The Case for Regional Currencies

Anthony Migchels – Real Currencies August 28, 2012

Regional Currencies are an integral part of comprehensive Monetary Reform. Areas like the United States and Euroland are far, far too big for one monopoly unit. Not only does it allow irresponsible and dangerous power centralization in the hands of those that control the currency, the Euro crisis shows another forgotten problem: regional imbalances.
For most in the United States the dollar seems an inevitability. But it was only in the aftermath of the Civil War that Lincoln’s Whig party got what they had been aiming for for decades: national currency. Up to then all sorts of currencies had circulated. First the various scrips of the colonies, later competing banking currencies. Then already the main aim of a ‘national’ currency was not wellbeing, but centralizing power in the hands of a few.
However, it relegated the more remote areas of the United States to eternal depression.

Regional imbalances

As we have seen with the euro crisis, in large currency areas regional imbalances are inevitable. Greece imports more from the North than it can export to its suppliers. As a result it has a negative balance of payments and loses euros to Germany, Holland and a few other countries. This means deflationary pressures (a dwindling money supply) that can only be solved either by going deeper and deeper into debt to maintain a healthy money supply, or structural redistribution from North to South through Brussels. The latter, of course, was the plan of the Eurocrats when they implemented the Euro. But while the Germans like importing Euros from Greece, it does not like giving them back. And who can blame them? They delivered goods and services for them.
This pattern is clearly recognizable in Europe through the Euro crisis and at the time it was predicted by a number of economists. But few realize this is always going on any national economy that is more than a city state.
For instance: the economy of the small nation of Holland is basically centered around the West, where Amsterdam is still at the heart of it all, complemented by a number of lesser cities. However, the North and South have forever known depressed economies, with difficulty getting full employment and structurally lower price levels. It is exactly the same issue: negative balance of payments with the core, in this case the West of Holland, net outflow of money (earlier Guilders, now Euros) and deflationary pressures as a result.
In every economy, even in a mature currency area like that of the United States, every region still generates most of its production through trade with regional partners. Yes, under the pressures of globalization and the ongoing onslaught of Transnationals against local economies, less and less is regional trade, but it still is quite substantial. There is basically no reason why this trade should not be financed with regional currencies. It basically is completely unnecessary and actually insane to allow these economies to wither away just because they cannot cope with (inter)national competition and as a result have too little money circulate locally to finance its regional economy.
The same is going on in the US where regions like Arkansas and rural States are under-developed and often actually quite poor.
Economists and bankers will explain ‘structural adjustments’ are necessary: people must give up natural rights to accomodate international corporations so that they can compete with core areas. Labor markets must become ‘flexible’, meaning lower wages, fewer worker rights. Of course, in the minds of these people, regions exists to provide optimal return on investment for capital.
But the simple truth is that economies only exist to provide the people with what they need for a decent life.

Centralization of Power

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