An observation on having your debt denominated in a currency you print

[randomness]

From Daniel Davies's D-squared Digest, April 20th:

A note on Modern Monetary Theory

Just to note that of course a theory should be tested against the real world, and that the real tests of a theory are in the extreme outcomes and corner cases.

I therefore note that, in respect of the Krugman/Galbraith/Baker/cast of thousands debate, that Zimbabwe exists as a country as well as a debating point, and that it does have domestic currency treasury bills, and that it is a perhaps startling fact that throughout the unorthodox policy measures of the last ten years, Zimbabwe has, in fact, never defaulted on its domestic currency sovereign obligations. So I score this one for MMT.

Comments

[st-rev.livejournal.com]

Twice zero is still zero, though.

[r-ness.livejournal.com]

In fact, times zero is still zero.

Good thing that's all that was promised.

[st-rev.livejournal.com]

dsquared is slick, smug, and utterly wrong on everything he's written about that I have personal knowledge of.

[r-ness.livejournal.com]

Clearly, your mileage varies.

I liked the Maple Syrup Reserve.

[st-rev.livejournal.com]

His discussion of nuclear plant engineering was howleriffic, in a bad way.

[r-ness.livejournal.com]

*shrug* I didn't see it.

[achinhibitor.livejournal.com]

I vote that we print up something like that, give one to each citizen and one to the Bank of China!

But I read somewhere that eventually Zimbabwe ran out of hard currency to buy the ink to print more currency. But I guess with electronic banking, that doesn't matter.

[r-ness.livejournal.com]

I vote that we print up something like that, give one to each citizen and one to the Bank of China!

That would obviously be in the interest of anyone with a US$ denominated mortgage.

At some point when I have some lots more spare cash I intend to buy a brick of those and hand them out as party favors or something. But at $3 each in lots of 1000, they're a too expensive for me to do that right now.

(http://www.educationalcoin.com/qldetail.cfm?ID=13432&showpic=yes&country=all&svar=&Qstatus=B&SilverFlag=)

But I read somewhere that eventually Zimbabwe ran out of hard currency to buy the ink to print more currency.

I read that the Giesecke & Devrient stopped selling Zimbabwe security paper after a German government request. Apparently Jura JSP continued to license the design software, but if you have no more paper to print on, you have a problem. (The designs are ugly but you can hardly blame the toolmakers for the designs made with their software.)

It all became irrelevant when Zimbabwe gave up on its own currency and switched over to the USD.

Now that's ironic. :)