Microkhan by Brendan I. Koerner

Cashed Out

February 11th, 2010 · 5 Comments


A few days back, we touched on the challenges of undermining one’s enemy by counterfeiting his currency. Today we’d like to shift the focus to another tactic of fiscal warfare: issuing a new currency upon seceding from a national union. We all know the Confederacy did it back in the day, but it has become an exceedingly rare step in contemporary times. Take, for example, the Tamil Tigers, who succeeded in briefly creating a de facto government on the Jaffna peninsula, complete with its own police force and school system. But the Tigers never went so far as to issue their own currency, for several good reasons. For starters, printing counterfeit-proof currency is incredibly expensive nowadays, and a fledgling nation would certainly be more susceptible to fiscal subterfuge than an established counterpart. On top of that, it’s just bad economics to use a currency that no one outside your borders will accept—it makes trade umpteen times more difficult.

But there is an obvious symbolic power to having your own currency, and that seems to have been the lure for the secessionist government of Biafra, which existed from 1967 until 1970. The Biafran regime issued its own currency in 1968, and then printed a second series of notes a year later. This second series was notable for its use of microprinting, then an incredibly novel anti-counterfeiting device. That indicates that the notes were likely printed at an advanced facility in Switzerland, and paid for by wealthy Ibgo exiles based in London.

Unfortunately for Biafra, the currency gambit did little to aid its secessionist cause:

Although Biafra had made a concerted effort to produce the second series of higher quality bank notes, it would appear that their circulation was limited. By the time the notes were introduced in 1969, the country controlled by the Biafran forces had been reduced to a circular area approximately 85 miles across (roughly 5,000 square miles) and all consumables had long been sold. When a foreign journalist, Michael Mok of ‘Life’ magazine, asked a nun working with the Biafrans whether he could make a cash donation to help the starving children, he was told that cash would be useless, as there was nothing left to buy in Biafra. This may have been one of the reasons why so many Biafran notes remained in Europe undelivered – they were a cargo that could bring little practical purpose.

The Biafran pound has enjoyed a brief afterlife along the Togo-Benin border, where traveling Igbo traders do significant business. The going rate as of 2005 was 270 Nigerian naira to one Biafran pound.

Can anyone else think of contemporary secessionist movements that have dared to issue their own currencies? Extra credit (and free Microkhan mesh hat) if you can dig up an image.

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5 Comments so far ↓

  • Jordan

    Obviously, the hardest part of establishing a new currency is getting people to accept it as legal tender. Unless they’re going to make it a convertible currency, which I don’t think anyone has done in ages, using a new currency implies some amount of faith in the regime. Also, these regimes tend to have enormous fiscal pressures, which provides an almost irresistible temptation to use inflationary currency printing to get out of their holes.

    Probably the prime example of that were the French Revolutionary assignats. They were originally issued with their value backed by confiscated French clerical property, but over time the fiscal pressures led the revolutionary government to print more and more of them, debasing their value.

    While you mention the Confederate currency, the Union also ran into a not dissimilar situation and started printing paper money. That’s where we get the term “greenback” from. It was enormously contentious, as paper money has almost always been, but may have been a necessary part of the war.

    There’s a great chapter in John Kenneth Galbraith’s book “Money: Whence It Came, Where it Went” called An Instrument of Revolution where he talks about paper money as the financial engine for many revolutions. In those situations, there’s always a conflict between the interests of debtors and creditors, who have opposing interests when it comes to printing fiat money.

  • Brendan I. Koerner

    The psychology of money is fascinating, indeed. My limited understanding of the topic is entirely due to my repeated readings of this comic book:

    http://www.originalwonders.com/newworldorder/the-story-of-money-federal-reserve-bank-of-new-york-comic/

  • Captured Shadow

    I couldn’t think of any rebels issuing currency but I am interested in de-facto currencies issued by corporations. I am thinking of green-stamps, airline miles, and virtual world currencies that can be exchanged for goods and services. I am also interested in private companies that print currency for governments in other countries. (http://www.delarue.com/ProductsSolutions/BanknoteProduction/ ) . What currency to they demand in payment? Does Guatemala have to pay for their currency in pounds? http://en.wikipedia.org/wiki/De_La_Rue or can they just let the company run off a few extra bills as payment? How difficult would it be for some insiders at the DeLaRue print off a few extra bills to fund a nice vacation in Belize?

  • Jordan

    @Captured Shadow

    If you’re interested in that, you might want to look into the roller coaster ride that was the Zimbabwean dollar over the last few years. I think they were getting their money printed in Switzerland and after a few cycles of devaluation and revaluation, the company doing the printing for them simply refused to do any more. Last I checked the country has switched to using other local currencies, effectively abandoning their own national currency.

  • Brendan I. Koerner

    @Jordan: While I was in Kenya, I met some folks who’d recently spent a lot of time in Zimbabwe. (Globetrotting disease-fighting types.) They said all the Zimbabweans wanted was American dollars, even though rands and other currencies are officially acceptable. Apparently this made the simple act of dining out in Harare much easier; I vividly remember one guy telling me that whenever he wanted a meal, pre-dollarization, he literally had to lug a suitcase full of Zimbabwean currency to the restaurant.

    I sorta love this image of a guy eating alone at some Harare diner, with a large suitcase stuffed with $10 million notes as his only companion.

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