Clever adaptation of the Bitcoin protocol (not Bitcoin itself) to provide tax-driven alternate currency in order to increase liquidity in the EZ periphery.
BITCOIN: A flawed currency blueprint with a potentially useful application for the Eurozone
Yanis Varoufakis
2 comments:
Isn't this illegal under current EZ arrangements? It just sounds like a mechanism for Greece to issue its own currency.
Since taxes, after year 2, would be payable in either euros or what Varoufakis calls "FT coins", it does seem as if Greece would then be under a dual currency standard. But perhaps it could steer the (inevitable) legal controversies better if the gov't called the FTs "securities" instead of "coins".
Varoufakis wants to have a maximum of 10% of GDP in FT coins in circulation at any given time, the first issue being redeemable for taxes only after a period of two years.
The premium would be 1.5 euros in taxes saved for one euro invested in FT coins - the equivalent of a 22.4% interest rate, if it were no-coupon bond.
If the gov't started the process by issuing an amount of FTs equivalent to 5% of Greece's 200 billion euro GDP then, in year two, tax receipts would get a hit of some 15 billion euros, a huge contribution to the budget deficit.
Presumably, the troika would not like this pre-announced collapse in tax receipts. Yes, the tax cut would be great for economic growth but we have seen that the EU doesn't care about the state of the Greek economy. And it's hard to imagine the submissive Greek government daring to implement such a defiant measure.
In conclusion, it seems to be a rather unrealistic proposal, to put it mildly.
It would be easier and more effective to have pension funds become shareholders of commercial banks in new IPOs, have the banks lend to the government a multiple (say, 10x) of the capital increase - and then have the government pay all of its debts to foreigners.
This operation would be automatically financed by the ESCB/Bank of Greece at the low MRO rate of 0.25% a year. It would be tantamount to a swap of IOUs - foreign debt would be exchanged for internal debt, a much easier problem to tackle (all Greek citizens would owe the debt to themselves).
All perfectly legal under the euro. Even a not-so-defiant Greek government should be able to implement it, I guess.
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