Very much appreciate your calm feedback, and clearly you read through the thread before posting.
End of the freely convertible dollar? In today's global economy, it's inconceivable. How would transnational corporations function? How would people travel? How would people with foreign real estate pay their bills?
If in fact a dual currency were re-instated, I assume the international dollars would be treated as a foreign sovereign currency complete with exchange rates for personal and business transactions, and currency exchanges (at banks and customs at the US border) for travelers with cash. Transactions would proceed as if you were paying for something denominated in a foreign currency.
The new wrinkle would be the reporting requirements of where the old greenbacks came from when converting to new 'peachbacks', much as is done today if you bring in/out more than $10K. Domestically, they would have to outlaw old-design greenabcks as no longer being legal tender domestically (forcing one the bank to exchange bills - and report where you got the greenbacks). This point of outlawing what was legal tender (raised only by one poster) seems fraught with problems and the biggest obstacle unaddressed by the article.
Technologically, it seems quite feasible.
The motivation (ostensibly to thwart money laundering by 'filtering' the exchange/flow of new and old currency domestically while not 'inflciting' that new currency on international populations whose confidence and use of dollars we wish to retain) seems plausible.
The 'unintended' consequences of two values for US currency to the detriment of domestic bill holders seems plausible.
But your point about Droke's credibility is noted.
Some notes on dual currency> Argentina went to dual currency to try to keep small dollar investors solvent. Also Europe is going through a dual currency phase now to phase out national monies and convert all transactions to Euros.
On May 21, IMF Managing Director Horst Köhler said he
welcomed Argentina's efforts for a debt swap it claimed would support medium-term financing sustainability. Eleven days later,Minister Cavallo engineered a swap that obliged Argentine banks to exchange relatively good, liquid government bonds fornew longer-dated, illiquid paper. The central bank was obliged to inject liquidity into the banking system (a feature which is not
present in orthodox currency board systems), which greatly
expanded the monetary base and reduced dollar reserve backing of the currency below 100 per cent for the first time.
Soon after, on June 15, Minister Cavallo announced a dual
exchange-rate regime: one for imports and another for most
exports. When markets worried again about devaluation, interest rates spiked and capital flowed out of Argentina. A week later, IMF Director of External Relations Thomas Dawson told a press conference that the IMF continued to support Argentina's efforts.
By September 7 last year, three events had occurred, with the IMF's approval, which seriously compromised the credibility of the convertibility system. Predictably, this did not stop the IMF from augmenting Argentina's stand-by credit to $21.57 billion. IMF First Deputy Managing Director Anne Krueger appeared utterly oblivious in a press release, saying: "The [new Argentine] program aims at restoring the credibility of the fiscal position and
the convertibility regime."
At the end of November, Mr. Cavallo further undermined the
convertibility system by requiring banks to exchange treasury bills for illiquid new ones. As a result, banks could not meet demands for deposit withdrawals, so he instituted restrictions on deposit withdrawals and transfers of funds abroad. A week later Thomas Dawson informed us "there is no Fund staff view on the
subject."
Dissatisfaction with these measures led to rioting and a revolving- door political crisis, producing five presidents in two weeks. Eduardo Duhalde became Argentina's fifth president on January 1, 2002, and ended convertibility five days later. He broke the monetary contract and created a new exchange-rate regime which stole about 40 per cent of the value of the peso—similarto FDR's breaking our domestic gold standard contract and devaluation.
This ended the legal right of people to convert pesos into dollars,amounting to outright theft of the central bank's foreign reserves. Duhalde's administration proceeded to violate contracts with foreign companies, steal the dollar deposits of Argentines, and wreak havoc on the banking system. Since Argentina's devaluation, all eyes have been on the IMF to come to Argentina's aid. And the Duhalde administration is already penciling in a bailout package to support its budget.
http://www.enterstageright.com/archive/articles/0302/0302argentina.txt If in fact a dual currency were re-instated, I assume the international dollars would be treated as a foreign sovereign currency complete with exchange rates for personal and business transactions Some questions to think about:
Would the exchange rate between the two be fixed or float? If fixed, would each float against other currencies? Seems like there would be problems unless the domestic currency was convertible only into greenbacks, and then greenbacks could be exchanged into foreign currency at exchange rates that float.
Would the US maintain 2 money supplies: domestic and greenback? Beyond money supply management, the simple wearing out of paper bills would force new issuance.
How would transition work? Seems like a lot of people would dump the peachbacks if devaluation relative to greenbacks was expected.
Is the purpose of all this to maintain the dollar's global role, while plundering the savings of US residents to inflate away debt?