Despite solid denials from the Icelandic government that it will adopt the Canadian dollar, Icelandic economists are insisting that the move would be good for Iceland, and could even be done without Canada’s permission.
Last March, a “diplomatic embarrassment” ensued when Canadian ambassador to Iceland Alan Bones told reporters that the Canadian Central Bank was ready for formal talks with Iceland about adopting the Canadian dollar. The idea was nixed when it was brought to light that the move only had the support of primarily the Progressive Party – which is in the opposition – and that the official position of the Icelandic government is to join the European Union, thereby adopting the euro.
But this has not stopped some economists from continuing to tout the virtues of adopting the loonie, the Wall Street Journal reports.
Last Tuesday, economist Heiðar Már Guðjónsson and assistant professor of finance at the University of Iceland Ársæll Valfells, speaking at an event in Toronto, argued that adopting the Canadian dollar would “immediately cut interest rates in half”, and that the entire operation could be completed – even without Canada’s permission – within a single weekend.
All it would take to replace the krona is to purchase about C$300 million of physical Canadian currency from a Canadian bank, ship it back to Iceland, pass an emergency law to officially move to the Canadian dollar and put it in bank machines, he said.
“This would take about one weekend,” Gudjonsson said, answering one of many questions asked by a politely skeptical audience. “Get the money on Saturday and it’ll be in the banks by Monday.” … Picking an exchange rate to convert the Icelandic krona to the Canadian dollar would also be fairly uncomplicated, he said. Gudjonsson suggested it will take about “one hour” to discuss an exchange rate with Iceland’s exporters with 125 Icelandic kronas to the Canadian dollar already viewed as an acceptable target.
Heiðar Már has long been a proponent of adopting the loonie. Below is a video of him from last November arguing for the adoption of the Canadian dollar.