Sweden found itself
subsidizing an arbitrage against its own economy. It inevitably reacted
by ending the import of other members' tokens. The Union thus ended.
The price of gold was no longer fixed and token coins were no more
convertible.
The East African Currency Area is a fairly recent debacle. An
equivalent experiment, involving the CFA franc, is still going on in
the Francophile part of Africa.
The parts of East Africa ruled by the British (Kenya, Uganda and
Tanganyika and, in 1936, Zanzibar) adopted in 1922 a single common
currency, the East African shilling. The newly independent countries
of East Africa remained part of the Sterling Area (i.e., the local
currencies were fully and freely convertible into British Pounds).
Misplaced imperial pride coupled with outmoded strategic thinking led
the British to infuse these emerging economies with inordinate amounts
of money. Despite all this, the resulting monetary union was
surprisingly resilient. It easily absorbed the new currencies of Kenya,
Uganda and Tanzania in 1966, making them legal tender in all three and
convertible to Pounds.
Ironically, it was the Pound which gave way. Its relentless
depreciation in the late 60s and early 70s, led to the disintegration
of the Sterling Area in 1972.
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