On Money | GwI

Written by Noelle Adams

Monday, 21 June 2010 04:23 - Last Updated Monday, 21 June 2010 04:49

The United States would be mistaken to take for granted the dollar's place as the world's
predominant reserve currency. Looking forward, there will increasingly be other options to the
dollar.
—World Bank President Robert Zoellick

In June of last year, the small country of O, known (if at all) for producing two world chess
champions, took the extreme measure of converting its beleaguered currency, the farrut, to the
US dollar. Having suffered from hyperinflation for the past decade, the so-called dollarization
program was an attempt at stabilizing a frail economy. A handful of small nations, including
Ecuador and the Virgin Islands, have successfully used the US dollar instead of their own
currency.

On June 26th the farrut became officially null and void as legal tender in O, and the dollar, which
had been introduced gradually into circulation over the previous months, became the only
recognized currency in the country. Farruts could be exchanged at the Bancu Centrale at the
rate of 127,000 farruts to the dollar, up until July 3rd.

As is widely known, on July 5th the United States government defaulted on its loans. Overnight
the dollar became all but worthless. While world economic markets reeled, O's Finance Minster,
fighting to save the economic pulse of his small republic, sold state industries to the highest
bidder; he used the resulting cash to establish the euro as the country's new currency. As a
result, the European bank-cum-corporation Santander owned 80% of O's industries.

Over the next several months this proved a disaster. The entire globe was scrambling for euros,
and O, by asking for payment in euros, had simply priced itself out of the world market. Its
export-driven economy was at a standstill. Santander itself, refusing to throw good money after
bad, sliced its ownership of Oian industries into tranches and bundled them into internationally
diversified securities, which it then sold, mostly to Eastern European subsidiaries and Asian
conglomerates, so that ultimately it was not clear who owned the floundering Oian
manufacturing sector, nor its postal service. It was indisputable, however, that there would be
no cash infusion to keep O's factories in business, and without it the country was facing
wide-scale unemployment.

The only out was to lower the cost of labor. The finance minister convened his board of advisors
and together the group decided on the unconventional move of converting the currency once
again, this time to the British pound sterling, which had recently undergone a devaluation due to
Britain's quixotic attempts to bolster US financial markets.

No sooner was the proposal announced than an activist group, People for Easy Money, staged
a protest. Carrying signs that read "Money Should Be Easy" and "Money Should Make Cents"
the group declared that the pound, with its subdivisions of shillings and pence, was too
confusing. "No one knows how many shillings are in a pound or how many pence are in a
shilling, and no one wants to know," the spokesperson Bendra Letru declared. An overnight poll
found People for Easy Money to have an 87% approval rating.

The finance minister appeared on television the next evening to explain the pound had long ago
been decimalized and shillings and guineas would not be in circulation. A quiet man with a PhD

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On Money | GwI

Written by Noelle Adams

Monday, 21 June 2010 04:23 - Last Updated Monday, 21 June 2010 04:49

in mathematics and another in economics, the minister sweated copiously under the camera
lights. For the first time in his life, he stuttered, over the word shilling, disproving any notion that
it is impossible to stutter over the sound "sh."

He did not win over the hearts of the skeptical public. At the president's request, the finance
minister dropped the idea of making the pound O's new currency.

Meeting late into the night, the board of economic advisors settled on the Chinese yuan as the
ideal currency for O. The conversion was finalized on October 15th.

On October 18th the Chinese Communist Party began its conversion of all yuans to rupees.

Not sure whether or not O's new currency, the now obsolete yuan, had any value at all on
international monetary exchanges, the finance minister put his head in his hands and wept. At
this point his board of advisors began a heated debate on what became known as the Yap
option.

On the small pacific island of Yap, stones of all shapes and sizes are used as money—the
larger the stone, the more it is worth. One board member had learned this as a teenager, when
visiting the Smithsonian Institution in Washington DC. In the basement of the Museum of
Natural History stood an enormous piece of Yapese money, five feet tall and four feet wide. This
board member suggested that Oians give up on any other kind of currency, and simply use the
country's stones as money.

A second board member pointed out that the country's limestone had been quarried long ago, to
build the very building they were sitting in and all the others like it, and what was left over went
to make the country's characteristic chess pieces. There were no stones left in O.

It was suggested they try anyway. Could they not pick another substance, such as quartz, or
even bamboo, which could be readily grown and cut into small pieces that would serve as
currency?

It was suggested that the previous member of the board was a pinhead, did he not know that
quartz was not among O's natural resources, and that if bamboo, which anyone could grow in
his or her backyard, was made the country's currency, O would be facing hyperinflation again.

It was countered there was no need to throw around insults, members of board were merely
brainstorming, or thinking out loud.

It was suggested a government building could be torn down and cut into pieces to provide the
limestone necessary to convert to a limestone currency.

This proposal was seconded by two other board members.

It was countered that this was the most pinheaded idea of them all, which statement raised a
small cheer and cynical laughter from one side of the table.

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Written by Noelle Adams

Monday, 21 June 2010 04:23 - Last Updated Monday, 21 June 2010 04:49

While the discussion degenerated around him, the finance minister lifted his head from his
hands and stood up. Closing up his briefcase, he left the room without a word. His subordinates
were too busy arguing with each other to notice.

In a daze, his feet followed their habitual path to the place he frequented when in need of either
solace or modest celebratory indulgence: The Ground Hog coffee shop across the street from
the Treasury Department.
He ordered an espressi cortadu and pulled a small, crumpled wad of yuans out of his pocket to
pay. The barista shook his head.

"One pawn," he said.

"Pardon me?" the minister responded.

To illustrate, the barista produced a box from under the counter and pulled out a small chess
piece. The box was filled with a jumble of figures, all made of the characteristic ochre and pink
of O's limestone, in various styles and sizes, obviously culled from many different chess sets.

"One pawn," he repeated. "If you only have a knight or a rook I can make change."

Realizing that even as the board members argued themselves blue, his compatriots had already
found a solution the problem, the minister pumped a triumphant fist in the air.

"The invisible hand will solve all problems!" he shouted at the barista. Forgetting his coffee, the
minister instead went straight home and made love to his wife for the first time in a month.

The next morning, he called a press conference and declared the country's characteristic chess
pieces, carved from pink and ochre limestone, to be the new currency. He issued an official
government currency chart and warned against accepting foreign-made chess pieces,
especially plastic ones. The infiltration of such substitutes, he admonished, would inflate the
country's currency and land O back in the same boat that had started this mess.

For a time all was well. The months of fluctuating currency and the world-market imposed
moratorium on exports had lead to a spontaneous overhaul of the national economy. Farmers,
who had exclusively grown wheat for export, had diversified their crops; cottage industries in
clothing, paper, and kitchen gadgets had sprung up; mechanics and repair men had become
adept at fixing the simplest and most complex machines with the limited parts available to them.
People had taken to riding bicycles and even horses in lieu of getting around with inaccessible
foreign oil. In short, O had become a modern utopia, with a self-sustaining local economy that
neither grew nor shrank, but allowed for a comfortable, self-fulfilling way of life for all of the
nation's citizens. Meanwhile the country's carbon footprint was approaching zero.

The chess-piece currency merely cemented the closed loop of this new way of life. The humble
pawn became a symbol of national pride, while the finance minister himself became a national
hero. Although he maintained that he had done nothing that the citizens of O did not do for
themselves, speaking invitations poured in from universities, farmers' unions and bridge clubs.
He was even asked to host the Christmas TV Special and in the process became good friends
with the celebrity host Giorgita Chista and the pop-singer Amorosu. Plans were drawn up to

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Written by Noelle Adams

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erect his statue in Independence Plaza.

The rest of the world was too busy panicking over its own economic woes to notice the radical
changes O had embraced. Too busy, that is, until The Economist magazine ran a cover article
on "the little country that could." At first the attention was flattering. The president and the
finance minister were invited to address the UN general assembly and the World Committee on
Global Warming (WCGW).

Even as the first wave of eco-tourists arrived in O, the WCGW proposed the next climate
change summit be held in O. The president readily accepted. Planning and preparations began.
Meanwhile, the increasing number of visitors to the country found they had no limestone chess
pieces of their own, so offered their national currencies to buy coffee and pay their
bed-and-breakfast bills. With little other choice, Oians accepted the foreign money, at times
giving rooks and pawns as change. Soon a black market in foreign exchange sprang up.

In an emergency session, Congress passed the Currency Protection Act, requiring all foreigners
to exchange any chess pieces they had acquired during their stay back to their own currency
when they left the country. But the tourists did not wish to give up their chess pieces. They
preferred to take them home as souvenirs of their trip. One by one, queens, bishops, knights
and pawns were smuggled from the country.  The Oians themselves drew up elaborate foreign
exchange charts, which they carried in their pockets and referred to throughout the day as they
negotiated the Babel of currency that had infiltrated their utopia. Soon enough, not a single
chess piece could be found in O.

Noelle Adams has worked as a journalist in Buenos Aires and Mexico City. She now lives in
Seattle.

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