Cowen: How Would A Greek Transition Out of the Euro Go?

Tyler Cowen has some thoughts:

Forget about the macroeconomics for now, I am thinking about the sheer mechanics of it.

If Greece announced it was leaving the euro, it might declare a bank holiday.  For some number of days, no one can pull their euros out of the bank (otherwise all euros leave the Greek banking system).  The government would have to put a money stamping technology in place fairly rapidly.  Once the banks are reopened, withdrawn money gets a stamp and it is now a “Greek euro” or “drachma euro,” trading at a lower value of course.  Is there an indelible, irreversible money stamping technology and how long would it take to distribute it  to every Greek bank?  How about ripping off one corner of the bill?  That wouldn’t take long.  Would corrupt bank tellers, handing out notes but refusing to rip them, undercut such a plan?

There would be a relative windfall for those who held their wealth in the form of currency rather than bank accounts.  It is impractical to “round up” these cash balances and stamp them.

Alternatively, there are already “Greek euro notes” with the stamp on them of a Greek letter.  The Greek government could simply announce that such notes are now “drachmas.”  Would the market believe them and would the ECB have to make a counter-announcement, promising they are no longer full legal tender at par?  Par acceptance of these notes in Italy would mean massive arbitrage and also would impose further deflation on Greece.  I don’t know how many of the euros circulating in Greece are in fact stamped this way.  If most of them are, the problem of how to get out of the euro would be easier to solve.  The bank holiday could be quite short because there is already a “new currency” with a physical existence in place.  (But what would happen to a German citizen, in Germany, who held a lot of such notes after a vacation in Greece?  Would the German government make that person whole, while limiting arbitrage from Greek citizens?  Perhaps that could work, but of course Greeks would try to trade their notes to Germans.  Note that non-Greek merchants would have to scrutinize accepted notes fairly closely for a while; eventually the Greek government would sub in a currency with a more distinct appearance.)

At first prices would be posted in terms of (old) euros, then in terms of both currencies (as they do in Hungary), and sooner or later in the new currency only.  That shouldn’t be a big problem.

It’s the money stamping that is tough, or whether “Greek euro notes” are a satisfactory stand-in for the current currency of the geographical territory of Greece.  Can anyone speak to this?

There doesn’t seem to be a great answer.


Strawberry Canyon

Over the weekend I took a trip out to Berkeley to hike along Strawberry Canyon. Two quick thoughts:

1. I’m still blown away by the number of amazing hiking trails that are right in the Bay area. Quite a few of which are accessible by public transit.

2. It made me happy to learn that the Lawrence National Laboratory at Berkeley has a herd of 350 goats living on the property for the sole purpose of eating brush to help prevent wildfires. I’m not kidding. I shot a video:

They were all very busy.

Here are a few other shots from my phone:

Interesting Reads

1. From MIT, Soon We’ll Be Able to “Throw Applications Between Our Computers and Phones”

2. Better displays with quantum dots?

3. Volcano Sunset Photography

4. If you’re into this sort of thing: The First Self-Powering Nano-Device That Can Also Transmit Wireless Data

5. Arabian Unicorn Leaps Out of Near Extinction

6. Mapping Sun’s Potential to Power New York

7. The Sad Plight of the Fundamental Analyst

8. When people move to the States from abroad, where do they go?

The Mother Hips

I have to thank my brother for letting me know about the Mother Hips show at Cafe du Nord last night. The venue was great – it’s an old Swedish hall that was build over 100 years ago in Upper Market. I’ve been meaning to see the Hips for a while now, and they put on a good show, although there were definitely a few parts of the set that dragged a bit. Here’s a clip of a Stones cover I shot:

But they didn’t play my favorite song:

It Tastes Like Pine…No Wait, That One’s Grapefruitty

Sam Adams isn’t the first brewery to release single hop beers, I have to hand it to them. They got this right:

By and large, most beer is made with a hodgepodge of hops, those flowers that add aroma, bitterness and flavor.

That’s because certain hops are ideal for imparting fragrance, while other breeds are better suited for adding mouth-puckering bitterness. Matching various hops’ strengths and weaknesses helps brewers create singular flavor profiles, much the way that cooks blend spices in different ratios and proportions.

Yet lately, brewers have stopped mixing hops. Instead, they’re dosing beers with a single breed, allowing drinkers to discern each hop’s unique characteristics.

One of the best examples of this liquid lesson plan is Boston Beer’s Latitude 48 IPA Deconstructed 12-pack ($14). The brewery took the five international hop varieties used in its IPA–England’s East Kent Goldings, Germany’s Hallertau Mittelfrueh, and Washington State’s Simcoe, Zeus and Ahtanum–and gave them a solo platform.

The base beer stays the same, acting as the control that allows the distinct difference in the hops to shine through: East Kent Goldings tastes smooth and somewhat sweet, while Simcoe has plenty of pine and citrus and Ahtanum boasts a grapefruit bouquet.

That’s from Tasting Table via my Mom.