Trevor,
Coins and notes don't come in until 2002. Because of
hassles about introducing them around Christmas, it now
appears that they will come in later in the year.
It is not entirely clear that there is no danger of
speculation against an individual currency between 1999 and
2002. I have heard the argument you have presented. But,
the new Eurofed will have to defend whatever currency is
under attack. I don't see the system as secure until the
actually get rid of the national currencies in 2002.
BTW, Americans who raise questions about the euro are
often lumped in with other US critics such as Milton
Friedman and Martin Feldstein, even when their politica
economics are obviously not of the same sort, and accused
of being afraid of how the euro will dethrone the dollar
globabally. There is a lot more to this than many are
aware of.
Barkley Rosser
On Mon, 2 Mar 1998 16:02:57 -0500 Trevor Evans
<[EMAIL PROTECTED]> wrote:
> Valis asks about the euro and the possibilities of speculation during the
> transition period.
>
> The euro is being introduced in two stages, the first in January 1999, when
> the currencies of the participating countries will be irrevocably locked to
> the euro, and certain wholesale banking and government transactions start
> to be denominated in euros, and the first half of 2001, when euro notes and
> coins will come into circulation. But in the intervening period, national
> currencies cease to exist, and the national notes and coins function merely
> as local representatives of the euro at the established exchange rate.
> There is therefore no basis for speculating in one of the currencies, since
> they will have ceased to exist as separate national money.
>
> There has been some discussion about what would happen if there was a
> massive demand to switch from holding, say Italian lira to German marks.
> The answer is that this could be met by the authorities, but that there is
> no reason to switch more than is needed to meet local payments, unless one
> expected the whole euro project to collapse, something which would involve
> a complete crisis for all the states involved, and the chance of which is
> absolutely minimal.
>
> A problem of speculation could however arise in the second half of this
> year, because the Maastricht treaty fails to fully specify how the exchange
> rate is determined when the currencies lock into the euro. This is because
> the euro will exchange 1:1 with the current European Monetary Unit (emu),
> but the emu is based on a basket of currencies, and includes the currencies
> of some countries that will not be joining the euro, at least at the
> outset.
>
> At present, most of the currencies likely to participate in the euro are
> trading close the centre of their permitted range against the emu. Current
> official thinking appears to be to announce these rates as the prospective
> permanent rates in May, when the formal decision on which countries will
> participate is to be taken. But this means these rates will then have to be
> defended in the exchange markets until the end of the year. If there were a
> major financial crash in the second half of the year events could take an
> interesting turn.
>
> Trevor Evans.
--
Rosser Jr, John Barkley
[EMAIL PROTECTED]
