Cuba finally ends its dual peso system

[MarxSchmarx]

The cuban government announced it is going to begin to phase out the distinction between the dollar-pegged exchangeable Peso and the local peso with which most workers are paid:


Cuba announced Tuesday that it would move toward ending a two-tier national currency system widely criticized for creating a privileged class with access to a special peso...Philip Peters, president of the Cuba Research Center, noted on his blog that though the economic effect of the announcement was difficult to determine, the country has "a lot to gain" by ending the dual system.http://www.latimes.com/world/la-fg-cuba-currency-20131023,0,2022279.story#axzz2iVmIWJZ4

The PRC used to have a similar system, and apparently so did the USSR in its early years and there was talk about re-introducing it during the twilight of the eastern bloc:

http://dmarionuti.blogspot.com/2010/02/dual-currencies-are-always-bad-idea.html


In 1988-89 George Soros, Wassily Leontief, Ed Hewett and Ivan Ivanov (Deputy Chairman of the State Foreign Economic Committee, GVK) launched their “Open Sector”project, with the participation of many Soviet, western and east-European economists (see Phil Hanson, "Foreign Advice", in M.Ellman and Kontorovich, The Destruction of the Soviet Economic System – An Insiders’ History, M.E. Sharpe, Armonk-New York, 1988, pp.238-255). It was a plan, initially surrounded by secrecy, for both wiping out monetary overhang and promoting foreign trade by introducing a new convertible currency inspired by the 1920s chervonets, paid to Soviet exporters and then circulating in parallel with domestic roubles. I took part in the project and went along for the ride, but never believed in it: what had happened with the chervonets would have happened with the parallel, convertible hard rouble: slow-motion stabilisation through rouble hyperinflation. Not a very effective or attractive measure, and it was shelved, like other radical plans, without being taken seriously into consideration.But all these ideas were eventually abandoned. As far as I know, a similar system is still used in places like the singapore stock exchange where some equities can be bought with Singapore or US $ (although both are hard currencies, unlike the eastern bloc examples).

I'm curious if anyone here has thought about this possibility, at least while there are capitalist states still around with which states that have committed themselves to the abolition of capitalism must trade. Are they as terrible an idea as these articles make them out to be?

[tuwix]

The most important part of the article was:



President Raul Castro had announced his support for such a plan in July. But the announcement Tuesday was short on details about how the country's leadership plans to unify the regular peso, which is worth pennies on the U.S. dollar, and the "convertible" peso, or CUC, which is pegged to the dollar.


And that means it isn't so sure that Cuba ends dual monetary system... It seems they don't know how to do it.

[cyu]

that means it isn't so sure that Cuba ends dual monetary system... It seems they don't know how to do it.

A lot of national governments don't really understand currency, or how to free themselves from being dominated by the capitalist-controlled currencies (partly because a large percentage of self-described economists are little more than pro-capitalist quacks). And for some that do, when the realization dawns on them and they start to make moves for financial self-determination, they are soon overthrown by the United States / NATO for fear that their example would spark a global contagion that leaves the US financially impotent.


while there are capitalist states still around with which states that have committed themselves to the abolition of capitalism must trade

If you must trade with American capitalists and they insist on being paid with dollars, then I would recommend you only get dollars from the foreign exchange market on the day that you're supposed to pay the capitalist. Either you sell real goods (oil, food, iron, concrete, consumer electronics, etc) for the dollars on that day, or you sell your own currency.

On all the days in which you're not trading with American capitalists, I would recommend you not hold any dollars at all, since the ultimate end goal is for everyone to abandon capitalist-controlled dollars. The more people that hold no dollars in their day to day dealings, the more dollars floating around in circulation - higher supply -> lower price.

Ultimately, what you want is for the percentage of people holding and using capitalist-controlled dollars to approach and drop to 0% - at which point it will become worthless - and any capitalists, who rely on their large mountains of dollars to buy themselves military hardware, will be broke.

[Popular Front of Judea]

The Cuban state is at a crossroads. Either choice has its downsides. The choice is either ultimately giving up much of its autonomy or continuing a policy that admittedly has some inegalitarian outcomes.

[Vladimir Innit Lenin]

The national peso isn't so much in-egalitarian in itself. Rather, its existence alongside the convertible peso means that those who only have access to the national peso are seriously hamstrung compared to those who have access to the convertible peso.

The problem the cuban state has is that the convertible peso is essentially the US dollar in all but name - it's basically pegged to the same exchange rate, meaning that the effective reserve currency of Cuba is the US Dollar, which is problematic considering teh US still effects a very strict embargo on the Cuban economy.

So on the one hand, doing away with the national peso will allow Cuban workers a huge potential upside to their earnings and access to currency and therefore consumer goods, but it will also weaken the Cuban state inexorably in the medium term and beyond, because their exchange rate, and consequently their ability to trade foreign goods, will be even more in the hands of the US: it will be both enabled by having an effective dollar reserve currency, and hampered because that same currency is controlled by a country that imposes strict limitations on what Cuba can trade and who with.

Personally, i've felt for a while that Cuba should abandon both currency systems and enable a new currency within the ALBA trading bloc; I don't understand why they need to still tie the convertible peso to the dollar, since they can't trade with many firms/countries that are involved with trade with the US anyway.

[cyu]

I don't understand why they need to still tie the convertible peso to the dollar, since they can't trade with many firms/countries that are involved with trade with the US anyway.

CIA agents in the Cuban finance ministry ;)

[LiamChe]

It seems to me that Cuba just keeps sliding deeper and deeper into State Capitalism, which was inevitable.

[cyu]

Cuba just keeps sliding deeper and deeper into State Capitalism, which was inevitable


It's not easy when the world's only remaining superpower has you on its s**tlist. Even when they openly spy on the heads of state of economically powerful nations like Germany, about all the guts the peasants have is to write an impolite letter about it.

Now if only they would use all the dirt they got on Charles Koch to put him away... assuming he hasn't already bribed all the top officials at the NSA...

[LiamChe]

Despite its problems, I still do commend Cuba on its resilience against U.S. Imperialism. Both the DPRK and Cuba have outlived the rest.