Who would do such a thing?

For what it's worth... France wasn't a G-8/G-6 member at the time, and the Euro conversion wasn't a revaluation of currency for a single nation. Not quite the same as the implication of the original statement relating to G-8 countries opting to revalue their currency (and, by extension, defaulting on debts).

 

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I've seen this scenario discussed before, and I've always had one question... what about kids? If you're too young to have a job, you make money by allowance, mowing yards, delivering papers, mom/dad giving you cash to go to bowling, etc. How would that work? When you're born, you're issued a SS# and a debit card? I just don't see cash disappearing completely.

And as far as this goes, I suppose I'm out of this conversation. I'm no expert, believe me. But I do have a question... why would revaluing a currency result in defaulting on debts? I mean, the debts would convert into the new currency. Right? Why not?

 

You must be the oldest person to ever live if you saw one cent newspapers. I have clippings from just my hometown paper, a small rural paper at that, from the late 1800's that cost five cents. And, as I said, a penny on it's own. Heck, I could buy a car with enough of them.
Guy

 

Well, the joke's on you. Not long ago, you could buy a copy of The Onion for a cent. ****, today a bum in Chicago will sell a copy for whatever you'll pay (since they're free). By the way, it's a very funny parody paper.

And also, that was a bit of a joke. But, without knowing much about the financial history of the US (or other states), this is my opinion. When they stopped making the half cent, the cent must have been worth some value. It only makes sense. They won't do away with the nickel before they do away with the cent. But, personally, I'm not a huge fan of Swedish Rounding.

 

A cashless society would be developed in waves. The first wave will come to an end when transactions direct from transactional accounts exceeds transactions from credit accounts. Japan exited the first wave around when the real estate bubble tanked most Japanese investment portfolios in the late-80s/early-90s. The United States is going through a similar overhaul. China should experience a similar dynamic in around 10-25 years (either 10-15 or 20-25, depending on how quickly they assimilate the Western half of the country) after their housing boom becomes a housing/lending crisis.

Once the first wave is completed, steps are taken toward establishment of the second wave: Cashless, cash-based transactions. Think of it similar to Amex's campaign about "social currency." People begin to think of products in terms of acquisition velocity. (Basically, how soon before I can own product X.) During this wave, products are marketed regarding security of transactions. "Responsible parenting" will involve creating pooled accounts for younger household members to spend from (like Paypal does now). Income earned would be directly routed into this account from whoever the child works for. This could be executed through a card, chip in a watch, phone, or basically any other RFID device.

The final phase would be "Joe V the Volcano" where individuals effectively revert to a debt based purchasing system, but the debts are accrued perpetually. This leads to the "company store" mentality. After a generation or two of this, there's revolution, and you end up with cashless communism.

Default occurs when an individual (or in this case, a sovereign nation) acknowledges an inability to perform on their debt. Revaluing currency is the primary example of non-performance. Since it costs A LOT of money to remove currency from circulation, print a new batch of currency, and implement the new currency into circulation, no single country would voluntarily do this without motivation of net lower obligations. This is why G-8 (and, by extension, G-20) countries fight like crazy to not get into situations which force them to revalue their currency. If the sovereigns that make up the global basket of currencies decide to change their currency values, it affects not only debt-holders, but anyone who uses international transactions.

The default occurs because the new currency is completely unrelated to the previous currency. Effectively, the sovereign declares bankruptcy with issuance of a new currency. It's like a corporation issuing new stock and bonds. Previous issuances are either voided in their entirety or revalued at such a low level, that they are effectively ignored.

[Edit: On a separate note, I'm against doing away with the penny and keeping the nickel. Going from 0.5c to 1c is not nearly as extreme as going from 1c to 5c. If we are to do away with the penny, I maintain that we need to do away with the nickel, quarter, and dollar, also. Transactions would be in 2c/10c/50c/$2 coins, with bills being $10/$50/$200/$1000 bills. This would effectively create 1c variance, instead of 2c variance, thereby reducing variance by 75%.]