Date of Award
L. Randall Wray, Ph.D.
Some countries, due to historical events, are within a creditor-debtor relationship and are unable to make full use of their currency. Debtor countries tend to not be fully sovereign -are either dependent on food, energy, or technology- which results in them being reliant on capital inflows. Foreign debt and lack of sovereignty feed each other into a debt trap and create an endless chain of dependency. This essay attempts to explore the possibility that governments with foreign debt and lack of sovereignty, like Mexico, should create another unit of account while keeping the current one. The parallel currency would not be convertible to any other. This would only be accepted to buy national products and to pay some percent of taxes. The intention would be to stimulate import substitution and prevent capital outflows. The creation of a parallel currency would at least help them gain food sovereignty. A parallel currency by itself would not be sufficient, as government subsidies and investments on innovation and technology would also be necessary for the transition to a less dependent and more sovereign scenario. In summary, this essay explores how money and debt have been used to create uneven power dynamics for Latin America in colonial and post colonial times. It next explores the argument for the creation of a non-convertible parallel currency for Mexico to reduce dependency thus creating sovereignty.
Huerta Ojeda, Angelica, "Parallel State Currency: A Mechanism to Expand Sovereignty for Countries with Foreign Debt and Trade Deficits" (2022). Theses - Graduate Programs in Economic Theory and Policy. 42.