- Last week, news came out that Barcelona’s mayor is preparing a digital local currency.
- There is growing conviction that the yuan will get the nod by the IMF to join the SDR basket next month.
- The currency situation in Venezuela is looking evermore desperate
- *On a lighter note, over 61,000 Australians have now signed an ongoing petition to change the name of the Australian dollar to Dollarydoos.
1/ Last week, news came out that Barcelona’s mayor is preparing a digital local currency. The idea put forth by recently elected Ada Calou is to “promote local businesses.” The currency, still nameless, will trade via mobile devices and be completely convertible with the euro. Some think that this initiative will, in effect, prove to be nothing different than one of the special edition currencies that are occasionally issued by the Casa de la Moneda (Royal Mint). Still, a spokesperson from the Bank of Spain commented that the new currency was “impossible, besides undesirable.” But the idea is not at all unprecedented; see for example the Bristol Pound in the UK. Either way, the context is what makes Calou’s proposal delicate. Recall that separatist parties swept the majority of seats in Catalonia’s parliament in the September elections, though they fell short of reaching the 50% regional vote watermark that would substantiate a call for a referendum. This week, the secessionists have put forward a resolution to national assembly (including a 9-point roadmap) to start the process for independence. With national elections coming up in December, development touching the issue of independence will be front and centre, and could be decisive to determine the next government.
2/ There is growing conviction that the yuan will get the nod by the IMF to join the SDR basket next month. Recent reports, which refer to Chinese sources, say that the government is already preparing a statement on the acceptance. The IMF has a formal meeting in November when it is expected to deliberate on the issue. Becoming an established “reserve currency” could certainly have benefits in terms of capital inflows – some estimates put potential demand for the yuan at $500 bln over the coming years. But the greater political implications are probably most important for the Chinese leadership as it seeks to further integrate the country into the global financial system and, of course, exert influence over it. In practice, there has been a flurry of recent developments that will change how the currency will be traded and thought of in the future. This includes the launching of its own cross-border payment system for the yuan (CIPS), the decision to start reporting the composition for its FX reserves for the IMF’s Special Data Dissemination Standards, the issue of a note by the PBOC in London, and plans to extend the hours of its onshore yuan trading to overlap with Europe. Full convertibility, however, is unlikely in the foreseeable future.
3/ The currency situation in Venezuela is looking evermore desperate. The most recent headline was that the central bank has filed a lawsuit at a court in Delaware against the US company DolarToday, accusing it of cyberterrorism and trying to destabilize the regime. It also accused the website of fuelling inflation in the country by quoting the bolivar at extremely weak levels. The company supposedly sources the FX rate from exchange counters in the Colombian border city of Cúcuta, where a lot of contraband goes through. The bolivar is trading around 820 against the dollar according to the website , compared with the official rate of 6.3 (yes, that’s a 130x higher than the official rate). Venezuela has legislative elections coming up in early December and some polls put President Maduro’s United Socialist Party behind, so it’s not surprising that the government is looking for scapegoats. No change in the currency regime will happen before the elections, but it could happen afterwards, regardless of the results.
*4/ On a lighter note, over 61,000 Australians have now signed an ongoing petition to change the name of the Australian dollar to Dollarydoos. This is a reference to a 1995 The Simpsons episode Bart vs. Australia. According to the organizer, it “will make millions of people around the world want to get their hands on some Australian currency.” Separately, earlier this year, the Bank of Canada pleaded for its citizens to stop “Spocking” the C$5 bills. The trend began after the death of actor Leonard Nimoy, who played Mr. Spock in Star Trek. Some analysts, however, claim that Spoking is just an offshoot of the “5 dollar Bill Murray” event in the US, which dates circa Q1 2014.