Posted on 06/04/2010 8:54:36 AM PDT by Slyscribe
A key difference between Greece’s fiscal crisis and crises in nations with their own currency is that its citizens’ wealth wouldn’t be destroyed by a devaluation.
In the case of Greece, a devaluation could only be achieved by leaving the euro and reviving the drachma at some significant discount to the common currency. But because Greeks hold their savings in euros, their monetary wealth would remain untouched — at least if their bank deposits are secure.
This reality may make the prospect of Greece leaving the euro somewhat less frightening to Greeks — and somewhat more likely to occur.
(Excerpt) Read more at blogs.investors.com ...
What exactly happens when a currency becomes worthless? Is it pretty much just worth whatever the material is worth?
Over spending = devaluation.
Euros may become collector items.
I have a 500 billion Weimar note, hee hee.
Euros are so bland they have very limited appeal to collectors.
I meant that to be a serious question. Do they just become collector’s items?
True, and even if they are removed from circulation, there are tons of them out there still. It'd take decades for the numbers to go down enough for them to be rare.
During the Weimar Republic hyperinflation they were used as wall paper or in Hungary in 1946 you can pick them up from the street. There days you can sell them on eBay, hee hee.
I collect hyperinflation notes. Pretty cheap hobby. You can buy Weimar notes for around a buck or two per note.
They'll probably do what Mexico did some years back. They seized all the dollar accounts their people had, converted them to pesos and then devalued the peso. It's no wonder a lot of foreigners don't trust banks and hold physical dollars instead.
Thatcher was right
a big question is what happens to greek citizen deposits in either greek or other EU banks. Traditionally, countries forcibly convert their serfs’ currency holdings wherever they can touch them (argentina 2003), but in this case, it seems somewhat nebulous.
I doubt it — the Euro could become the currency for stronger economies in Europe, like Germany/France, while the basket case Club Med countries (like Greece) would exit the building.
And when has a government ever confiscated bank deposits/gold/retirement accounts/land, etc.?
If the Greeks are hoarding Euros, they better either be in accounts outside the country (and even those might not be safe) or underneath their mattresses. €100,000 in €500 notes would be under an inch thick.
I'm not a financial economist (I just had a few econ classes in college), but it seems that the larger economies might become skittish in having their monetary systems linked with a common currency because it makes them even more subject to another nation's economic woes. And, of course, there is the issue of national pride. If much of Europe rolls back to their own currency, will the more solvent ones not feel inclined to do so as well? I'm not arguing this is the case, I'm just throwing out some questions/thoughts.
Another excellent article from IBD. I hadn’t thought of the euro/savings angle. Holders of Greek debt have to be really second guessing themselves.
When I was a kid we used to threaten to pay one-another back in “Confederate dollars”. ‘nuff said!
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