Iceland to Adopt Canadian Dollars as Currency?

[Jacob]

What do you say about this, Viking?

http://www.theglobeandmail.com/report-on-business/economy/currencies/from-iceland-with-love/article2356634/

[Syt]

Why not? Other failed states in the Balkans have used the German Mark in the past, and Bulgarian Leva is also 1:1 to the German Mark (and therefore 1.95583 to the Euro).

[HVC]

is there anything a country can do to stop another country from adopting their currency?

[Barrister]

is there anything a country can do to stop another country from adopting their currency?

No.

It's happened a few times.  Several countries have adopted the US dollar, Kosovo adopted the Euro - all without the US or EU having much to say about it.

The thing is - if you adopt someone else's currency you lose all control over your monetary policy.  That may be worth it - I understand why Iceland might look at using the loonie.  But you lose any and all control.

Though I wonder if the Bank of Canada would be willing to mint specific Icelandic loonie coins.  Probably - they'd be a huge hit in Gimli, Manitoba after all...

[Syt]

is there anything a country can do to stop another country from adopting their currency?

As Barrister said: no. In the case of German Marks (later Euro) in places like Ex-Yugo it didn't even spark much public debate - it ran basically under "amusing footnotes" in the news, if at all. The economies involved were too small vs. Germany/EU to have any effect on the Mark/Euro issuing economy. There was no notable drain of funds that way.

Of course things might be different if a larger country took that step - Russia adopting Euro or USD? That would spark a few interesting summits.

[The Brain]

is there anything a country can do to stop another country from adopting their currency?

No.

Thermonuclear war sometimes works.

[Viking]

There has been a realisation within icelandic society that we cannot (either due to lack of skills due to smallness of country or due to our own arrogant pigheadedeness) run our own currency. In one sense this is a matter of currency exchange rates, the Króna is so small that any reasonably sized bank can tank the currency completely in speculation. In another sense it is desirable to gain a larger more stable currency to make investment and trade safer and more predictable.

Until now we've talked about joining the Euro, but the EU insists we join the EU and the Common Fishery Policy (which is a very very bad idea for iceland and if you want to know start a thread and I'll tell you in much detail and with much hatred of spaniards, basques, portugese and greeks).

We haven't really discussed the issue of taking up the Danish Krone (which we used up until 1918) or the Norwegian one (too heavily oil linked to be of any good to us). Our trading partners are the EU more than anything, they buy our fish (50% and more of our exports) so the Euro has been seen as the preferred option, but the EU membership is a bit of an ask.

What the Canadian speculation has that the others don't is that it seems that the Canadian government seems to be willing to regulate our banks and treat them as if they were canadian (e.g. lending them money from the central reserve).

If the final resolution to this is the Currency Union of the Republic of Iceland and the Dominion of Canada (run out of Ottawa) I'd be happy with that. My first choice remain the EU but that requires the destruction of the CFP and it's replacement with individual transferrable fisheries quotas for the entire EU.

(btw, when checking the official name of Canada i typed the first two letters of the country into my google search window and once I had got as far as "ca" googles first suggested option was "Cataphract"; ah google you know me only too well)

[Martinus]

So this is more than just a unilateral decision of Iceland, it seems. I think Denmark should respond to another act of aggression from Canada.

[HVC]

What the Canadian speculation has that the others don't is that it seems that the Canadian government seems to be willing to regulate our banks and treat them as if they were canadian (e.g. lending them money from the central reserve).

How would that work? our banks are pretty heavily regulated. would the the banks or iceland have to be chartered?

[HVC]

is there anything a country can do to stop another country from adopting their currency?

No.

It's happened a few times.  Several countries have adopted the US dollar, Kosovo adopted the Euro - all without the US or EU having much to say about it.

interesting.

[Viking]

What the Canadian speculation has that the others don't is that it seems that the Canadian government seems to be willing to regulate our banks and treat them as if they were canadian (e.g. lending them money from the central reserve).

How would that work? our banks are pretty heavily regulated. would the the banks or iceland have to be chartered?

Basically the individual icelandic banks would have to operate in precisely the same way and under the same laws a canadian banks. So, yes, they would have to be charterd and incorporated as canadian companies.

So, yes, this is a very large surrender of sovreignty and no a decision that should be taken lightly.

[Admiral Yi]

There are abundant cases of countries fixing their currency to another country's currency, but I can't think of another time when a country went whole hog and adopted a foreign currency as their sole legal tender.

[Viking]

There are abundant cases of countries fixing their currency to another country's currency, but I can't think of another time when a country went whole hog and adopted a foreign currency as their sole legal tender.

Fixing a currency is merely a promise to support the value of your own currency relative to another by a central bank. If your currency is under the fixed rate your central bank spends hard currency to buy back it's own currency. If your currency is over the fixed rate your central bank prints money.

Bosnia adopted the DM and Kosovo adopted the Euro formally without joining the European Central Bank.

Iceland want's to join a currency and join a bank without joinin the EU (or Canada for that matter)

Edit: Fixed the Bosnia DM bit.

[Hansmeister]

There are abundant cases of countries fixing their currency to another country's currency, but I can't think of another time when a country went whole hog and adopted a foreign currency as their sole legal tender.

Ecuador and Panama both adopted the US$.  Bosnia adopted the DM when it became independent.

[Viking]

There are abundant cases of countries fixing their currency to another country's currency, but I can't think of another time when a country went whole hog and adopted a foreign currency as their sole legal tender.

Ecuador and Panama both adopted the US$.  Bosnia adopted the DM when it became independent.

Correct, Bosnia adopted the DM not the Euro as I said above.