo Drachmas. Shops can pay wages in Neo Drachmas.

So the question is whether shops can get merchandise for sale for New Drachmas. For approved imports within the government ability to meet Euro claims at 1:1, that merchandise can be obtained for Neo Drachmas.

So the critical element would be an agreement by the Chinese to extend RMB¥ credit payable in some agreed ratio of €:NeoDrachma.

Given that, there would be shops who would take the Neo Drachma, and given that shops who take the Neo Drachma will have booming business while shops that do not will see business dry up even more than today, resistance to taking Neo Drachmas will either be resolved in hold-outs giving in or hold-outs closing up and their place taken by those who accept Neo Drachmas.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed May 16th, 2012 at 01:48:33 PM EST
[ Parent ]
The discount would probably be very high,

Potentially.

That the collapse of an overvalued currency peg sucks is not something any sane person would deny.

It's just that unilaterally attempting to maintain an overvalued currency peg sucks worse.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 16th, 2012 at 03:02:55 PM EST
[ Parent ]
Apparently what we are discussing here is moot anyway. And Greece hasn't got a government to react.
by Katrin on Wed May 16th, 2012 at 03:57:08 PM EST
[ Parent ]
It has been moot for over two years by now, since that's roughly how long it's been obvious to anybody who was paying attention that this charade could not continue.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 16th, 2012 at 04:05:43 PM EST
[ Parent ]
Haw about Gresham's law? The Euro would be hoarded and cease to circulate. Everyone would claim (falsely) to the store owner that they have no Euros at hand. The shopkeepers would claim (falsely) that they can only return change in NeoDrachma because they have no Euro coins, etc.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Thu May 17th, 2012 at 06:05:47 AM EST
[ Parent ]

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