I'll bet you a good dinner that the Euro doesn't decline significantly (5% max) against the US$, Br. Pound, or the Swiss Franc during the next year. The charts tell me that it is likely to actually advance against the US$ & Canadian$. I haven't studied the other relationships. I'm a technical analyst, not a fundamentalist.
There is a bias 'anti-euro' by conservatives in UK & by those EC countries, like Switzerland, who have till now rejected joining in. Blair has tipped his hand saying on several occasions that he wants UK to become a closer partner with the rest of W. Europe; he doesn't mean only Norway, Sweden, and Switzerland. Lastly, when have bureaucrats like those at the EC been the best handicappers of economic outcomes? They are not people I would let manage my assets!
Some contentions:
FIVE countries in the eurozone face the threat of severe economic problems as a direct result of their membership of the single currency, according to a damning official report by the European Commission.
"direct result" claims in a complex living system are ridiculous.
In a frank admission that the single currency's critics in Britain and
elsewhere were right all along, the report warns that Ireland, Finland, Spain,
Portugal and Holland are trapped in a policy straitjacket they cannot escape.
"cannot escape": another example of predictive hubris by the author.
Over the past two years, eurozone interest rates have been kept low to meet
the needs of big economies such as France and Germany. But the low rates,
combined with the weak single currency, have given the five a huge extra economic
boost at precisely the wrong time - just when they were already booming.
and long term rates. The market sets those. Lenders and borrowers set rates according to perceptions of inflation and supply/demand.
Because the countries had joined the euro bloc, they could not put up their own interest rates to calm their economies.
Again, the banks and capital mkts set real world rates! The worship of the Central Banks is much like other forms of prayer: not necessarily rewarded as hoped.
Now they face a crash, says the report. Government deficits are likely to soar, unemployment will rise and their banking systems will be threatened with crisis. [And the crash will include other EU countries too, as was predicted by German economists as early as 1992! --CR]
The whole world is tetering on depression; who thinks those few late boomers could be immune?
The report admits that the five joined the euro at the wrong exchange rates. Having given up control of their own currencies and interest rates, they cannot use monetary policy to fend off disaster.
Time will tell, and economies adjust. In this world of 'funny money', is the $US worth its' current relative value? I think not.
'Monetary conditions in a single member state can be inappropriate, as the single euro-area interest rate may not be in line with the individual country's needs,' the report continues.
Same error of spot rate = whole curve.
The admissions come in the end-of-year report of the EC's directorate for economic affairs, in the section 'Macroeconomic Developments In The Euro Area'.
It states: 'The real exchange rate at which countries entered the third phase of economic and monetary union might not have fully reflected the competitive position of some member states.'
Maybe so; perfect foresight is impossible.
The report says Ireland is particularly vulnerable to any rise in the value of the euro because its exports would become uncompetitive, given recent strong wage inflation in the Republic.
Maybe. But after being so strong for the past decade, a slowdown is to be expected. Nothing is forever.
Gerard Lyons, chief economist of Standard Chartered bank, added: 'This report effectively concedes that the single currency is a completely unstable system.
All fiat curencies are an unstable system. Just look at 20 year charts!
'It highlights the problems of a one-sizefitsall interest rate and exchange rate. There are no shock absorbers.' Peter Dixon of Commerzbank said: 'The project is flawed. I cannot think of any good economic reasons why you need a single currency.'
There will eventually be( I predict) a handful of continental currencies
(N.Amer$, ASYEN, Euro. ) and maybe at sometime a global one with very many
(hundreds) local currencies for bioregional economic use.
Steve
-- http://magma.ca/~gpco/ http://www.scientists4pr.org/ Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.—Kenneth Boulding
