flavianopolis

As some of you might know the small island and British dependency Saint Helena issues it's own currency. It's called the Saint Helena Pound and is pegged to Pound Sterling in the relation 1:1.

The Government of Saint Helena has sufficient Sterling-denominted assets to repurchase the entire issuance of notes and coins at par. Registred banks have the right to "buy" and "sell" Saint Helena Pounds and Pence at par with Sterling from and to the Government of Saint Helena. If a commercial bank on Saint Helena wishes to obtain SH£1000 in notes, the commercial bank in question has to transfer UK£1000 to the Sterling account of the Saint Helena Government at a Bank in the UK. Shortly thereafter the commercial bank in question can withdraw SH£1000 in notes at the Government's Cashier's Office on the island. Vice versa; if a commercial bank wishes to get rid off SH£1000 in notes, the commercial bank in question has to hand over these notes to the Government's Cashier's Office on the island, and shortly therafter UK£1000 is transfered from the Sterling account of the Government to the Sterling account of the commercial bank in question. Still, only notes and coins issued by the Government of Saint Helena are legal tender on Saint Helena.

I would like to present a plan where I describe how the Saint Helena monetary system could be transformed into a gold standard with free issuance of notes. It's not too complicated.

Firstly, the Government of Saint Helena ought to end the repurchase and sale of notes and coins. Some of you might think that that would result in massive depreciation of the domestic currency, but most certainly that would not be the case. Due to their legal tender capacity, notes and coins will remain demanded by those who are indebted in terms of Saint Helena Pounds. All fears of massive depreciation are therefore groundless. It might even be the case that the Saint Helena Pound would gain against Sterling.

Secondly, the Government of Saint Helena ought to issue a law according to which 0,513643625 grains of crown gold is declared legal tender for One Saint Helena Pound and 0,00513643625 grains of crown gold is declared legal tender for One Saint Helena Penny. In this manner a new at par rate of the Saint Helena Pound is established.

Thirdly, the Government of Saint Helena declares that notes and coins issued by the Government will remain legal tender only for another year during which Krügerrands will be offered against SH£1000 in notes or coins per Krügerrand.

As the fourth step the law according to which it is prohibited to denominate debts and assets in anything but Saint Helena Pounds and Pence ought to be abolished. People ought to be left free to denominate assets and debts in any currency or precious metal they wish.

As the last step, private issuance of notes is allowed. Private notes are nothing but easily transferable deposits and from the legal point of view they ought to be considered deposits.