A cheerful little ramble through history from John Hempton at Bronte Capital (if his stock selection is as good as his prose, his clients must be rich) with a history lesson for Greece.

When the Austro-Hungarian empire collapsed there was a single currency over a huge area covering much of what is now Euroland. In this case the rather Germanic Austrians were in charge (or rather were in charge until their empire collapsed).

What they did was put troops on all the borders and made it illegal to take cash (or wire cash!) across borders. Then all Austro-Marks in each country was stamped – converted to Drachma for Greece, Marks for Germany, Peseta for Spain or whatever the currencies of the day were [If someone remembers the 1918 border splits better than me they are welcome to say…]

In this conception all Spanish debts become Peseta debts. All German debts become Mark debts. All Greek debts become Drachma debts. Unstamped currency goes worthless.

Armed guards are posted along Europe’s borders, and the transport of currency is banned. Trouble is, even the thought of it should be enough to persuade every Greek and Italian to switch their accounts to Deutsche Bank in Berlin.