Sunday, November 27, 2011

New Libyan Currency: where is the democracy ?

Tawasul news agency announced on Facebook the imminent issue/arrival of the newly minted Libyan currency of a which I'm publishing a photo below taken from their website.

In my humble opinion  and my knowledge of economics is limited to non-existent, a new currency is not the top priority in Libya.  If true the new money looks nice but we should not be wasting money on it we could have survived with the old Libyan notes, even the ones with Gaddafi's face on and thank God it was only the One Dinar currency and more recently the 50 Dinar currency which I actually rarely saw since it came to the market a year or so ago. 

Some people say that having these new banknotes will make the ones taken out of the country invalid and so help restore the economy and will hit those who have been hoarding money and starving the marked of cash. So re-introducing badly needed cash would hit two birds with one stone... maybe I really don't know how this works and if this is the solution to fight all the war profiteers. Yet again I think a new currency would have been the last step before the transitional period ended in 2013. Like this it feels to me as if someone has made a business deal somewhere but most importantly who decided this step ? have Libyans been asked about their opinion? has their been a national referendum ? What a waste of time and resources...

I hope I'm wrong... what do you think ?


Mitchell said...

Not directly relevant, but there is a post here about the connection between political power and the ability to mint money, in the old Roman empire...

Maya M said...

To me, the important thing is - who will make the decision to switch on and off the proverbial printing press, and by what criteria?
In a country without gold standard (as all countries are today, as far as I know), it is too easy for government to dump inflation on people.
I have also a post about currency:

NOMAD said...

a new currency is a symbol of unification and existence to the world for a new state

Highlander said...

Mitchell there is always a connection between power and money :)

Maya that's what we are wondering who is making these decision? not the Libyans who put their lives on the line .... I remember your post about the currency that was quite interesting.

Nomad, there was no separation in Libya on the basis of the currency... we have lots of newly printed money still in the 'safekeeping' of the UK and which was due to be delivered when the war started, they only gave us back a small part - unless someone stole the rest in Libya and I can tell you there is a lot of money being stolen .... :(

A10Sean said...

Hi - The new currency is key to the regime change . A new central bank was formed in March '11 - prior to the regime overthrow . A new central bank could allow for a few things to happen:

1. Immediately it can be lent money to finance various efforts - obviously against the old regime which was still in place at its inception.
2. A new central bank could operate differently to the old one - which created currency and spent it into the economy . The new style central bank might operate like typical western democracies - The central bank would print money which it would then lend to the Govt - which would then spend into the economy . Note that the new way means there is a lot govt debt which did not exist previously . The new currency allows this to happen. Note that the old notes are not just being replaced - they will not longer be valid currency ! Also , the new currency is now , as of Dec '11 , tied to SDR - Special Drawing Rights - like a new global currency.