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<nettime> Re: A Tale of Two Currencies
Brian Holmes on Fri, 11 Jan 2002 02:13:20 +0100 (CET)

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<nettime> Re: A Tale of Two Currencies

"What would money issued directly by the people look like?"

Thanks to Keith Hart, for bringing up into the sublime public space of
nettime a question that kept springing back to my mind during the initial
transition to the euro. Namely the question, what does it mean if one
currency is born exactly when another one seems to be dying? Hart's text,
a jewel of understatement, is about many many things, including localized,
cooperative exchange systems like LETS and SELS, and also the Argentino, a
proposed fiduciary script that was supposed to be the synthesis of the
various forms of chits and promissory notes edited by the Argentine
provinces as a way to replace real money with... well, another
institutional reality, one that would only hold good within the country.
Of course the idea didn't last long, and the Argentino went the way of
Argentina's last four presidents. Meanwhile, the euro was opening up a
borderless continent, in which people as far away as the Dutch and the
Greeks share the same trust that 1 = 1, i.e. that my euro equals your
euro. All these 300 million people also seem to share, for now anyway, a
similar trust that the amount of goods and services their old money used
to buy them will remain about the same as what they'll now get exchange
for their wages in euros. Just as this great moment of collective faith
was sweeping the Continent, and making it into borderless Euroland,
Argentina rather more violently created yet another new currency  just
last Sunday when it devalued its own peso by 30% against the US dollar.
The peso, you see, had ceased to exist as an independent money with a
special faith all its own. Instead, in 1990 the Argentines under the
pastoral prayers of the IMF, and with its beneficent capital
contributions, had placed their faith in the value of the US dollar, which
their peso was to unfailingly reflect and mimic, to the point where it was
really just as good as a dollar. To the point where it _was_ a dollar.
This effective dollarization had four consequences. First, it stopped the
hyperinflation that had reached 4,000 percent in 1989. Second, it made
Argentina into a country where foreign investors could reasonably expect
to double their fortunes in a reasonably short time (five years, when you
get 15% return and there's no inflation eating it away). Third, it made it
very easy and tempting for high-income Argentines to directly convert
their money into dollars, and to put it off-shore somewhere (Switzerland
isn't Euroland, is it?), while even middle-income people wisely got
dollars to put into wool socks. Fourth, it meant that Argentina's products
and labor - which were paid for in dollars, ultimately to Argentine
citizens who themselves had to pay peso-dollars for privatized public
services owned by foreign investors - became impossibly high priced by
comparison to those of other Latin American countries who had retained
their faith in their own currencies.

We could add to that:

Fifth, all the above meant that to keep this ball rolling - and to keep
the dollars flowing back to the foreign investors who had chosen to invest
in wealthy Argentina instead of in the other neighboring countries who had
remained relatively poor and risky by maintaining their faith in their own
poor and risky currencies - the IMF found itself obliged to keep pumping
huge amounts of dollars into Argentina, as the country slid into a severe
recession that began, as if by coincidence, during the 1997-98
Asian-Russian-Brazilian financial crisis that everyone has since forgotten
and that fortunately had no long-term effects. Now, the effective
dollarization of the Argentine currency meant that there were no economic
borders between the holders of pesos and the holders of what Americans
call "greenbacks." But the disappearance of international borders meant,
strangely enough, the creation of internal borders. It happened like this:
as Argentina became increasingly unable to sell its products and attract
dollars in any other way than by borrowing them and paying them back out
for privatized public services (plus some more thrown in for very
lucrative corruption services), it gradually came about that a continually
shrinking portion of the Argentine population had access to the basic
institutions of modern social life, i.e. electrical, water, and telephone
networks, health and education services, road and rail transport, food and
consumer goods markets. At 40% unemployment in some provinces, you're
talking about a lot of people locked out of a lot of those basic
institutions. The fact is that the Argentine government, along with the
dollar-peso, finally fell under pressure from the streets when the
citizens were excluded from access to the monetary institution itself,
that is, when the government (and the IMF) imposed the 1,000 dollar per
month limit on cash withdrawals from banks. If I read him right, Keith
Hart, in his wonderfully understated and diplomatic way, hints that with
the continuing integration of people even further apart than the Dutch and
the Greeks into one Europe and one euro, the same kind of internal borders
might spring up here. And in fact, he doesn't say it but they already did
spring up in the nineties, as the pressure of the Maastrich convergence
criteria gave rise to social exclusion. (Remember how anguished we all
were about that in the mid-nineties? Before the New Economy solved the

Now, I'm not saying that Euroland is necessarily going to work out for the
worst, and like Hart I think there are all kinds of positive potentials
there - but I was feeling a little, shall we say "dark"? the other day, as
I stood in the line at the post-office bank (a semi-public French
institution), in a relatively well-off suburb of Paris, thinking about
Keith Hart and LETS and SELS and the euro and Argentina, and watching a
policeman in a bullet-proof vest (hmmm, you didn't used to see those vests
before, did you?) ask the post office-bank worker, "Everything OK?" while
the other guy outside fingered his Uzi.

Seems to me there are 2 questions in the short run:

1: Will the Argentine "contagion" spread? Which I think is also a way of
asking, Will the Asian-Russian-Brazilian crisis, the first fully systemic
crisis of globalization, come back again to roost, ultimately in the US
itself? Mind you, the American Treasury and the big Anglo-American ratings
agencies are saying very faithfully that contagion is unlikely... But at
the same time, commentators in the newspapers are saying "This could
affect the consolidation of the FTAA!" (i.e., the proposed North-South
American free-trade zone, in answer to borderless Euroland). 

And then there's question 2: What will happen if the new Argentine
government, or a sucessive government, actually does come to terms with
the IMF, on a plan to keep the devaluation from dramatically affecting the
earnings of the big American and European transnationals? I mean, is it
possible to post guys with Uzis in front of all the Argentine
supermarkets, so the hungry people don't cross the borders? But isn't that
the plan that just failed? If so, does that mean the FTAA will inevitably
fail? Alternatively, will there again be talk of a break from the IMF and
a national fiduciary currency unpegged from the world economy? Or - yet a
further flight of the imagination - will the role of the IMF and the "new
rules for the new economy" of globalization somehow be replaced with other
new rules? And if so, which ones?

These are the kinds of questions that I think Keith Hart is also raising
when he talks about LETS and sbout what money directly issued by the
people would look like. And these are also the issues that some of us were
bringing up a few months ago, on the streets outside the Summit of the
Americas meeting in Quebec City, which was supposed to institute the
great, borderless FTAA. But there's no place for Keith's utopianism at
those kind of summits. And we bloody ignorant protestors from the
traveling anarchist circus don't know a thing about economics, do we?

Happy New Year then,

Brian Holmes

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