Local currency

The sardex: in the FT (September 19, 2015)

What is the superiority over the Euro? In my view, the critical feature is the local monitoring of the credit. The authors emphasize the personal relations in setting the network. There authors state that the problem of defaults is minor and that they rely on courts only as a last resort. Practically, that means that human relations are more efficient in enforcing credit than "anonymous" banks. Since the Sardex is used only for local transactions, people may also consider a default on the credit balance as an act of disloyalty against the local community. It would be interesting to know more about cases of defaults. Also, the organizers can increase the total credit to the local economy and run a local monetary policy. There is probably an optimal size for such a local currency: more members mean more trading possibilities (externality), but possibly less credit monitoring and enforcement.



  • "Europe requires Euro-bonds," Voxeu, January 10, 2012. [The text draws on historical lessons. It does not advocate the immediate introduction of euro-bonds].