This.
https://www.youtube.com/watch?v=wWgC6xaVjcU
Moderators: Elvis, DrVolin, Jeff
by Elvis » Fri Feb 14, 2020 8:18 pm
by JackRiddler » Sun May 24, 2020 8:53 am
On 22-24 November 2019, International Seminar on Land, Finance, and De-dollarization was held in Macau, China, which was co-organized by Global University for Sustainability, Lingnan University, Southwest University, and the Federal University of Espirito Santo.
by Elvis » Sun May 24, 2020 9:55 pm
by Elvis » Thu Jun 04, 2020 6:03 pm
by Elvis » Thu Jun 04, 2020 7:41 pm
by JackRiddler » Sat Jun 06, 2020 11:22 pm
Confronting Monetary Imperialism in Francophone Africa with Ndongo Samba Sylla
Posted Mar 15, 2019 by Scott Ferguson, Maxximilian Seijo, and William Saas
https://mronline.org/2019/03/15/confron ... #gsc.tab=0
[...]
Ndongo Samba Sylla (@nssylla) is a Senegalese development economist and Research and Programme manager at the West Africa office of the Rosa Luxemburg Foundation. Sylla is also the author of many articles and three books, including the recently published L’Arme Invisible de la Francafrique, or “The Invisible Weapon of Franco-African Imperialism.” In that book, Sylla and coauthor Fanny Pigeaud lay out a comprehensive case against the CFA Franc, a neocolonial currency union that presently constrains the social, political, and economic prospects of each of its member states.
[...]
Sylla: Yeah. The CFA Franc is … a currency born during the colonial period. Now it is the acronym for two different currencies. The first is the Franc of the African Financial Community, this is the currency of eight countries, members of the West African Economic and Monetary Union. And there is another CFA Franc, it’s the Franc of the Financial Corporation of Central Africa, for the six countries belonging to the Central African Economic and Monetary Community. So we have two CFA Francs, but at the beginning there was just one CFA Franc. And the beginning was in 1945, that is just after the Second World War. And at that time, the acronym meant ‘Franc of the French Colonies in Africa’. So it was clear that this was a colonial currency, which was circulating in sub-Saharan colonies of France. The currency was created, officially, on December 26, 1945, by the General de Gaulle and his Finance Minister.
30 Minute Mark
Sylla: [It was clear that this was a colonial currency] which was circulating in the sub-Saharan colonies of France. The currency was created officially on December 26, 1945, by General de Gaulle and his finance minister. And the currency was created the same day that France ratified the Bretton Woods agreement; the same day also that the new parity of the French franc was declared to the IMF (which was just born).
The CFA Franc was created in a context where the French economy had been destroyed during the war, and there was not enough foreign exchange reserves. There was high inflation, many shortages, et cetera. And so, the decision at that time was whether we should have a devaluation of the French franc, which would be homogenous throughout the empire. Because at that time, there was just one currency circulating in more or less the whole empire, except, for example, in India and Indochina. It was the French franc which was circulating in the empire, and of course the bank notes were more or less differentiated from one place to another. But it was basically the French franc. And as the French economy was in a more precarious state, the technicians of the ministry of finance in France said “it would be better that we devalue the French franc.” And that decision implied that the new currencies be created. And the CFA franc was created in that context.
That means it has been created with a devaluation of the French franc. And the devaluation of the French franc has abolished what was called “monetary unity”—that is, one currency circulating in the whole empire. So, the CFA Franc is … a devalued French franc. But what is interesting is that when the CFA Franc was created, it had an external value higher than the French franc, because one CFA Franc was exchanged with 1.70 French franc. And in 1984, there was a devaluation of the French franc, which was not followed in the colonies. And as a result of that, one CFA Franc was worth 2 French francs. That means that the CFA Franc was born overvalued, because in the British colonies, their currencies had parity, which was obviously weaker than the British pound. But France decided to keep the CFA Franc at an exaggerated external value, because it was in interest for France to break up the ties that the African colonies had nurtured during the war with the other parts of the world—for example, Latin America and Asia.
During the war, the trade between France and its colonies had decreased a lot, and France wanted to regain control of that trade. And so, it was interesting for France to have colonies with overvalued currencies. As a result of this overvaluation, the colonies could no longer sell competitive products in Asia and Latin America, so they were obliged to sell it to France. And at the same time as their currency was overvalued, they could buy, cheaply, goods from France. So it was very profitable for France to have colonies with overvalued exchange rates. What was also profitable for France is that the French franc was, at that time, a very weak currency. And the Bretton Woods regime was a regime with U.S. dollar hegemony. And goods had to be bought in U.S. dollars. But with the CFA Franc, France could buy all the raw materials, all the products, in its colonies without using U.S. dollars, because France could just credit the amount of exports of the colonies in the French franc. And that’s what France did. This was really important for France, as it contributed to strengthen, a little bit, the French franc exchange rate. Because if France had to earn dollars to buy its imports in Africa, it could have been very disruptive for the French economy, which was really in a mess just after the second World War. The creation of the CFA Franc was also a means for France to have total control on its colonies, because all the decisions—economic, financial, and political—were taken from France.
Seijo: So you’ve just explained the historical creation of the CFA Franc, and how it shaped African political economics. Could you talk about what the current status of the CFA Franc is, and how it’s related to the Euro currency zone?
Sylla: Before answering that question, I’ll give some context about why the CFA Franc still exists. Because after the creation of the CFA Franc, there was some political concessions from France, which allowed the colonies more autonomy and which recognized some rights—labor rights, etc. This process has led to decolonization. But what is particular in the case of France is that other monetary blocks—because in Africa you had many monetary blocks: you had the sterling area; you had the peseta zone; you had the Belgian monetary zone; the dollar zone —and all those monetary blocks were dismantled after formal decolonization.
But this did not happen with France. Because when France knew that the decolonization was something inevitable, France said to African leaders—because most of the Francophone leaders were trained in France; sometimes they even had seats in the French parliament; and those elites would afterwards rule the newly independent African countries. And France told those leaders: I will grant you independence, provided you sign what was called “cooperation agreements”—that means agreements giving France monopoly rights in many areas, for example: raw materials, currency diplomacy, armed forces, higher education, civil aviation. In all those domains, there were cooperation agreements. And this was something very clear: the prime minister of France at that time wrote to the Prime minister of Gabon at that time, telling him that we will grant you independence but you have to sign those agreements. Without the signing of those agreements, no independence. And it was clearly written. As a matter of fact, all those countries would more or less stay in the safer zone. You could see even in the case of a country like Gabon the cooperation agreements were signed the day of its official independence. So that means that in Francophone Africa, there was not really a full decolonization, but only a partial decolonization. So this is the context which explains why the CFA Franc survived the wave of formal independences in Africa.
Ferguson: This history, it seems to me, is illuminating in a way that we often don’t hear when we hear about the story of decolonization. We hear narratives about various formerly colonized peoples winning or receiving or agreeing to take up their own political autonomy or their political capacity, but they remain economically dependent. And usually, my sense of the way that that conventional narrative is told, even if it’s on the side of decolonialization, it takes money for granted—sort of treats money as a commodity, and doesn’t really open up a question of how money is really the central question and problem when it comes to the process of decolonialization. Is that your sense? Do you have a sense that putting money at the center of the story brings new light to this history?
Sylla: Yeah, and I must say that I have learned a lot, and [began] seeing things differently, when I started to work on the CFA Franc. I had the more or less conventional view about the process of decolonization, but when you factor in the money aspect, you see why you could not really talk of real decolonization without taking into account whether the money management was decolonized or not. And clearly, in the case of the CFA Franc, one of the most important aspects for France was to have the CFA Franc zone maintained. And you could see many statements from ministers, from MPs, saying that it’s important that African countries remain in the CFA zone. Because if they remain in the CFA zone, it is as if those African countries were an administrative department of France. Because as France could buy all African products, just by credit—so it is a very critical thing for them, very critical, because they could buy everything just by crediting it in their own currency in the operations account. And that means that what is called the exorbitant privilege for the U.S. dollar is somehow what France enjoys in its former colonies through the maintaining of the CFA Franc. Because France has an exorbitant privilege. But now this has declined with the arrival of the Euro. But nonetheless, it has been a very important exorbitant privilege. And I think that, without this arrangement, it would have been really tough for France to rebuild its economy and also be a major economic power.
Seijo: So can you talk a little bit about how the CFA Franc is operating in the Euro context?
Sylla: In fact, the CFA Franc mechanisms have not changed since colonial times. They are really simple; they are based on four principles. The first principle is the fixed parity against the French currency. Which was the French franc before, and now the Euro. That means the peg is always there, it’s the same peg and it normally should not be devalued. The second principle is the freedom to transfer capital and incomes within the Franc zone. The Franc zone gathers the 14 countries using the CFA Franc, and also the Comoros and France. The Comoros have a so-called national currency, but it functions in the same way as the CFA Franc. It’s just the parity that is different; otherwise it’s more or less the same working principles. The third principle is that the French Treasury promises to guarantee the convertibility of the CFA Franc into French currency. And this convertibility guarantee means that the French Treasury promises to lend foreign reserves, Euros, to the two central banks–the one in West Africa, the other in Central Africa–if they no longer have any foreign exchange reserves. That is the promise of lending money. It is as if the French Treasury was acting like a private IMF for the African Central Banks. [A] private IMF to say that if they have … [a] shortage in foreign reserves, [the] French will be there to lend them money so that the fixed peg is maintained, so that the free transfer of capital in incomes will not be impeded. What has to be said is that France has seldom performed that role of lending money in times of crisis.
The fourth principle is that, as a result of this convertibility guarantee by the French Treasury, the central banks, the central banks are required to deposit in a special account of the French Treasury fifty percent of their foreign exchange reserves. After independence, this was one hundred percent. This has been lowered to sixty five percent in 1973. And since 2005, it’s fifty percent. So, those foreign exchange reserves are deposited at the French Treasury as a counterpart to the guarantee of convertibility. And this is something you would never see anywhere else than the CFA Franc. All of these mechanisms date back to the colonial period. And they are still functioning like they functioned in the colonial period. The French authorities are represented in the bodies of both … central banks and they have veto power. That means that no monetary policy decisions, including the decision to devalue the CFA Franc, can be taken without the approval of the French government.
People don’t know also that the CFA Franc is a currency unknown in international markets. Every time a CFA Franc is exchanged against the Euro this has to pass through the French Treasury. That means that the French Treasury is de facto the foreign exchange office of African countries because the CFA Franc is unknown in international markets. Everytime there is a conversion it is through the French Treasury. I have to add that the bank notes, the coins are still produced in France without any international call for tenders. And the stock of gold of the central bank of West African states is at 90% held by the Bank of France.
All these elements show that the CFA is a colonial monetary arrangement. It’s workings have not changed with formal decolonization. It is interesting to say that [in] the first report about the Franc Zone published in 1953, it was clearly indicated that the CFA Franc is technically similar to the French franc. In fact, the CFA Franc is a sub-multiple of the French franc because there is a total integration between the monetary space in the franc zone countries and the monetary space of France. So, it’s the same money. The sole difference is that, for the CFA Franc countries, you have different bank notes; but it’s more or less the same.
Now with the era of the Euro, you could say that the CFA Franc is the sub-multiple of the Euro. What has really changed with the arrival of the Euro is that the governance of the CFA Franc now includes the European Union authorities [Council of the EU, European Central Bank, Economic and Financial Committee]. Because when the French knew that the French franc would disappear and [cede] it’s place to the Euro, they negotiated with their European Union … partners and they [said] they want to peg the CFA Franc with the Euro. They had to negotiate that with their partners because there were some critical voices, for example Germany and Austria, which [said] that, normally, if France want[s] to peg the currency of its former colonies, it’s the European Union who will be sovereign. There will be no place for France to [have a] say. What happened is that France was efficient enough to convince the European Union authorities [of] the fact that guaranteeing the convertibility of the CFA Franc is not a danger to [the] French public budget and so to European Union stability. They made a compromise on that basis.
The compromise was that now France [had] to have the consent of European Union authorities if the membership of the CFA Zone is to be enlarged. Also, exchanges have to be brought to the French convertibility guarantee. In the same way, France should give the European Union authorities prior information in the case that the CFA Franc parity is planned to be modified. For example, if a devaluation is planned France has to inform first the European Union authorities. These dynamics mean that now the CFA Franc is under the tutelage of both France and the European Union authorities. So, this is a change brought by the arrival of the Euro.
The second change …. has, let’s say, an economic nature. By pegging the CFA Franc to the Euro, now the African countries and their central banks are more or less submitted to the same restrictive rules in terms of inflation, public debt and public deficit[s]. The mandate of our central banks is to have price stability and they target a rate of inflation below three percent. This kind of setting tends to lead to deflationary outcomes, which are bad for the long-term growth of African countries. The other thing is that African countries receive their export income in dollars, whereas their currency is pegged to the Euro, which has often appreciated a lot vis-a-vis the dollar. For example, between 2002 and 2008, the Euro has appreciated a lot vis-a-vis the dollar–more than ninety percent cumulatively. At that time, many agricultural producers were bankrupted because of just one factor: the Euro was so strong. So, the arrival of the Euro means less export competitiveness for African countries. This is a serious handicap for structural transformation and also the capacity to record trade surpluses.
Ferguson: In the way that you tell the story of the rise and evolution of what is essentially a colonial project, the CFA Franc, it seem that it begins with a clear, somewhat clear, chartalist intention and consciousness. But by the time we get to the later twentieth century and the Eurozone, it seems like the chartalist insights, as evil as they were put to use, are really lost. And my sense is that this happens in the way that both the Eurozone and, of course, the CFA Franc really provide little place for fiscal capacity in any of the European economies or the Francophone African economies. Is that fair to say?
Sylla: Yes, that’s true. Because we are no longer in the same type of international mindset. From 1945 to 1980 more or less, there was the idea that economic development should be encouraged using heterodox policies. And so there was an active role for central banks and an active role for states. But since then the mindset has changed. Now, monetary policies are too orthodox, at least for developing countries like those of the CFA zone. The budgetary policy, fiscal policies are too orthodox. African countries are trying to follow the dictates of France, the IMF, and also the European Union. You don’t have to have budget deficits. You don’t have to borrow money passed some given level, etc. And so, it has become difficult for many countries. At that time, as you say, there was this chartalist perspective by France on African countries. But with the integration of France in the European Union this chartalist perspective has disappeared. Because now France had no longer the same margins to create money to, let’s say, buy African products. France is no longer sovereign monetarily and you could see that with the relationships with the African countries, which are blindly following the crazy Eurozone model.
Ferguson: We’ve been talking at a theoretical level for a while and I was wondering if you could give our listeners a real contemporary example of the disaster that the CFA Franc for people in communities, whether it’s in Senegal or elsewhere.
60 Minute Mark
Sylla: You just take a look at the long term growth rates. For example, if you take the real GDP per capita of the most important economies in the Franc zone, you’ll see that today it is lower than 40 years ago. Take the case Côte d’Ivoire. In 2016, its real GDP per capita was 1/3 lower than it was in 1978, which was its best year. The annual growth rate of real GDP per capita for Côte d’Ivoire, between 1960 and 2016, is more or less 0.5%. In my own country, Senegal, during the same period, annual rate of growth for real GDP per capita is 0.02%. That means there has been no long term growth at all.
Nowadays, you will hear people say that the CFA Franc countries today have a high rate of economic growth. And that’s true; since 2012 there has been a 6% rate of economic growth. But this is a kind of economic growth which is catching up with the past best levels of economic performance. Out of the whole 14 CFA Franc countries, 9 of them are ranked as less developed countries, and four of the remaining five have a real GDP per capita lower than they had in the 1970s and 1980s.
What’s also interesting is that you could not explain why this CFA zone still exists. Because you’ll see that trade between African countries and the Franc zone is very limited. In Central Africa, it’s less than 5%. After 70 years of so-called monetary integration, they have just much less than 5% of original trade. If you take the case of West Africa, it’s better but nonetheless not very important. Between 10-15%. If you take also the level of competitiveness of African countries of the Franc zone they fare the worst in the world. In w Africa, except Côte d’Ivoire all the remaining countries and chronically in a state of trade deficit. Countries like Benin, Niger, Mali, Burkina Faso, they never recorded one year of trade surplus. They are structurally in a situation where they have to be indebted in foreign currencies. They will never be able to develop because the mechanism of the CFA Franc will never allow them to be developed. On the one hand, as I said earlier if you want to produce you have to create money, but in the CFA Franc Zone the central banks are more or less forbidden to facilitate money creation. The reasoning of the French authorities for this is very simple. They say that more bank credits means more imports. More imports mean less exchanged reserves. And less exchanged reserves imply more pressure to defend the fixed peg to the euro. So at a macroeconomic level there is this rationing of credit. And there are some crazy indicators that show that the CFA Franc exchange rate is more or less functioning like a currency board. That means that the monetary base of CBs is covered nearly at 100% by foreign reserves. In this context there is not enough credit to stimulate production. And those who happen to produce in order to sell abroad cannot be competitive because the currency is too strong because it is pegged to the Euro.
So on the one hand, there is no credit for production. And when you are able to produce you cannot sell abroad because you have a strong currency. Because you have no monetary sovereignty. So this is the case of the CFA Franc zone and that’s why there is no economic dynamism at all. Economic growth in the CFA Franc zone is never triggered by internal dynamics, but just by external dynamics. For example, good terms of trade and cheaper interest rates, … on international financial markets. So this is the sad story of the CFA Franc. Somehow owing to these mechanisms when there are economic crises it’s much more difficult for CFA Franc countries than others because the exchange rate cannot be used as a policy variable. As they follow the neoliberal rules, so public deficits are not really encouraged and the central banks generally in those circumstances follow an orthodox monetary policy, and that means that whenever there are economic crises, the main way of adjusting economically is what is called internal devaluation. That means lowering internal prices and limiting public deficits and letting the private sector enterprises go bankrupt. That is the main mechanism of adjustment in the CFA Franc.
Siejo: So, given those harms, how has the CFA Franc been challenged by African people and governments, in the past and now?
Sylla: There have been many attempts to challenge the CFA Franc, at least there have been four periods. The first took place just after the independences. Guinea was the first [Sub Saharan African] country to challenge the CFA Franc. Guinea took their independence in 1958. Two years after, they had their own national currency and left the CFA Franc. But France did not accept that, and in retaliation the French secret services flooded the Guinean economy with counterfeit bank notes. Through a large scale military operation called Operation Persil. This operation is described in books and especially by the people who performed it. And obviously those counterfeit banknotes disrupted the Guinean economy, and this was a warning from France saying that if you want to get rid of the CFA Franc reflect twice because we will sabotage your economy.
Another example is Togo in the early 60s. They had a political leader named Sylvanus Olympio, who had been trained at the London School of Economics. He wanted a national currency and to diversify Togo’s international relationships, namely with American, German, etc. But he had never been able to create his national currency because he was killed days before its launch, in front of the American embassy in 1963. Togo and Guinea were the first two countries to challenge France, but more or less they have failed. Togo has failed and Guinea has exited, but its economy never recovered.
There were also attempts to challenge France in the mid 1970s. In that period, there was some turmoil following the suspension of the Dollar-gold convertibility. Africans were angry to see that France had devalued its currency without warning them. This devaluation of the French Franc was followed as a result of the fixed peg by the African countries using the CFA Franc. This has increased inflation, the debt burden, and also had reduced the value of their foreign exchange reserves. Because at that time, all the foreign exchange reserves were held at 100% in French Franc, so Africans were not happy about that. France responded with some minor concessions. Since then, France allowed African countries to reduce their monetary deposit rate to 65% and accepted that the CBs now be managed by African staff. Until the mid 70s, the CBs managers were in Paris. But as I said earlier, France is still represented and has a veto power.
There was a third wave of challenges in 1994, when the CFA Franc was devalued for the first time in its history. This was a shock for many African leaders who opposed the devaluation, but it was nevertheless enforced by France and the IMF. When France decided that there would be a devaluation, this produced inflation, impoverished urban dwellers and led to riots in which many people were killed in the days that followed. Those protests were not against the CFA Franc in particular, but were an immediate response to the devaluation.
And now there is this current wave of protest that started in 2015/2016, and what’s interesting about this wave is it’s more popular and more Pan Africanist. For the first time, everyone is talking about the CFA Franc. Recently, Italian government officials accused France of behaving like a colonial power in Africa, and this of course brought more visibility to the CFA Franc.
There is an episode which is not really known, but which is interesting as it illustrates how France dominates this system…
75 Minute Mark
Sylla: Now the issue of the CFA Franc is gaining more visibility and recent declarations of Italian government officials accusing the French of behaving like a colonial power in Africa have also given more visibility to the CFA Franc.
There is an episode which is not really known, but which is also really interesting as it illustrates how France dominates this system. In 2011, there was a presidential election in Côte d’Ivoire. There was some tension between Laurent Gbagbo, who was the incumbent President and Alassane Ouattara, who was a former IMF staff and also a protege of France. There was an electoral dispute and France [took] sides with Ouattara. To put pressure on the Gbagbo government, the French government asked the BCEAO, the central bank of West African states, to stop supplying the Ivorian economy with bank notes, and to stop dealing with the Gbagbo regime, which could no longer access its accounts at the central bank. The French government also asked the French banks’ in Côte d’Ivoire to cease all external operations, and finally, the French government blocked the operations account. The operations account is the account where all operations to convert the CFA Franc into Euros, and vice versa, pass.
As a result, there was a financial embargo against Côte d’Ivoire and against the Gbagbo regime. The Gbagbo regime [then] chose to create a new national currency and were [having] discussions with some countries [about helping] them manage their foreign exchange reserves. But they didn’t have time to create this new currency, as France bombed Gbagbo’s palace to install Ouattara. This was one intervention among more than forty-some done by France since the independencies in Africa.
So, there have been many attempts to challenge the CFA Franc, but each time France has been very strong and sent very clear messages that France will never allow African countries to exit the CFA Franc. But I think now with the current wave [of dissent], it will be much more difficult for France to have that stance.
[...]
Sylla: With regard to the issue of how to get out of the monetary status quo, there are in my opinion, four different points of view. First, there is the perspective I call symbolic reformism, which consists [of] touching only the visible systems of monetary coloniality without touching the fundamentals of the CFA Franc system. This includes proposals such as changing the name of the CFA Franc, having banknotes and coins manufactured outside of France, and even further reducing the deposit rate of foreign exchange reserves at the French treasury. Emmanuel Macron, for example, made this type of proposal, and he even suggested that he was open to expanding the CFA Franc zone to a country like Ghana.
There is the second perspective that I call adaptive reformism. These are reforms that aim to adapt the CFA zone to the current context, marked by the economic and geopolitical decline of France and the Euro, but with the ultimate objective of maintaining it. This is the case, for example, of those who want the parity of the CFA Franc to be more flexible because the peg to the Euro is too rigid and undermines the price competitiveness of African exports, and because the CFA zone is increasingly trading with China and other countries [using] the US dollar.
For many economists of different sides, there is this proposal of [basing] the exchange rate of the CFA zone on a basket of currencies, but the problem with this perspective is that it is simply unrealistic because it ignores the functioning of the CFA zone. Exchange rate flexibility is not an option in the CFA system because the convertibility guarantee is offered at a fixed exchange rate and in the currency of the guaranteeing authority. Many people who claim to be experts and moderate [still don’t] understand that the demand for flexibility is incompatible with the maintenance of French guardianship; it is one or the other.
Thirdly, there is the perspective I call neoliberal abolitionism that is an exit from the CFA Franc that follows the neoliberal monetary integration model. By that, I am referring to the Eurozone model. I have in mind those countries in West Africa who want to be part of the single currency project of the ECOWAS (Economic Community of West African States). This single currency project for West Africa normally should be launched next year, but I don’t this this will be done, owing to technical and political problems. Technically, no country yet fulfills the convergence criteria copied from the Maastricht Treaty and defined as prerequisites for entry into the new monetary zone to be created. Politically, the current Nigerian President, who has just been re-elected, Muhammadu Buhari, has been demanding, since 2017, a divorce plan from the French treasury of the eight West African countries that use the CFA Franc, but [since] then, the countries of the West African monetary union that use the CFA Franc have remained silent, for fear of angering France. It is very unlikely that there will be an ECOWAS single currency by next year.
Even if it were possible, for me it would be a very bad idea, for the simple reason that sharing the same currency is not justified among ECOWAS countries, owing to a number of factors, like for example Nigeria’s disproportionate weight. Nigeria accounts for at least 70% of West African GDP. [As well], there are differences in economic specialization. Nigeria is an oil producer and exporter, whereas, you will find in West Africa at least nine countries which are net oil importers. There is also the fact that economic cycles are not synchronous in West Africa and the level of inter-ECOWAS trade is very low. All of these elements point to the fact that a single currency is premature and not justified economically in West Africa. We have to also say that there is no planned federal fiscal mechanism, but rather, limitations on public debt and deficits, following the Maastricht criteria. That means, in case of economic crisis, countries in this currency union would only have the option of so called internal devaluation [via] the lowering of internal prices, which often comes to austerity policies and the growth of unemployment.
Lastly, there is my extremely minority perspective which I call sovereign abolitionism that is an exit from the CFA Franc that breaks with the neoliberal model of economic integration and that strengthens the sovereignty of individual countries and also the sovereignty of [countries] collectively. If we put aside the political criticism of the CFA Franc, the real economic criticism is that the CFA zone must not exist because it has no economic justification. It is not a so called “optimal monetary zone.” Each country must have its own national currency because economic fundamentals, levels of development and productive dynamisms are not the same. But saying that does not mean that we cannot have systems of solidarity between African countries. For me, this is possible.
That’s why my preferred option is that of solidary national currencies. Concretely, that means that each country has its own national currency with its national central bank. The exchange rate parity is determined according to the fundamentals of each country, and countries have a common payment system. Their currencies are linked by a fixed but adjustable parity to a common unit of account, and also there is solidarity in the management of foreign currency reserves. Finally, there are common policies to ensure energy and food self-sufficiency, because in the ECOWAS zone energy and food products represent between 25-60% of the value of imports, depending on the country.
The advantage of this option for me is that it makes it possible to reconcile macroeconomic flexibility at the national level, that means the possibility to use the exchange rate as an instrument of adjustment, and at the same time to have solidarity [between] African countries. This option also helps break the Anglophone, Francophone, and Lusophone divide, [which] is a legacy of colonialism. What is unfortunate is that this option is unlikely to emerge. Generally, people talk about national currencies in the CFA zone, and many Pan-Africanists are convinced that Pan-Africanism means having a single currency for the largest possible number of African countries. I see this position as not really solid on economic grounds. Unfortunately, those who defend the CFA Franc are not interested by national currencies and those Pan-Africanists that want to get rid of the CFA conceive of the alternative as just the single currency, but not national currencies. That is a little bit unfortunate, but obviously, I will try to push this argument about the necessity to have national currencies organized in a solidary way.
[...]
Eight West African countries agree to sever common currency from France
Issued on: 22/12/2019
Text by: NEWS WIRES | Video by: Clovis CASALI https://www.france24.com/en/20191222-ei ... uel-macron
Eight West African countries Saturday agreed to change the name of their common currency to Eco and severed the CFA franc’s links to former colonial ruler France.
The CFA franc was initially pegged to the French franc and has been linked to the euro for about two decades.
Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo currently use the currency. All the countries are former French colonies with the exception of Guinea-Bissau.
The announcement was made Saturday during a visit by French President Emmanuel Macron to Ivory Coast, the world’s top cocoa producer and France’s former main colony in West Africa.
Ivory Coast President Alassane Ouattara, speaking in the country’s economic capital Abidjan, announced “three major changes”.
These included “a change of name” of the currency, he said, adding that the others would be “stopping holding 50 percent of the reserves in the French Treasury” and the “withdrawal of French governance” in any aspect related to the currency.
Macron hailed it as a “historic reform”, adding: “The Eco will see the light of day in 2020.”
The deal took six months in the making, a French source said.
The CFA franc’s value was moored to the euro after its introduction two decades ago, at a fixed rate of 655.96 CFA francs to one euro.
The Bank of France holds half of the currency’s total reserves, but France does not make money on its deposits stewardship, annually paying a ceiling interest rate of 0.75 percent to member states.
The arrangement guarantees unlimited convertibility of CFA francs into euros and facilitates inter-zone transfers.
CFA notes and coins are printed and minted at a Bank of France facility in the southern town of Chamalieres.
The CFA franc, created in 1945, was seen by many as a sign of French interference in its former African colonies even after the countries became independent.
The Economic Community of West African States regional bloc, known as ECOWAS, earlier Saturday urged members to push on with efforts to establish a common currency, optimistically slated to launch next year.
The bloc insists it is aiming to have the Eco in place in 2020, but almost none of the 15 countries in the group currently meet criteria to join.
Stumbling blocks
ECOWAS “urges member states to continue efforts to meet the convergence criteria”, commission chief Jean-Claude Kassi Brou said after a summit of regional leaders in the Nigerian capital Abuja.
The key demands for entry are to have a deficit of less than 3 percent of gross domestic product, inflation of 10 percent or under and debts worth less than 70 percent of GDP.
Economists say they understand the thinking behind the currency plan but believe it is unrealistic and could even be dangerous for the region’s economies which are dominated by one single country, Nigeria, which accounts for two-thirds of the region’s economic output.
Nigeria’s Finance Minister Zainab Ahmed told AFP “there’s still more work that we need to do individually to meet the convergence criteria”.
ECOWAS was set up in 1975 and comprises Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo—representing a total population of around 385 million.
Eight of them currently use the CFA franc, moored to the single European currency and gathered in an organisation called the West African Monetary Union, or WAMU.
But the seven other ECOWAS countries have their own currencies, none of them freely convertible.
(AFP)
by thrulookingglass » Sun Jun 21, 2020 8:59 pm
by Elvis » Mon Jun 22, 2020 4:03 pm
by thrulookingglass » Mon Jun 22, 2020 4:57 pm
by Elvis » Wed Jun 24, 2020 9:52 pm
thrulookingglass wrote:What's the matter? You don't think people would behave themselves properly without it as a social control mechanism?
by thrulookingglass » Wed Jun 24, 2020 10:34 pm
by JackRiddler » Wed Jun 24, 2020 10:57 pm
by Grizzly » Fri Aug 07, 2020 10:47 pm
Kyle Bass sits down with infamous Chinese businessman Guo Wengui, also known as known as “Miles Kwok,” to hear a series of shocking accusations and predictions revolving around the Chinese government. Kwok provides his perception of the backstory behind several recent high-profile news items, and touches on the Chinese government’s management of the economy. He also unfurls an alarming forecast about Alibaba co-founder Jack Ma. Filmed on October 5, 2018 at an undisclosed location.
Could the United States sanction 90 million Chinese Communist Party (CCP) members with an existing law? Elmer Yuen, an entrepreneur from Hong Kong sat down with Simone to discuss designating the CCP as a criminal organization inside the United States. They also discussed the consequences of China's newly passed, controversial National Security Law against Hong Kong, and whether it will truly be implemented.
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Zooming In is a weekly in-depth/investigative report program hosted by the award-winning journalist Simone Gao. Zooming In focuses on US-China relations, American tradition and values, and critical questions that America faces today. It is known for never shunning tough, controversial issues or complex stories. Exclusive interviews and reports from China, insight from top experts on US and China, good storytelling, and engaging visual presentations make Zooming In one of a kind.
by Elvis » Fri Aug 07, 2020 11:18 pm
https://prospect.org/blogs/tap/did-larr ... he-pushed/
Did Summers Jump, or Was He Pushed?
by Robert Kuttner
August 7, 2020
On Thursday, Larry Summers told a virtual forum hosted by the Aspen Institute: “I am very, very happy being able to speak freely. My time in government is behind me and my time as a free speaker is ahead of me.”
My sources told me that the Biden campaign, yielding to serious pressure from progressive groups, asked Summers to take himself out of contention for a job in the administration. Summers made it sound like a purely voluntary decision.
My recent Prospect piece, cataloguing Summers’s serial policy disasters and zombie-like survival as an influential adviser, demonstrated why Summers had become a lightning rod for a broad range of progressive groups.
But don’t count Larry out. He has all sorts of back channels to the Biden campaign, including to Biden himself, who is said to like him. Summers did not say that he’d cease to be an informal adviser, and may yet turn up in some kind of transition team role. He also exercises significant behind-the-scenes influence through his numerous protégés.
According to several sources, Summers still covets the career-capper job that has twice eluded him—chair of the Federal Reserve. If Summers makes another run at the Fed, he can always say that, technically, chairing the independent Fed is not exactly serving “in government.”
Keep an eye on this guy. He has more lives than a cat.
Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University’s Heller School.
by Monk » Sat Aug 08, 2020 7:42 am
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