Currencies Flourish In Greece - Barter And Bitcoin

Bartering in Greece

Discuss About The Currencies Flourish In Greece Alternative.

Debt crisis occurs in various countries that paves a path for the government of such countries to control availability of cash. Similarly, in Greece, a debt crisis occurred in the year 2009 that forced the government to implement capital control in a way that allowed people to withdraw a limited amount of cash from banks and ATM’s. However, considering the given corporate and complicated environment, there are infinite number of transactions taking place in everyday life, and therefore, lack of cash for undertaking these transactions is a problematic scenario.

Therefore, the society is required to improvise a kind of money that can allow them undertaking transactions in an easier way without facing the problem of cash crunch. In relation to this, it can be noted that the system of barter that existed a long time before can facilitate in encountering this issue. This is the reason why in Greece, as the issue of capital control troubled the people, barter started gaining traction at the economy’s margin as there was no money to change hands. Furthermore, it was noticeable that there was a online barter club named Tradenow that established its own currency known as tradepoints. The reason people of Greece found it more convenient can be attributed to the fact that money was not readily available and such measure still allowed them in facilitating maximum number of transactions (Alderman, 2015). However, the activity of bartering shall remain modest for the country as it cannot offer a lasting solution to the problems incurred in Greece that in turn, remains a politically tricky and volatile matter for the fresh coalition government. Despite this thought, the bartering system still represented an opportunity to the people of Greece that allowed them in navigating the uncertainties. The measure of Tradenow assisted the people in tackling their problems as cash was not required and transactions were also easily undertaken. In relation to this, such system was implemented through online networks that matches needs and offers of the people. The evidence of 6000 users signing up for such policy proves that it was helpful to the people and even many small businesses that disregarded the network of barter have now joined hands in the same. In this system, one tradepoint is equated to one euro and users are then allowed to use barter or rack up the digital currencies to attain products and services from others in the society (Alderman, 2015). Moreover, to attract businesses, users also gained the opportunity to deal in a variety or mix of points and euros. Furthermore, the prevalence of modern online systems also allowed the bartering system to become more effective in nature. This is the reason why such activity can also pursue a multiplier impact upon the economy, thereby establishing new businesses and work.

Bitcoin as an Alternative Currency

The most crucial reason why the people wanted to go for barter can be attributed to the absence of money factor that posed a major threat to the entire economy. Furthermore, the nature of such type of money also has transferable credit or debt. Even though the government provided measures that can assist in avoiding such scenario, but the system of barter was given more importance by people as its own currencies. This is why various barter communities emerged in Greece wherein an alternative euro-equivalent currency known as the TEM emerged (Roberts, 2015). Overall, such system can facilitate in continuing the payment transactions on a wider level even though it has been criticized by many.

Bitcoin has emerged to be one new innovative approach that has facilitated in serving as a new kind of money. In other words, it is a worldwide and cryptocurrency payment system wherein it operates without the presence of a single administrator or central bank. However, it has been noticed that such system has witnessed both upwards and downward trends in its prices that can be attributed to various factors (Crosby, 2015).

In the present scenario, the prices of bitcoins have witnessed a very high increment since its origination. The first and foremost reason behind the price variation of bitcoin can be attributed to its supply and decrease or increase in demand factors. Just like the prices of gold rely upon this factor, similarly the price of bitcoin is also ascertained by the requirement of solving particular equations that are also regarded as mining, thereby forming the part of supply. The other crucial part in this context is the demand for bitcoins that is based on its awareness, its trust amongst community members of cryptocurrency, its popularity, and others (Barney & Ray, 2015). Therefore, if the demand for bitcoins will be high and the supply fails to meet the demand, this will result in a spike in the price of bitcoins. Moreover, with bitcoins being a finite value, its supply is very restricted in nature ( Robert, H, 2018). This is the reason why analysts expect that the price will increase in future. The second factor is that the crypto community consisting of bitcoin developers and users facilitate in causing price fluctuations. In relation to this, trust plays a crucial part in such environment but despite the prevalence of other altcoins having more superior characters than bitcoin, it is still considered the most valuable currency owing to its trust factors. This is why it is best for traders to heed their sentiments in the context of bitcoin. Therefore, not only is bitcoin in its fledgling stage, it is also peculiar and new with an unstable rate, thereby making it mutable and risky in nature. In contrast to this, still such currency is regarded as the future currency owing to its revolutionary nature (Buttonwood, 2018). Nevertheless, trading such currency has surely benefited the society and may do so if this trend continues. Thus, bitcoin developers and users themselves influence the fall and rise of prices of bitcoins.

Factors Influencing Bitcoin Prices

Another significant factor influencing the price of bitcoin can be attributed to new technological changes in this context. In other words, latest innovative efforts and advancements in technology has influenced the prices. This is evident by the fact that bitcoin integration with PayPal system has sparked interest in the currency amongst the people. Another innovation is the utilization of blockchain technologies for streamlining supply chain and enhancement of transparency in several systems. The last factor that influences the price of bitcoin are the regulations that are enforced by governments. This is because bitcoin is not restricted by government regulations and therefore, governments struggle to frame regulations for the same. Therefore, the prices of bitcoins witness a major fluctuation whenever there is an official declaration regarding regulation of digital currency (Shaw, 2017). This also occurs even if government declarations are not associated directly with the cryptocurrencies (Buttonwood, 2018). Similarly, when the government imposes a ban on the use of bitcoin, there is a significant variation its price. However, the reason behind elimination of bitcoin payment method can be attributed to its anonymity factors.

Quantitative Easing (QE) policy influences upon interest rates through various channels like liquidity channels, signalling channel, duration risk channel, etc. It is crucial to understand the operation channels in order to assess whether a particular QE policy has been successful or not. In relation to liquidity channels, it can be seen that the strategy of QE consists of buying long-tern securities and thereafter, paying for the same by enhancing the balances of reserves (Krishnamurthy & Jorgensen, 2011). Such reserve balances are considered a more liquid asset in comparison to long-term securities. Therefore, in this regard, QE plays a key role in enhancing the liquidity in the hands of many investors, thereby facilitating in diminishing the liquidity premium on most of the liquid bonds (Bouraoui T., 2015). This is the major reason why it is very significant to emphasize such channel as it implies an enhancement in treasury yields respectively. In other words, it is usually considered that treasury bonds pursue a liquidity price premium and such premium can be considered to be high during severe crisis tenures. Moreover, an enhancement in liquidity can be anticipated to decrease such a liquidity premium and enhance yields as a whole (Bodie et. al, 2014). Therefore, through this channel, it is signified that QE plays a key role in enhancing the yield on most of the liquid assets like treasuries, etc. Moreover, central banks enhance the liquidity in the hands of many investors by purchasing various long-term securities and issuing bank reserves under the policy of QE. It is therefore asserted that increased liquidity and enhanced functioning of markets, as the outcomes of the asset purchases on the part of central banks will lessen the premium for illiquidity, thereby enhancing the prices of assets. In contrast to this, it has been argued that an expansion in liquidity decreases the liquidity price premium that are carried by government bonds relative to other lesser liquid assets and hence, enhance government bond yields. Nevertheless, the impact of QE through such liquidity channel can only persist while the central banks are in a position to conduct asset purchases.

Quantitative Easing and Liquidity Channels

QE is also regarded as expansionary in nature, thereby facilitating in inflation expectations and this can be forecasted to pursue an influence on interest rates (Peirson, 2015). Some commentators have also argued that QE can enhance tail risks that surround inflation. In other words, an environment wherein investors are not sure about the influences of inflation policy, there policy actions can result in greater uncertainties over the inflation results. In contrast to this, some have also argued that aggressive policy can decrease uncertainty about inflation in a way that it encounters the feasibility of a deflationary spiral. Nevertheless, the inflation channel plays a key role in predicting that QE can enhance the fixed rate on inflation expectations and inflation swaps as measured by differences betwixt TIPS yields and nominal bond yields. In contrast to this, QE may also facilitate in decreasing or increasing interest rate uncertainties as measured by the implied swaptions volatility. Moreover, when central banks announce the plan of offering the system with infinite liquidity, the expectation of inflation are more likely to increase. This is why investors are more likely to reckon QE policy as inflationary. Therefore, irrespective of the impact of QE, high expectations of inflation may enhance the prices but also eventually increase economic affairs in the overall processes. Therefore, through these channels, QE works effectively.

References

Alderman, L. (2015) Trading Meat for Tires as Bartering Economy Grows in Greece [online]. Available from: https://www.nytimes.com/2015/09/22/business/international/trading-meat-for-tires-as-bartering-economy-grows-in-greece.html [Accessed 2 May 2018]

Barney, J. and Ray, G. (2015). How information technology resources can provide a competitive advantage in customer service. Planning for Information Systems [online]. 3(2), p. 444-460. Available from: DOI: 10.4236/me.2015.63038 

Bodie, Z., Kane, A. and Marcus, A. J. (2014) Investments. McGraw Hill

Bouraoui, T. (2015) The Effect of reducing quantitative easing on emerging markets. Applied economics, [online] Available at : [https://www-tandfonline-com.simsrad.net.ocs.mq.edu.au/doi/full/10.1080/00036846.2014.1000524?scroll=top&needAccess=true] Accessed : 27 April 2018

Brigham, E. & Daves, P. (2012)  Intermediate Financial Management.  USA: Cengage Learning.

Buttonwood. (2018) The rise and fall of bitcoin [online]. Available from:  https://www.economist.com/blogs/buttonwood/2018/01/tales-crypto-1 [Accessed 4 May 2018]

Crosby, M. (2015) Block chain technology. [online]. Available from https://scet.berkeley.edu/wp-content/uploads/BlockchainPaper.pdf [Accessed 21 April 2018]

Krishnamurthy, A. and Jorgensen, A.V. (2011) The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy [online]. Available from: https://www.nber.org/papers/w17555 [Accessed 28 April 2018]

Peirson, G, Brown, R., Easton, S,   Howard, P. and Pinder, S. (2015) Business Finance, 12th ed. North Ryde: McGraw-Hill Australia.

Robert, H. and Jen W. (2018) How high will bitcoin go, Vol 11, pg 34-36, [online]. Available at: [https://web-b-ebscohost-com.simsrad.net.ocs.mq.edu.au/ehost/detail/detail?vid=0&sid=8952bd0d-1b89-4afa-a9be-cd5ac2197f04%40sessionmgr103&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=126930474&db=heh]

Roberts, N. (2015) Alternative Currencies Flourish in Greece as Euros Are Harder to Come by [online]. Available from: https://www.wsj.com/articles/alternative-currencies-flourish-in-greece-as-euros-are-harder-to-come-by-1439458241 [Accessed 1 May 2018]

Shaw, J. (2017). The Blockchain Transformation of Accounting and Auditing. [online]. Available from:  https://njcpa.org/stay-informed/topics/article/2017/09/14/the-blockchain-transformation-of-accounting-and-auditing [Accessed 20 April 2018]