Yanis Varoufakis Brookings Institution/Flickr

Greece’s Two Currencies

Greece today offers a case study of how capital controls bifurcate a currency and distort business incentives. And the reality of Greece’s dual-currency regime is the most vivid demonstration yet of the fragmentation of Europe’s monetary “union.”

ATHENS – Imagine a depositor in the US state of Arizona being permitted to withdraw only small amounts of cash weekly and facing restrictions on how much money he or she could wire to a bank account in California. Such capital controls, if they ever came about, would spell the end of the dollar as a single currency, because such constraints are utterly incompatible with a monetary union.

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