Post by oliver on Sept 15, 2017 7:56:13 GMT
Think of Free Banking era in the US, with private bank notes. Was there only one UoA, the US$, or were there as many UoAs as there were banks? A $5 note issued by a bank in Town A could buy, say, 50 eggs in Town A. The same note might buy only 40 eggs in Town B, even if the sticker price of the eggs was the same as in Town A. Vice versa for a $5 note issued by a bank in Town B.
If we agreed that during Free Banking there was only one UoA, the US$, would this imply that credit balances in the ledger of the central bank of Zimbabwe are denominated in US$, even if merchants in Harare would ask for their goods either a $5 Fed note or a $10 bond note?
Just a thought.
I'm starting to think that it doesn't matter that much if you think that there could be two UoAs, 'dollars' and 'LETS dollars', in our LETS world. Is it that different from imagining that a merchant in the US in 2017 would say that the price of a certain good is $9 in "year 2010 dollars" but would only accept $10 worth of Fed notes for the goods? Only the latter price would have any practical meaning.
I think you're right. It's a matter of degree whether one thinks of it as being a world with one UoA + some minor discounts per issuing agency / bank or of various separate UoAs. This is what I argued on your blog once, when I claimed that the smallest unit for an independent UoA is a single, commercial bank. It's also confusing, of course, to think of various UoAs all with the same name.
I guess in the free banking period, it makes sense to talk of one UoA because they all referenced a common, commodity standard / UoA and all carried the same name (dollar).
Zimbabwe is obviously attempting to do the same thing. It is like a free bank vs. the more or less homogenous, domestic USD currency area. But, owing to its history of not being particularly trustworthy, it isn't doing a very good job. The trust that the USD conveys cannot just be transferred to the reserve bank of Zimbabwe by fiat.
To do a better job, Zimbabwe would have to set up a real currency regime like Hong Kong, with a giant treasure trove of forex reserves that it could throw at anyone who doubted its commitment. It probably hasn't got the current account surplus to pull that off, but issuing promises that it will do its best just isn't going to cut it given its history and the state of its economy.