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  #21  
Old 14.06.2012, 11:56
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Re: How will Switzerland fare if the Euro blows up?

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Politicians, experts and bankers who papered over the cracks and have been unable to take any decisive action on the euro for the last two years. Would they really have the foresight and strength to prepare fallback plans like printing currencies??

Do you imagine such a major printing and logistical event could have been in secret??
They dont need to print anything initially - and they probably wont. All they need to do is simply to stamp existing Euros within the countries banking system and those newly stamped (ink marked) Euros would become the new currency.

This has been highlighted in some articles that have been circulating.

Last edited by Lex; 14.06.2012 at 12:06.
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Old 14.06.2012, 12:07
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Re: How will Switzerland fare if the Euro blows up?

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They dont need to print anything initially - and they probably wont. All they need to do is simply to stamp existing Euros within the countries banking system and those newly stamped (ink marked) Euros would become the new currency.

This has been highlighted in some articles also.
Not quite sure what is involved in "simply to stamp" banknotes. Isn't that the same as printing new notes? And what about all the billions of un-stamped ones in circulation?

Sounds like a recipe for further disaster - rather than avoiding disaster...
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  #23  
Old 14.06.2012, 12:45
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Re: How will Switzerland fare if the Euro blows up?

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Not quite sure what is involved in "simply to stamp" banknotes. Isn't that the same as printing new notes? And what about all the billions of un-stamped ones in circulation?
Lets say a country within the Eurozone transitions to a new currency:

- All physical Euro notes within the affected banking system can be marked (with an ink/stamp etc) and handed to depositors. These 'marked' notes are now the de-valued currency and are no longer equal to an unstamped Euro
- All unmarked notes in circulation are left as old euros with their old values - i.e. only euros within the banking system are affected (electronic money far outnumbers physical money in circulation). So people with the unmarked Euros under their mattress will either be OK,, OR the banks will not allow these to be exchanged (I dont know it depends on how much money they think is stuffed in mattresses or how 'evil' the politicians are).
- All depositors accounts in the affected country are immediately changed to the new currency. Until a new currency is printed, this money can be withdrawn from ATMS/banks, but with strict limits, AND you get a stamped/marked euro (which is now devalued and a new currency) - so you no longer get the old exchange rate.
- Over the border a stamped Euro is no longer the equivalent of an old (unstamped euro). Anyone running around with stamped Euros is really now holding the new devalued currency. Overseas you either wont be able to use it, or you will need to swap it for an unmarked currency. I'd bet the banks wont touch it.
- Over the next few weeks and months as a brand new currency is printed, people exchange the stamped euros for the new currency.

The article below that I randomly found suggests a 2-6mth window of introducing the actual new currency (where the transition was stamped/marked notes)

http://www.abc.net.au/news/2012-05-1...work3f/4012490

Satyajit Das, the analyst they quote, does know his monetary history well - apart from that I just randomly found the article now. I dont claim to know the accuracy of whats above, just that systems can exist before a new currency is printed (not that that would take long anyway)

Last edited by Lex; 14.06.2012 at 12:56.
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  #24  
Old 14.06.2012, 13:01
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Re: How will Switzerland fare if the Euro blows up?

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CURRENCY printer De La Rue celebrated a 73 per cent rise in profits amid reports it is preparing to start making drachmas in case Greece crashes out of the eurozone.
http://www.thenorthernecho.co.uk/bus...fits_leap_73_/
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  #25  
Old 14.06.2012, 13:18
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Re: How will Switzerland fare if the Euro blows up?

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Satyajit Das, the analyst they quote, does know his monetary history well - apart from that I just randomly found the article now. I dont claim to know the accuracy of whats above, just that systems can exist before a new currency is printed (not that that would take long anyway)
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"So basically you have to do it by surprise. What you would do is effectively close the borders and shut down the entire banking system, pretty much the whole economy, for a few days

"Then you would take all the euro in circulation within Greece and stamp them as Greek euro, and then you would have a process of replacing them with your new currency, but that's going to take two to six months.
Close the borders for a few days but the stamping takes six months? Yeah, I see how that can work. Especially in Greece.
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  #26  
Old 14.06.2012, 13:25
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Re: How will Switzerland fare if the Euro blows up?

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stamping takes six months?
No, it says replacing the old system with new currency will take around 6 months. The stamping you do quickly on physical notes already at the banks.
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  #27  
Old 14.06.2012, 13:52
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Re: How will Switzerland fare if the Euro blows up?

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No, it says replacing the old system with new currency will take around 6 months. The stamping you do quickly on physical notes already at the banks.
Is there a legal procedure to devalue legal tender notes that the country has not issued?
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Old 14.06.2012, 13:53
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Re: How will Switzerland fare if the Euro blows up?

Are they for real?
Stamp, stamp! Make a billion from a thousand. Did not work too well last time round
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  #29  
Old 14.06.2012, 13:59
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Re: How will Switzerland fare if the Euro blows up?

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Mr Das says there would be at least two advantages for Greece if it did leave the eurozone - tourism would increase and its debt would be waived.
"Their tourism industry, which is their main industry, would benefit because they would become cheaper, so people who are now going to Turkey may come back to the Greek islands," he said.
Of course the Greeks could also lower their prices in EUR to actually match the value of the services they offer... but sofar that idea has been too revolutionary for Greek tourism businesses who continue to practice outrageous prices.
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  #30  
Old 14.06.2012, 14:17
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Re: How will Switzerland fare if the Euro blows up?

Any country exiting the Euro would go through chaos - as would the rest of the Euro zone. Not so long ago it was thought to be unthinkable but it has started to look possible. The costs and disruption would be huge. The idea of stamping the currency has bee done elsewhere - but so far as I'm aware only on a country's own single nation currency, to change the denomination by knocking off six zeros or so for example.

Do it in a country using the Euro - stamp all the notes over the weekend in the banks. Then what happens to the 20% or so held in private hands? What value have they? Some will be from other countries, some will be local. Likewise what happens to the Euros circulated from Greece to the rest of Europe for example? Potentially they'd be devalued as well.

The paper currency is probably not the biggest single unknown - potentially all the loans to Greece, or wherever would devalue along with the new currency. If so then all those who've lent to the country in question take a haircut. If they haven't been prepared in advance to suffer the devaluation to their books they could fail as well.


I don't think anybody really knows the full consequences but you can be sure that they would be drastic and painful for the whole region - not just the Euro zone since most regional economies are closely linked whether they be part of the Euro, EU or EFTA.
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  #31  
Old 14.06.2012, 14:26
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Re: How will Switzerland fare if the Euro blows up?

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Not quite sure what is involved in "simply to stamp" banknotes. Isn't that the same as printing new notes? And what about all the billions of un-stamped ones in circulation?

Sounds like a recipe for further disaster - rather than avoiding disaster...

ohh... so you were seriously expecting a neat "solution"???

There isn't going to be one, I'm afraid.

There's no telling which of the myriad scenarios will play out (Greece out, Greece and Spain out, Germany out, Northern Euro and Southern Euro etc etc), but I can almost guarantee that the end will be messy, unplanned, and hugely destabilizing. It will make the Lehman Bro collapse look like a birthday party that wasn't so much fun...

Last edited by dino; 14.06.2012 at 14:43. Reason: grammar
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  #32  
Old 14.06.2012, 14:29
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Re: How will Switzerland fare if the Euro blows up?

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Is there a legal procedure to devalue legal tender notes that the country has not issued?
Its a good question and I have little idea on how they would go about it but reading one of these reports from 29th May 2012 (below) - it seems full of legal holes. It may be what your looking for though, titled 'Can Greece legally withdraw from the Euro?'.

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Clearly, the process of withdrawal from the EMU and the euro currency by a eurozone member is fraught with legal difficulties. These difficulties, however, pale in comparison to the legal quagmire which will ensue concerning the currency of payment for obligations involving both the government and private parties located within the withdrawn state. Will these payments be made in the new currency of the withdrawn nation at some statutorily fixed conversion rate, or will they be required to be made in the former currency? This problem becomes all the more important due to the fact that the euro would still exist after the withdrawal of a current eurozone member state. While the withdrawal from a supranational entity such as the EU and its currency union presents unprecedented legal issues, especially in a world of public international law focused upon the actions of "nation-states," several basic principles contained in the body of the "law of money" can provide some navigational aids for these rather uncharted waters.

Our first legal principle, referred to as lex monetae, or "state theory of money," provides that the law of the nation of the currency in which the debt is expressed shall decide what constitutes the currency. Although the euro is, legally speaking, the currency of the EU, it is also the legal tender of each individual eurozone member. Accordingly, pursuant to the lex monetae principle, an EU nation is free to exercise its sovereign powers to substitute a new national currency for the euro currency and to then, by national law, establish a conversion rate for the exchange of former euro obligations into the new national currency........
Above is at the following address: www.parliament.uk/briefing-papers/SN06342.pdf
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Old 14.06.2012, 14:34
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Re: How will Switzerland fare if the Euro blows up?

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Not quite sure what is involved in "simply to stamp" banknotes. Isn't that the same as printing new notes? And what about all the billions of un-stamped ones in circulation?

Sounds like a recipe for further disaster - rather than avoiding disaster...
No, it's simple really.

First of all, the government announces that with immediate effect, all bank accounts in Euros are converted to a new currency. All money withdrawn in cash gets stamped as people withdraw it. Notes already in circulation prior to that are unstamped of course, and there will be an initial run on these but it won't last long.
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  #34  
Old 14.06.2012, 14:34
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Re: How will Switzerland fare if the Euro blows up?

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Its a good question and I have little idea on how they would go about it but reading one of these reports from 29th May 2012 (below) - it seems full of legal holes. It may be what your looking for though, titled 'Can Greece legally withdraw from the Euro?'.



Above is at the following address: www.parliament.uk/briefing-papers/SN06342.pdf
That works for the Greek obligations. But if you hold a German issued 100 EUR note, you are in effect holding a Germany paying obligation over which Greece has no devaluing or substitution authority. So in theory even if a Greek bank gives me a stamped German issued note, per lex monetae Germany still has to honor it at face value.
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Old 14.06.2012, 14:39
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Re: How will Switzerland fare if the Euro blows up?

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No, it says replacing the old system with new currency will take around 6 months. The stamping you do quickly on physical notes already at the banks.
I work with Greeks every day... listening to them, anyone with half a brain has already taken their money out of Greece. There isn't a lot left to stamp. Which is part of the problem, of course.
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  #36  
Old 14.06.2012, 14:53
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Re: How will Switzerland fare if the Euro blows up?

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That works for the Greek obligations. But if you hold a German issued 100 EUR note, you are in effect holding a Germany paying obligation over which Greece has no devaluing or substitution authority. So in theory even if a Greek bank gives me a stamped German issued note, per lex monetae Germany still has to honor it at face value.
Would it theoretically be possible for ther reverse to happen, ie, the rest of the Eurozone converts its currency to a "new euro" and leaves Greece as the sole country to use the "old Euro" which it can then devalue as much as it wants. Similarly to what happened when the DDR Mark was coverted to the DM, one exchange rate applies for cash in hand and another for bank accounts. This would discourage people from hoarding cash.
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  #37  
Old 14.06.2012, 14:59
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Re: How will Switzerland fare if the Euro blows up?

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Would it theoretically be possible for ther reverse to happen, ie, the rest of the Eurozone converts its currency to a "new euro" and leaves Greece as the sole country to use the "old Euro" which it can then devalue as much as it wants. Similarly to what happened when the DDR Mark was coverted to the DM, one exchange rate applies for cash in hand and another for bank accounts. This would discourage people from hoarding cash.
Theoretically yes. Practically existing Greek EUR paying obligations will not be affected by any devaluation (Greece will have to pay in *hard* currency anyway) so I'm not sure this "exit and devaluation" spiel actually serves any practical purpose.
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  #38  
Old 14.06.2012, 15:13
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Re: How will Switzerland fare if the Euro blows up?

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the "lust" for "something catastrophic" is widespread
I don't know that folks are 'lusting' for something so dramatic, but I would like this daily drip of bank bailouts, political unrest and depressing economic news to end. I mean, GTFO with it already.

I've no idea what's going to happen except that it just can't keep going this way. I'm not thrilled that the US bailed out Lehmann overnight leaving the taxpayers with the hefty bill but it sure beats this method of trying to solve a crisis by committee and failing a little bit more each day.
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Old 14.06.2012, 15:26
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Re: How will Switzerland fare if the Euro blows up?

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I've no idea what's going to happen except that it just can't keep going this way. I'm not thrilled that the US bailed out Lehmann overnight leaving the taxpayers with the hefty bill but it sure beats this method of trying to solve a crisis by committee and failing a little bit more each day.
Er, did the bailout of Lehman actually fix the US economy? I don't really see what the US did better than Europe.
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  #40  
Old 14.06.2012, 15:45
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Re: How will Switzerland fare if the Euro blows up?

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Theoretically yes. Practically existing Greek EUR paying obligations will not be affected by any devaluation (Greece will have to pay in *hard* currency anyway) so I'm not sure this "exit and devaluation" spiel actually serves any practical purpose.
Threatening to default is a useful bluff when trying to renegotiate your loans maybe?
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