The dollar system gives US a huge advantage

In an interview published the weekend last the "Financial Times", the former Chief Economist of the ECB (it left him in June of this year at the age of seventy), Otmar Issing, launched a discreet warning: "the euro is an experiment." I've never stopped to say and to prevent the foundations on which it rests are still fragile. "Issing was in a highly symbolic position. Before the creation of the single European currency eight years ago, he was the same functions in the same city of Frankfurt. But it was at the headquarters of the prestigious Bundesbank. For a long time, say 1961 where took place the first re-evaluation of the deutsche Mark until the second half of the 1990s, the German currency turned out as the strongest of the major currencies of the world. Over this period spanning more than thirty years, the value of the dollar in deutsche Mark declined more than half (more than two-thirds to the Swiss franc).

Today, as long as German and European, Issing believes that the introduction of the euro was "a good thing, an excellent thing, is because the Germany was almost at the same time losing its quality of economic model." The next Advisor to Goldman Sachs did not explain to our colleague the reasons for the abandonment by the Germany of its own model. This is not, directly, our subject. Two remarks on this subject may however inform the fate of the euro, its fragility, but also its appeal.

The Federal Republic of Germany is left to win by the deficit and spending so-called solidarity facilities (in fact, assistantship almost unconditional and indefinite) which have become the main cause. Especially, and this at the level of the "top management", the German model of social market, the "soziale Markt-wirtschaft" economy, has lost its appeal not because he was less competitive (what was almost eventually have us believe), but because the American model moves to another level. The German market was "sozial" not in the sense where we mean the equivalent of this word in French, but in the sense "beneficial for the entire society." Great American capitalism part from a narrow point of view and, therefore, brutally realistic. In principle, he chose the camp of owners (shareholders); in reality, it promotes and often preferred agents: the managers of the major groups to ensure mergers & acquisitions kicked a monopoly position. Accusing evidence, she says, and for good reason. The German competition seriously limited appetite for profit. The American system gives him free reign. Irresistible "superiority"! This dialectic has not escaped the great French capitalism.

To take the measure, and elle great is the inherent virtue of the euro the matter in the absence of which its sulphur bait would probably not enough to ensure survival, i.e. the success it is necessary to understand its reason for being at the highest level. The dollar system gives US a huge advantage. It gives them the Faculty theoretically virtually unlimited address deficits (due to all kinds of expenses, civil or military, not covered by their own resources) through certificates of indefinitely accumulated debts. But he condemned the dollar to become a more and more vulnerable currency. Where the chronic instability of an international monetary system orbiting, as is the case, on the currency. Blatant example: in 1995, the legacy of the umpteenth carabinée crisis of the Mexican peso have caused to precipitate the dollar to its lowest in Tokyo (70 yen to the dollar, against approximately 120 currently, yet still historically very low!).

Over the past thirty to forty years, whenever the dollar thus experienced serious difficulties and touched a new low point (on the long term, still less than the previous), the fragile balance monetary European was more or less shaken in its innermost. It was the first time the case in 1967-1969 (fall of the pound sterling, the Viet Nam war, "high society" of President Johnson). Reaction of six European countries of the common market (ECE): meeting in the Hague in 1969, they decide to form a full monetary union in the next 10 years. As is known, the project will take form later (at Maastricht in 1992) and its implementation (the changeover to the euro date from 1998-2002). Meanwhile, the monetary history of the Western Europe will be punctuated by several attempts, several times questioned, reconstitution of a European system of exchange rates "fixed but reviewable" (the "monetary snake"). In short, the current monetary union, characterized by the disappearance of national currencies, is the result of a compromise if it can be said radical. Devaluations and floating exchange rates have proved totally illusory solutions: the countries of the eurozone repudiate block for themselves more or less chronic instability of the Exchange since 1914, but the euro "fleet" soured-vis external, starting with the dollar currencies.

Theorist of the "monetary zone optimum", the Canadian Robert Mundell, Nobel Prize in economic sciences in 1999, wrote at this time there: "Happen a moment where accumulation of U.S. debt will render untenable the role of the dollar as the single international currency." The increase which tends to be exponential claims in dollars held by the Bank of China approach us it dangerously this test of truth Suppose that Asian countries are to get rid of part of their assets in dollars to massively buy vouchers and bonds issued in euros by the German, French, Dutch, and Italian States, and the euro rise to heights. Would it stand up to his success

The question arises because the euro is only on paper currency of a unified economic zone. The reality is that the European Union is still of economic spaces and national tax. Or Europe to eleven, or (even less) to fifteen or twenty-five form a large single market. From this point of view, the euro, instead of the dollar, is an artificial construction and will remain so for a long time. Its main strength is expressed negatively: the euro is Europe an infinitely superior to the plans of instability that preceded it.