 from seignorage, the difference between the actual cost of printing the notes and the prices paid when they are sold to banks. An Australasian economy currency would enable trading within Australasia to be done with more convenience and lower costs .
Answering the inflation objection One major argument against multiple currencies is that two Reserve Banks won’t together be so easily able to control inflation. But we can’t control it now. One New Zealand dollar in 1950 was worth a mere 4 cents in 2000, scarcely evidence that the Reserve Bank has been competent in controlling inflation over the past fifty years. Even the last decade has seen a steady erosion of the value of the NZ dollar.
This is because the way we allow money to be issued now will always bring inflation. The bulk of the money we have now actually creates inflation.
Currently almost all the money we use is interest-bearing debt money. In New Zealand in 2001 98.3% of our money was issued by the banks and only 1.7% by Government as notes and coins. Since all businesses and governments have to pay interest on their debt and have to build repayment of this interest into their prices for goods and services or taxes, the money system itself is inflationary.
It is true that too much money brings inflation. For example in Germany after the First World War there was hyperinflation money was created at such a pace that by 1923 people had to take their money to the stores in wheelbarrows and a ham sandwich cost 24,000 marks. But while it is important to keep the money supply sufficient to buy the goods and services in the economy, it is equally important to issue the right sort of money.
It is not too much money which causes inflation, it is too much interest-bearing debt money.
If governments were serious about controlling inflation they would issue debt-free money themselves rather than allowing commercial banks to issue their inflation-causing money. If groups of citizens in green dollar and time dollar systems can do this and previous governments in various countries at various time have done it, so can governments today.
Answering the objection
‘We will lose central control’
It is true that if there were to be multiple currencies, no one agency would have complete control. If a government allows local currencies, to keep prices constant their central bank would have to be in constant negotiation with the agencies of local communities. In the same way with an Anzac dollar the central bank of Australasia would be in constant negotiation with the other players.
And we will need further convincing that central control works anyway. After the crash of 1929 during the Depression years 1929-33 the Federal Reserve shrank the money supply to one third of its former size, causing a tragic drop in prices and terrible hardship, hardly evidence that they were delivering stable prices and serving the people.
If there were a variety of currencies at all levels of organization – international, supranational, national and local – and it is perfectly possible given the advances of modern technology to have dual currency smart cards or other cards – the challenge to those who monitor the system at any level of complexity would be to have them all coexisting without inflation.
It is clear there are benefits from both an ANZAC currency and a New Zealand currency. So why not have both currencies, surely a win-win solution? The either/or mentality does not serve us well - we end up throwing out the baby with the bathwater. In the last few decades we have seen enough radical change and political reversals of the policies of successive governments. It is far less disruptive to keep what works and change what doesn't.
Deirdre Kent February, 2002