By Rob Beschizza at 8:29 am Fri, Oct 19, 2012
Ironically this is the sort of thing i would expect Argentina to do, not Panama.
What would happen if :
* everyone was free to use whatever currency they wanted, and
* all currency exchange was instantaneous and free?
Outside of specific countries with rather onerous restrictions (the rules are probably tightest for people who deal in enough cash to get the money-laundering cops worked up’ but not enough to qualify them as high-rolling international financial institutions with accountants and lawyers to deal with that nonsense), usually born of isolationist paranoia or some serious issues with the local currency, you can use whatever currencies amuse you. It’s just that most of them aren’t legal tender, and nothing obliges anybody else to accept payments in whatever funny money amuses you. There are places (notably tourist hot spots and areas with a lot of informal trading going on) where several currencies are accepted; but that’s a purely voluntary matter between the transactors.
As for exchange, somebody has to handle the buying and selling of currencies against one another, and the exchange rates aren’t constant. Yes, the exchange fees and rates accessible at a lot of consumer finance entities are pretty usurious; but transaction costs don’t drop to zero even for the people who clear billions a day in international interbank transfers and similar high-rolling stuff.
There are countries that unilaterally adopt a foreign currency as legal tender. Examples that come to mind: Montenegro (now a country) used the German Mark for a long time and now uses the Euro as its only currency. Kosovo adopted the Euro as well. None of them are officially in the Eurozone.
Just like the US Dollar is an official or de facto currency in a bunch of countries around without anyone being able (or willing) to do anything to stop it.
Everyone (as in every country) _is_ already free to use whatever currency they want.
Edit: Also, I’ve settled bills with three or four currencies at once a couple of times. There are countries where multiple currencies are universally accepted with generally agreed-upon exchange rates even though they technically aren’t legal tender there.
I read that as “Panda aims to adopt Euro”. I’m not sure what that would have meant, but I would watch the video anyway.
If they accidentaly the whole economy, what should we do… is this dangerous?
As long as they don’t tie their whole economy to the Euro it´s ok.
Portugal, Spain, Italy and Greece would give their collective right arm to exit the Euro…
“Alongside” is pretty weird. It means vendors would have to offer prices in both currencies, or else buyers have to hold both currencies in their wallets.
Not that weird. Many stores in border towns and cities along the Canada/US border will take both currencies. Usually they just have prices in their native currency though and have an exchange rate displayed. Doesn’t matter much at the moment since both currencies are worth about the same.
Lots of countries already do that. Throughout the caribbean, prices are often posted in both US$ and the local currency.
mumble mumble rats… mumble… sinking ship…
He would like to, the rest of us don’t. I guess that’s the reason behind his travels. Leaders like to watch what new crazyness his comes up with.
Countries using somebody else’s currencies should be a wet dream for classical/orthodox economists, gold-standard nutters and other “we shall have no inflation” crazies. Unsurprisingly though, they usually end up being economic backwaters with no real growth, and eventually abandon the idea.
Because the problem with a currency you don’t control is that you don’t control it. Whoever does control it can (and will) screw you at some point, and even if this doesn’t happen, at some point you will have some sort of perfect storm and you’ll be powerless to face it.
Economic activities do not follow the laws of physics; it’s all a big game, and if you let other players write the rules, you can be sure that you’ll never win.
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