By Peter Tase
On January 28, 2020, Bulgaria’s premiere digital news outlet Iconomist.bg, published a note on Johns Hopkins University Professor Steve H. Hanke and his deep engagement within the Bulgarian Banking and Financial Regulation Legislation and the successful implementation of the country’s Currency Board System.
In this publication Iconomist emphasizes: “On January 23rd, MP Menda Stoyanova amended the law governing the work of the Bulgarian National Bank. Stoyanova’s amendment would change the rules governing the currency board system in Bulgaria and the exchange rate of the lev to the euro.”
In this context Prof. Steve Hanke, the father of Bulgaria’s Currency Board and adviser to former President Petar Stoyanov, notes: “Stoyanova’s correction is shocking. Why would you want to repair something that is not broken?
In fact, since the currency board was introduced and broke the crushing hyperinflation on July 1st, 1997, it has performed remarkably. It is therefore not surprising that the currency board is the most respected post-communist institution in Bulgaria and is widely supported by the Bulgarian public.”
Professor Steve H. Hanke continues to caution the Bulgarian policy makers and is certainly ringing the alarm bells: “In addition to being shocking, Stoyanova’s correction is dangerous; it brings to life memories of Argentina. On April 1st, 1991, Argentina introduced a system called “convertibility”.
It wasn’t exactly a currency board, but it had some similar features. Most importantly the convertibility system fixed the peso’s exchange rate into US Dollar. Convertibility killed Argentina’s inflation and worked well until early 2001. It was then that Argentina’s economic tsar made changes to the Convertibility Law. These were similar to Stoyanova’s amendment. The results were catastrophic. In less than a year, on December 23rd, 2001, Argentina defaulted on its sovereign debt and political chaos reigned.”