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In collaboration with Dr Robert Hancké of the London School of Economics, the UK’s No. 1 retail forex provider,1 IG, has considered...
Breakaway region Michigan
Parent country United States
Old currency US Dollar (USD)
New currency Michigan Dollar
Michigan’s economy has been in decline for decades, having been outcompeted in its key industries. Would a new currency be enough to turn the state’s fortunes around?
An independent currency in the free-trade area of the US could have significant benefits in the short run
The region could develop new industries and kickstart economic development with a cheaper currency
Since competitive advantages based on undervalued currencies are not likely to last for very long, Michigan could soon lose that cost-based increase in competitiveness and find itself back where it started
The move by Michigan is unlikely to have important economic effects on the rest of the US economy, which is simply too large to for the state’s new currency to have much impact
Monetary independence for old industrial states might boost US competitiveness in the margin – but that margin is not very wide
Change in value of US dollar (USD) since 2000, based on SDRs per currency unit source
Dr Robert Hancké
“It’s unclear to what extent the dollar’s unfavourable exchange rate explains the majority of the problems of Michigan and other rustbelt states.”
An effective monetary secession is likely to entice other states to follow suit
It would be of particular interest to states that trade a lot with the rest of the US and could benefit from a weak currency against the dollar
Depending on the number and geographic location of these states, this could lead to a wider secessionist movement and a fierce counter-reaction from Washington DC
Using a softer currency than the dollar might benefit the region economically
But it might also preclude a more structural shift into high-end services and other post-industrial economic activities
The idea of an independent currency for states within the US is not really on the table and it is unclear how secession – political or monetary – would work in practice
Michigan has other options for economic revitalisation, such as investment in education, skills and innovation
Dr Robert Hancké is an Associate Professor of Political Economy at the London School of Economics. His research interests include the political economy of advanced capitalist societies and transition economies as well as macroeconomic policy and labour relations.