President Jose de Flores has saved the long-suffering Republic of Under the Bed (RUB) peso! In a move universally recognized as one of the most brilliant in the history of finance, president de Flores has revalued the RUB peso. The tiny republic has declared a weeklong national holiday to celebrate what no doubt marks the dawn of a golden age of prosperity for all its citizens.
Milton
Friedman, Nobel Prize winning economist, Professor Emeritus of
Economics at the University of Chicago and Senior Fellow at the Hoover
Institution had nothing but praise for the plan when asked.
"Jose has long had a reputation for financial brilliance. It was
only a matter of time before he would make a discovery that would
announce his genius outside academic monetary circles."
Friedman then went on to state "The world watched in envy when the United States discovered gold in California in 1849. The impact of Jose's idea on his tiny country's future will make the '49 gold rush look like Bill Gates finding a penny on the street by comparison." Friedman's analogy is not arbitrary. In the past world currencies were based on the "gold standard". Under the gold standard paper currency was backed by each nation's gold reserves. In this system, those holding paper currency could choose to exchange their paper for the gold it represented. Thus the value of the paper was guaranteed.
de Flores's plan is to move the peso to what he calls the "coupon standard". The peso will now be backed with coupons clipped from newspapers, magazines and special mail offers. Each coupon has a cash value of 1/20th or 1/100 of a cent (US). The republic's central bank will now hold enough coupons to have $1.00 US in cash value to back each peso.
Normally a currency would be backed by a scarce commodity otherwise too much of the currency can be printed resulting in runaway inflation. Since the coupons are based on US currency, the peso will effectively be "pegged" to the US dollar. Thanks to this peg, inflation is impossible.
The downside of a peg, as other countries have discovered in the past, is the risk of collapse due to trade imbalances. This is also a non-issue thanks to the US dollar denominated coupon reserves at the RUB's central bank. As envious British Prime Minister Tony Blair put it, "As long as they keep printing coupons, de Flores can keep printing money."
Best of all, the new currency is actually worth MORE than its face value. That is because each peso can be exchanged for up to 100 coupons whose value typically exceeds $0.50. In fact at this time coupons having an average face value of over $1,100.00 are behind each peso. So the potential for saving money is fabulous. "That's really what makes this the plan of the century rather than just a very good idea", said Friedman.
Obviously, the economic theory behind de Flores' revolutionary idea is complex. Even if they don't understand the economics though, the people of the republic do understand that prosperity has come. "I hear we're all going to be rich!" said Juan Miguel when asked what the change meant to him. "I don't really know much international finance, but everybody here knows how good Jose is with money and he says this is a good thing for everybody. I leave all that stuff up to him."
Another citizen,
Purin, was equally elated. "I hear that you can trade in your
money for coupons at a government coupon center. I bet they have lots
of chocolate and butterscotch pudding coupons. 
My friend Henry got a Pizza
Hut coupon. He said we can use it tonight to order a large pizza with
Milkbones on it." Purin wiggled his tail with anticipatory
delight as he added, "Mmm, yummy. Now I need to hurry off so I
can get some more coupons before they run out." Lines at the
coupon centers are indeed long, but those leaving the centers say the
wait is worthwhile. All come out with coupons worth hundreds times
the pesos they came in with.
As
one would imagine, the plan requires a vast number of coupons to back
the new currency. Keeping the central bank in coupons is the job of
RUB Treasurer Santiago. 
This reporter was able to
get an exclusive interview with the young, pink elephant. In it he
cheerfully said, "I know I am a little behind in my clipping but
I'm working very fast. It's hard to work scissors when all you have
are stumpy little paws. I'm working so hard that I've already worn
out three pairs of scissors. Jose says I am doing such a good job
that he told me next time my scissors wear out he'll by me a grown up
pair! Then I won't have to use those baby plastic safety ones any
more." Taking a more serious tone he then went on to say, "I
know I'm big enough for the sharp ones. I just have to remember to
walk slowly with them and no running - not even when I'm in a big
hurry."
Santiago is particularly proud of his filing system for the coupons he's clipped. "I keep them in an old shoebox" he said. "I used to put them in an envelope, but I ran out of room. Now I use a shoebox and there's lots of room. Only problem is that people keep coming in and messing things up."
While the Republic's Treasurer Santiago is busy clipping coupons, Secretary of the Treasury Julio Chavez is busy printing new money to replace the old pesos. Although the currency is still called the peso, the actual bills now refer to themselves as "dollars" and bear a striking similarity to US notes of the same denomination. "Jose designed them", says Chavez. "He's a wiz in PhotoShop you know. He told me that he made them up all by himself and that he didn't base them on a scan of something else."
While there are those who doubt that the new peso isn't an altered version of scanned US currency, de Flores stands by his design. "Their saying 'dollar' instead of peso isn't a mistake. I did that so people would know that our money is backed by dollars. It's just good PR. That's also why we switched to using '$' as the symbol for the new peso."
Scanned or not, there should be plenty of money to go around the Republic now. According to Chavez, over $100,000 has been printed so far. He then added, "of course Jose is holding on to most of that to pay for government expenses. Things like entertaining foreign dignitaries and such. All those trips to the U.N. and to Washington DC really add up. Still, we've introduced over $53 into circulation among the general population which brings us three quarters of the way towards retiring the old peso."
Citizens can exchange their old pesos for the new at local banks.
Last updated 11/22/02