Published in the Financial Times, August 25, 2017
Sir, Tony Barber, in “Politics motivates Silvio Berlusconi’s parallel currency idea” (FT.com, August 22), notes that critics of Mr Berlusconi’s proposal argue that, if implemented, it “would risk inflicting untold damage on the Italian economy”. It seems odd that anyone can be so confident of the effects of an approach that remains largely untried at scale.
The parallel currency idea was considered by the European Central Bank during the Greek crisis. We can but speculate as to whether the Greek people would be worse or better off today if it had been tried. Many recommended that the euro be introduced as a common currency (in effect a parallel currency) rather than as a single currency. In 2009 California temporarily used IOUs as a parallel medium of payment. Further back, the “greenback” originated as a parallel currency in the US Civil War. And there are today many burgeoning examples of virtual and local currencies: bitcoin and others, the local currencies often associated with Transition Towns, and the many currencies issued by Brazilian community banks. These last have been described as “reinventing the ways in which people relate to each other, support each other and collaborate economically on the ground and within communities”.
Mr Berlusconi’s idea may well be politically motivated, but in our current poor state of knowledge, different economists’ opinions about parallel currencies yield encouragement and condemnation in equal measure. But we should encourage such ideas to be explored further. Only then can we possibly find ways out of our current, utterly dysfunctional financial system.
London SW1, UK