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.
Jordan // Feb 11, 2010 at 10:26 am
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 // Feb 11, 2010 at 1:13 pm
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 // Feb 11, 2010 at 1:28 pm
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 // Feb 11, 2010 at 1:52 pm
@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 // Feb 12, 2010 at 10:13 am
@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.
Joel H. // Feb 12, 2016 at 5:02 am
There are five current or recent secessionist countries that I can think of offhand that have their own coins and/or currency:
1. The small part of Soviet Moldavia that lies east of the Dniester River declared itself the “Transdniestrian Moldavian Republic,” also known as “Transnistria” or “Pridnestrovia,” when the USSR broke up, and has been issuing its own kopecks and rubles ever since. Being an ethnically Russian area, it rejects the rule of Moldova, which is ethnically Romanian (having been taken from Romania by the USSR in 1940) and whose currency uses the same names as the Romanian.
Images are available at https://en.wikipedia.org/wiki/Transnistrian_ruble .
Amusingly enough, one series of Transnistrian notes was overprinted with four zeroes to raise their value 10,000-fold just before a revaluation! Equally amusing, and a little puzzling, is that the country’s coat-of-arms, as seen on a 2000 series of coins, features a hammer-and-sickle — but apparently more because of nostalgia than any political leanings in that direction!
2. Then there’s the Nagorno-Karabakh Republic, an ethnically-Armenian area recognized by the UN and most countries as part of Azerbaijan, but which also tried to go it alone after the USSR broke up: https://commons.wikimedia.org/wiki/Category:Banknotes_of_Nagorno-Karabakh_Republic .
3. The Sahrawi Arab Democratic Republic reportedly actually controls part of the former colonial Spanish Sahara, but the area is recognized internationally as being under the rule of Morocco. Pictures of their coins can be found at https://en.wikipedia.org/wiki/Sahrawi_peseta .
4. The Republic of Somaliland lays claim to the formerly-British northern section of Somalia, and has issued coins and currency in the “Somaliland shilling”: https://en.wikipedia.org/wiki/Somaliland_shilling .
5. Finally, there is the Principality of Seborga, ordinarily a small town in Italy, that seems to have discovered that the agreement that transferred it to the Kingdom of Sardinia way-back-when wasn’t properly completed. Upon learning this in 1963, they “reasserted” their independence, elected a Prince, and started striking coins in their own “luigino” currency in the nineties: https://en.wikipedia.org/wiki/Seborga_luigino .