from: http://www.aci.net/kalliste/ Click Here: <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Currency Markets The Euro Has No Clothes 90 cents, here we come. PARIS - To survive as a contrarian in France, you have to be unassailably competent, breathtakingly charming, or both. Since charm gets subjective, best be right, or at least very plausible. Patrick Artus is an economist who says his European colleagues seem to be censoring themselves in avoiding acknowledgment of the euro's deep weaknesses. Mr. Artus also thinks that the new economy is a faint and shallow notion in the key countries of the euro zone, that Europe's strong growth projections mask big structural problems and that the top leadership of the European Central Bank is doing an inadequate job. This is not exactly the party line. The party line, he says, in particular the ECB's mumbling about the euro zone's ''strong fundamentals,'' and about the common currency's ''potential for appreciation,'' is hooey. Mr. Artus, who served at the Banque de France for 10 years before becoming chief economist of the large, state-affiliated Caisse des Depots & Consignations, continues to get invited to the right professional gatherings and quoted by the right reviews. In truth, he flourishes (without reprisal or intimidation, he says), which suggests that if the competence/contrarian equation is right, Mr. Artus is on to something about the euro and the Continent's economy. If Mr. Artus were just negative or cynical, attributes that never got anybody in trouble in France, he would hardly be noticed. But his economic views aim at Europe's daily existential orthodoxies, and beyond them, their subtext questions the competence of the economic experts and officials responsible for them. Sitting in his office overlooking the Seine, Mr. Artus talks with the directness of a man who looks to make hard points as opposed to slithering around them. For starters, he said, ''We're basically concerned that the euro zone is not a strong economic zone.'' He contended that long-term capital was now draining from the zone at the rate of $220 billion a year, $120 billion of it in direct investment by industry, and $100 billion in portfolio investments such as the purchase of stocks or bonds. ''This is a real phenomenon, a much less simplistic one than Duisenberg's analysis,'' Mr. Artus argued, referring to Wim Duisenberg, president of the European Central Bank. ''The euro is on a structural slope downward, and it will be until noneuro countries invest here. As long as we aren't capable of limiting our outflow, we risk being under 90 cents'' for a euro. Referring to Jean-Claude Trichet, governor of the Banque de France, Mr. Artus said, ''If you told this to Mr. Trichet, he'd faint. It's not the sign of a strong economy if we invest elsewhere and they don't come here. It's troubling to realize that the euro will be something very weak for reasons that aren't cyclical'' - as Mr. Duisenberg argues, he said. ''The ECB is not the pilot here, but European structural weakness. They make out it's a cyclical problem, but it's not. That's the serious thing.'' In testimony before the European Parliament this week, Christian Noyer, vice president of the European Central Bank, insisted again that the euro's 18 percent decline against the dollar since its inception in January 1999 ''does not reflect economic fundamentals.'' This kind of thinking, from Mr. Artus's point of view, is delusion, and he told a French newspaper two weeks ago that it seemed likely that ''everyone is censoring themselves'' on the subject of how soft the euro's exchange rate would be at the end of the year. Mr. Artus said he believed that Germany, France and Italy, the euro zone's premier economies, had not united conditions necessary for sustained growth. He saw inadequate gains in productivity and, taking France as an example, said he doubted the growth of a new economy. ''But no, but no,'' he said, ''It's not going to happen. This message goes down badly now, since our growth could be at 3.5 percent. But it's cyclic catching-up. It's all demand and not matched by supply. You get no sense of growth in the long term.'' Underlying pessimism in Europe, he said, is based on the unproved optimism of its officials and experts. ''The government here says it will finance start-ups,'' he said. ''O.K., but we don't build the new economy technologies. We consume them. There are a lot of things bubbling, but it's not very deep, and no miracles are in store.'' Mr. Artus acknowledged that this was an individualistic position, so far from the dominant loop for some to say it was ridiculous. ''There are only a few people who make a deep structural analysis,'' he said, clearly referring to himself. ''It's not easy to be outside the consensus. But the worst thing is to embrace growth when there is no structural change. It allows us to avoid asking the right questions.'' In the past, Mr. Artus has attacked the French government's institution of a 35-hour workweek as a measure that would raise costs to employers by 4 percent or 5 percent and eventually mean an overall diminution in hiring. At the very least, checked against the initiative's current intermediate stage, he has not been proved wrong. Mr. Artus did acknowledge, though, that he might have allowed his judgment to be tainted by the herd, telling a French reporter that ''we wrote 97 cents to one euro'' - for the end of the year - ''but what did we really think? Ninety cents? Eighty-five cents?'' Asked whether all this bucking the trend made any difference, he replied: ''I've got no personal problems and no problems in speaking out. There's no censorship.'' Smiling a bit, he added: ''But there's virtually zero influence. That's because economic decisions are taken for political reasons.'' International Herald Tribune, April 20, 2000 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, misdirections and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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