Chris' original point was whether it was a good idea to introduce a single currency into a number of jursidictions which formerly had their own currencies and levers for monetary policy tailored to local needs.
Going the other way, would the fifty states of the US be better able to manage local affairs if there were 50 different currencies. What is gained and what is given up. I gues it is all about trade-offs. Arthur -----Original Message----- From: Keith Hudson [mailto:[EMAIL PROTECTED]] Sent: Monday, December 17, 2001 11:24 AM To: [EMAIL PROTECTED] Cc: [EMAIL PROTECTED]; Steve Kurtz Subject: Re: EU admits: Euro currency a disaster At 14:39 17/12/01 +0100, you wrote: (SK) >> I'll bet you a good dinner that the Euro doesn't decline significantly >> (5% max) against the US$, Br. Pound, or the Swiss Franc during the next >> year. (CR) >Your prediction above may well be correct, but that won't have to be the >merit of the Euro... (the USD may fall by itself, the CHF will have to be >lowered artificially to prevent harm for our export industries and tourism, >and a mix of both may apply to the GBP.) Chris is right. The exchange rate of the GBP and CHF against the Euro is a sideshow. It is swamped almost completely (approximately 10-fold) by the value of the Euro against the US$. A rough-and-ready idea of the relative strengths of trade capacity (and also of exchange values via relative investment opportunities) may be given by the Price-Waterhouse-Cooper list of the 50 most viable corporations. In this, the US has 26 mentions, EC 12. UK 4 and CH 2. The ups and downs of the US economy thus has a much more important effect on exchange rates. I wouldn't bet on which way the Euro goes. It seems to be stabilised now after many years of falling. As both the US and the EC economies seem flat on their backs, the chances are that both will continue downhill for at least a year or two (probably for a lot longer in my view). If they both decline at the same rate then the leverage effect of the US economy means that the Euro will rise. Even if the economies of France and Germany slow down relative to the US then the Euro could still rise -- though by not so much, of course. The economies of France and Germany would have to nosedive before the Euro will fall further against the US$. But that could happen in 2002! In both France and Germany, small companies (still important for employment) will be taking a pasting next year. In France, the 35-hour working week will be imposed on small companies. Hitherto, they've escaped the draconian legislation. While large firms, with their larger workforces, have been able to flex and adjust in all sorts of ways so far to obviate the rigidity of the 35-hour week, small firms can't possibly do so. In Germany, the mittelstand (predominantly family-owned machine tool firms with high exports in good times) -- previously its pride and joy -- face huge problems of succession, being unable to rationalise in the usual ways of the US or the UK, and will die at a faster rate in 2002 than now, their owners simply dying or retiring. We live in interesting times. Keith Hudson ___________________________________________________________________ Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED] ___________________________________________________________________
