AH Challenge: Subnational currencies for the United States...

[Chris S]

So from my "Personal opt-outs for integration (UK and Europe and elsewhere)...." thread in Chat I discovered (and posted) the interesting tidbit of info which suggest that the United States itself is not an optimal currency area (i.e. "a geographical region in which it would maximize economic efficiency to have the entire region share a single currency").

In fact when Michael Kouparitsas did a study on it and published the results in a 2001 paper he found that out of the eight regions into which the Bureau of Economic Analysis (BEA) divides the USA about five of them (New England, the Mideast, Great Lakes, Rocky Mountains and Far West) were core regions "that have similar sources of disturbances and responses to disturbance" and the remaining three regions (Southwest, Southeast and Plains) were non-core regions that differed greatly from the core regions. I mapped it out in that thread of mine in chat and I've linked the map image below. Basically it would seem that only the areas in green on the map constitute an optimal currency area (I've coloured the other 3 regions separately since they don't necessarily constitute an optimal currency area combined. Note that the BEA's regional boundaries are coloured red).

So the challenge is to get these three regions (basically the Greater South and the Plains states) to be given their own subnational currency or currencies by the present day. The POD could be any time, but since the optimal currency area theory hadn't arisen until the 1950s/1960s I can't imagine any POD being derived from an earlier attempt at optimal currency area study of the United States allowing for subnational currencies before that time. Of course if it is easier a POD could be done from before 1900 and it would just so happen that a subnational currency or currencies would only remain in use in those areas whilst the rest used the standard United States dollar. If US territories also end up with their own currencies it would be a bonus.

 

[MAlexMatt]

kill the bank kill the bank kill the bank kill the bank

Sorry, it's my personal buggaboo.

More seriously, a survival of free entry banking in the United States, or somehow implementing actual free banking, would accomplish this AH challenge almost exactly. One of the big things that led to the death of free entry banking in the US was the chronic instability of the US banking system. One way to somewhat stabilize the US banking system would be to keep states from outlawing branch banking: One of the major reasons US banks were so unstable in the 19th century in comparison to banks elsewhere was the prevalence of under-capitalized, over-exposed unit banks with only a single branch.

To make things even better, find some way to get national branch banking allowed. The Canadian system allowed national branch banking by the end of the 19th century and was greatly more stable than the American one (at the onset of the Great Depression, more than 10,000 American banks failed from 1929-1932. Not a single Canadian bank failed).

EDIT: Or even just have the regional Federal Reserve Banks be given the right to issue their own, unique brand of bank notes.

 

[Jape]

EDIT: Or even just have the regional Federal Reserve Banks be given the right to issue their own, unique brand of bank notes.

Does this mean bus drivers and bar staff all over America will inspecting and umming over regional notes.

Personally I've seen many a business in England grind to a short halt as the staff gather to squint at Scottish pound notes. While the less said about Northern Ireland's monopoly money the better. I can see a New York taxi driver looking in confusion as he's paid in wierd purple Utah dollars

 

[mowque]

In my TL, I'm working with this, but money handing out by corporations (so like scrip) instead of state confederations like you are planning. Interesting idea though.

 

[MAlexMatt]

Does this mean bus drivers and bar staff all over America will inspecting and umming over regional notes.

Personally I've seen many a business in England grind to a short halt as the staff gather to squint at Scottish pound notes. While the less said about Northern Ireland's monopoly money the better. I can see a New York taxi driver looking in confusion as he's paid in wierd purple Utah dollars

In periods with a panoply of private notes IOTL people quickly adapted to their presence. In times when carrying a large number of notes long distances was expensive, and when unit banking laws prevented individual banks from having enough branches over the currency area they served, some notes traded at discount in certain areas. Magazines popped up with listings of each note's worth from week to week, and people learned how to recognize each note's distinguishing marks.

Now, in a post-1860 setting that wouldn't be necessary (lower inter-regional transportation costs, no unit banking laws, wide familiarity with popular brands/regional Federal Reserve markings), but the quick adaptation to multiple currencies should be no issue.

 

[Chris S]

Does this mean bus drivers and bar staff all over America will inspecting and umming over regional notes.

Personally I've seen many a business in England grind to a short halt as the staff gather to squint at Scottish pound notes. While the less said about Northern Ireland's monopoly money the better. I can see a New York taxi driver looking in confusion as he's paid in wierd purple Utah dollars

Well you aren't supposed to use Scottish notes in England and there wouldn't be any Utah dollars for this challenge unless posters went to extremes. At most there would be a Southeast Dollar, a Southwest Dollar and Plains Dollar (or whatever other terms other than "dollar" they might use) which would only be legal and acceptable in their respective jurisdictions. At the very least there would be a Southern and Plains dollar for all 3 regions alongside the US dollar or maybe two currencies; a Southern dollar and a Plains dollar. If they are made in colours other than green they should be fairly easily and instantly recognizable and bus and bar staff in say New York or LA would just throw them back at whoever attempted to use them there.

 

[JimTheB]

I could see the Plains currency being called the Bushel and the SW one the Barrel.

 

[Chris S]

kill the bank kill the bank kill the bank kill the bank

Sorry, it's my personal buggaboo.

More seriously, a survival of free entry banking in the United States, or somehow implementing actual free banking, would accomplish this AH challenge almost exactly. One of the big things that led to the death of free entry banking in the US was the chronic instability of the US banking system. One way to somewhat stabilize the US banking system would be to keep states from outlawing branch banking: One of the major reasons US banks were so unstable in the 19th century in comparison to banks elsewhere was the prevalence of under-capitalized, over-exposed unit banks with only a single branch.

To make things even better, find some way to get national branch banking allowed. The Canadian system allowed national branch banking by the end of the 19th century and was greatly more stable than the American one (at the onset of the Great Depression, more than 10,000 American banks failed from 1929-1932. Not a single Canadian bank failed).

EDIT: Or even just have the regional Federal Reserve Banks be given the right to issue their own, unique brand of bank notes.

Initially I thought it would be a problem to get this challenge accomplished in the post-Civil War era when central banking was renewed and currency printing became centralized, but then I stumbled across this site:

http://montreal-universal.com/index.php?id=2032&cat=922&query=&page=0

It contains images of scrip from 1872 (so after the Civil War and the centralization of currency) for South Carolina:

http://montreal-universal.com/image...st-Civil-War-5-Dollars-Notes-PS3318-1872-.jpg

http://montreal-universal.com/image...pg?PHPSESSID=634bdbb43a27f95c881b3b2b82387fdc

http://montreal-universal.com/image...-Civil-War-50-Dollars-Notes-PS-3326-1872-.jpg

And remembered that California printed IOUs back in 2009: http://www.realclearmarkets.com/art...a_begins_printing_its_own_currency_97293.html , http://www.mymoneyblog.com/how-to-redeem-california-iou.html, http://louminatti.blogspot.com/2009/08/registered-warrant.html


So it should still be possible to move from there to some kind of regional currency (perhaps the various scrips become consolidated into a southern United States Dollar, backed by the central bank but printed by the various commercial banks?). Perhaps as part of the Reconstruction process? Maybe in an attempt to get the South to pay more for it's own reconstruction? Or maybe as a result of the Civil War and centralized banking we get nationalized branch banking and thus the states allow branch banking? Then with all the various US banknotes floating around (United States Notes, Gold Certificates, National Bank Notes and later Silver Certificates (1878) and Federal Reserve Bank Notes (1915) and Federal Reserve Notes (1914) between the Civil War and the Depression we might get Federally printed regional currencies as well.

Perhaps a Great Depression POD could work as well? A number of those banknotes disappeared after the Depression, so perhaps in order to battle the Great Depression the government could institute some regional currencies to stimulate local economic recovery?


I was wondering if any regional currencies would incorporate features of the old Confederate currency (see here and here) but then after a while some of the images would become politically incorrect (even though similar images were shown on one of the South Carolina scrips of 1872 for instance (the $50 scrip from the third link of the montreal website that I gave above)

EDIT: Interestingly, some of the states which have recently had proposals voiced in their legislatures for them to print their own money are states which Kouparitsas found doesn't fit into the optimal currency area: South Carolina (here and here), Georgia and Virginia, North Carolina, but there was also one proposal in Utah and a bunch of other states which are in the OCA