4 ms·

But the CFA being pegged to the euro, means that the countries adopting it can't really do monetary policy, like countries in the eurozone can't

by licnep 7y ago

JetSpiegel 7y ago
At least Eurozone countries get a seat at the Eurogroup meetings and the European Council. African CFA users don't even get that.
- Double_a_92 7y ago
  The pegging is not forced on them. It's their own national bank which buys and sells tons of Euros to keep the exchange rate stable.
  - vkreso 7y ago
    Exactly, its an autonomous response towards the market. Stability is always preffered in human decision making.
  - dragonwriter 7y ago
    > It's their own national bank which buys and sells tons of Euros to keep the exchange rate stable. The two CFA franc zones have zone central banks (which aren't exclusively controlled by countries in the respective zone, since France has a seat on each), it's not individual national central banks issuing currency or managing the peg.
- seszett 7y ago
  Isn't it very common for a currency to be pegged to another, though? Dozens of currencies are pegged to the EUR or USD, and the two CFA francs are not very different, except that the French treasury is legally bound to guarantee free convertibility between CFA franc and euro, unlike say the US federal reserve with Cuban peso.
  - skgoa 7y ago
    Yes, it is common. There are even countries that officially adopting a currency they do not control, e.g. Croatia uing the euro. But this has the very real drawbacks that the previous comments mentioned.
pinkfoot 7y ago
It also means their corrupt governments cannot monetise their debt and destroy their currency, savings, pensions, and ultimately economy. Like Zimbabwe did.
- RobertoG 7y ago
  That's nonsense. Zimbabwe (like the famous Weimar republic, by the way) had a extreme fall in the real productive capacity of the economy (1). Inflation was going to happen nevertheless the monetary policy they adopted. (1) - http://bilbo.economicoutlook.net/blog/?p=3773 http://bilbo.economicoutlook.net/blog/?p=3773
  - pinkfoot 7y ago
    Nope, the fall in capacity followed the destruction of the currency and the end of the rule of contract law.
    - tim333 7y ago
      Googling briefly it seems >Food production halved in the 1990s as a result of [Mugabe's] decision to strip white farmers of their land and hand it to members of the black population who, in many cases, had no farming experience. before the inflation kicked off. https://news.sky.com/story/how-zimbabwes-economy-has-collapsed-under-mugabe-11127628 https://news.sky.com/story/how-zimbabwes-economy-has-collaps... Same brilliant policy in Venezuela pretty much.

But the CFA being pegged to the euro, means that the countries adopting it can't really do monetary policy, like countries in the eurozone can't

by licnep 7y ago

But the CFA being pegged to the euro, means that the countries adopting it can't really do monetary policy, like countries in the eurozone can't

JetSpiegel 7y ago

At least Eurozone countries get a seat at the Eurogroup meetings and the European Council. African CFA users don't even get that.

Double_a_92 7y ago
The pegging is not forced on them. It's their own national bank which buys and sells tons of Euros to keep the exchange rate stable.
- vkreso 7y ago
  Exactly, its an autonomous response towards the market. Stability is always preffered in human decision making.
- dragonwriter 7y ago
  > It's their own national bank which buys and sells tons of Euros to keep the exchange rate stable. The two CFA franc zones have zone central banks (which aren't exclusively controlled by countries in the respective zone, since France has a seat on each), it's not individual national central banks issuing currency or managing the peg.
seszett 7y ago
Isn't it very common for a currency to be pegged to another, though? Dozens of currencies are pegged to the EUR or USD, and the two CFA francs are not very different, except that the French treasury is legally bound to guarantee free convertibility between CFA franc and euro, unlike say the US federal reserve with Cuban peso.
- skgoa 7y ago
  Yes, it is common. There are even countries that officially adopting a currency they do not control, e.g. Croatia uing the euro. But this has the very real drawbacks that the previous comments mentioned.

pinkfoot 7y ago

It also means their corrupt governments cannot monetise their debt and destroy their currency, savings, pensions, and ultimately economy. Like Zimbabwe did.

RobertoG 7y ago
That's nonsense. Zimbabwe (like the famous Weimar republic, by the way) had a extreme fall in the real productive capacity of the economy (1). Inflation was going to happen nevertheless the monetary policy they adopted. (1) - http://bilbo.economicoutlook.net/blog/?p=3773 http://bilbo.economicoutlook.net/blog/?p=3773
- pinkfoot 7y ago
  Nope, the fall in capacity followed the destruction of the currency and the end of the rule of contract law.
  - tim333 7y ago
    Googling briefly it seems >Food production halved in the 1990s as a result of [Mugabe's] decision to strip white farmers of their land and hand it to members of the black population who, in many cases, had no farming experience. before the inflation kicked off. https://news.sky.com/story/how-zimbabwes-economy-has-collapsed-under-mugabe-11127628 https://news.sky.com/story/how-zimbabwes-economy-has-collaps... Same brilliant policy in Venezuela pretty much.