Currency boards are the answer to KES woes!

[Arcadian_Dreamer]

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By design, a currency board, unlike a central bank, has no discretionary monetary powers and cannot engage in the fiduciary issue of money. It has an exchange rate policy (the exchange rate is fixed) but no monetary policy. A currency board’s operations are passive and automatic. The sole function of a currency board is to exchange the domestic currency it issues for an anchor currency at a fixed rate. Consequently, the quantity of domestic currency in circulation is determined solely by market forces, namely the demand for domestic currency.

A currency board cannot issue credit. Accordingly, a currency board imposes a hard budget constraint and discipline on the government. This is an underappreciated feature of currency boards. Unlike central banks, a currency board can’t be used as a means to finance government budgets.

Currency boards have existed in about 70 countries, and none have failed.

[audacityofhope]

By design, a currency board, unlike a central bank, has no discretionary monetary powers and cannot engage in the fiduciary issue of money. It has an exchange rate policy (the exchange rate is fixed) but no monetary policy. A currency board’s operations are passive and automatic. The sole function of a currency board is to exchange the domestic currency it issues for an anchor currency at a fixed rate. Consequently, the quantity of domestic currency in circulation is determined solely by market forces, namely the demand for domestic currency.

A currency board cannot issue credit. Accordingly, a currency board imposes a hard budget constraint and discipline on the government. This is an underappreciated feature of currency boards. Unlike central banks, a currency board can’t be used as a means to finance government budgets.

Currency boards have existed in about 70 countries, and none have failed

So you want Kenya to be the first country to fail? Think!

The guys running the show ..... (I mean the "d duo")...
You and I know other than 2002, all elections have been .... (well you know the rest/drill ... complete the sentence)

[hk]

By design, a currency board, unlike a central bank, has no discretionary monetary powers and cannot engage in the fiduciary issue of money. It has an exchange rate policy (the exchange rate is fixed) but no monetary policy. A currency board’s operations are passive and automatic. The sole function of a currency board is to exchange the domestic currency it issues for an anchor currency at a fixed rate. Consequently, the quantity of domestic currency in circulation is determined solely by market forces, namely the demand for domestic currency.

A currency board cannot issue credit. Accordingly, a currency board imposes a hard budget constraint and discipline on the government. This is an underappreciated feature of currency boards. Unlike central banks, a currency board can’t be used as a means to finance government budgets.

Currency boards have existed in about 70 countries, and none have failed.

You're a fan of Mr. Hanke prof applied economics john hopkins?
1. KES isn't a free floating currency its managed, so the market hasn't quite established the correct price given countries fundamentals. Before creating a currency and setting up the peg, the currency has to float freely to establish correct market rate then lock in the peg.  KES market rate is highly distorted by remittance inflow, funds that're not generated locally or chasing local investments.
2. Currency boards are great to control hyper inflation and deficits. The key though is the discipline of CBK and treasury mandarins to hold stipulated reserves. In Kenya this would be the biggest problem. All in all Currency board is a great idea but without strict discipline e.g Hong Kong the effectiveness would be limited.  Just my humble opinion.

btw I think former PS of treasury Thugge was a student of prof. Hanke at John Hopkins.

[Arcadian_Dreamer]

You're a fan of Mr. Hanke prof applied economics john hopkins?
1. KES isn't a free floating currency its managed, so the market hasn't quite established the correct price given countries fundamentals. Before creating a currency and setting up the peg, the currency has to float freely to establish correct market rate then lock in the peg.  KES market rate is highly distorted by remittance inflow, funds that're not generated locally or chasing local investments.
2. Currency boards are great to control hyper inflation and deficits. The key though is the discipline of CBK and treasury mandarins to hold stipulated reserves. In Kenya this would be the biggest problem. All in all Currency board is a great idea but without strict discipline e.g Hong Kong the effectiveness would be limited.  Just my humble opinion.

btw I think former PS of treasury Thugge was a student of prof. Hanke at John Hopkins.

Prof Hanke gets currencies boards and dollarization right. There is no reason small countries should have their own central banks with discretionary powers.

1. You are right the KES is managed but it really does not matter when it comes to setting up a currency board. You can start from anywhere.

2. I agree, countries without discipline and tenuous rule of law such Kenya & Argentina would struggle to implement CB. The government will just eat the reserves. I think we are better off with dollarization.