Ecuador to Adopt Digital Currency

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Economist Bill Black says Ecuador's plan is supposed to provide bank services to rural communities through mobile phones -
September 8, 14

JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this edition of the Bill Black report.

Now joining us from Bloomington, Minnesota, is Bill Black. Bill is an associate professor of economics and law at the University of Missouri-Kansas City. He's also a white-collar criminologist and a former financial regulator. And, of course, he's regular contributor to The Real News.

Thanks for being with us, Bill.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

DESVARIEUX: So, Bill, there's been talk of Ecuador coming up with a digital currency, and they just released some more details about that plan. First of all, just explain to us what exactly is a digital currency and how would that work.

BLACK: Well, there isn't an exact definition of digital currency, because there are multiple ways to do it. But here's the background. In 1999, there was a terrible banking crisis in Ecuador in which basically the large banks collapsed and there was a nightmare. And one of the ways that the government back then responded to the crisis was by adopting the U.S. dollar as the currency of Ecuador. So they didn't just peg their currency; they actually have the U.S. dollar as their currency. And that means there are literally planeloads of cash that fly back and forth between the United States and Ecuador to bring money in and to bring old bills back for destruction. And this is treated by the public in Ecuador as being a wonderful thing because what before was so bad. So, politically it's impossible to go back to having a sovereign currency.

And that has a lot of problems in economics, because if you don't have your own currency, you basically lose a lot of sovereign powers. The president of Ecuador, Correa, Rafael Correa, is very good academic economist who eventually became president of his nation. So he knows all about the weaknesses of not having a sovereign currency, but also knows that politically it's impossible to get rid of it.

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