[Nettime-bold] Re: A Tale of Two Currencies

[Brian Holmes <106271.223@compuserve.com>]

"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 problem?)

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


_______________________________________________
Nettime-bold mailing list
Nettime-bold@nettime.org
http://amsterdam.nettime.org/cgi-bin/mailman/listinfo/nettime-bold