[PEN-L:2404] Re: Re. euro-query

[Rosser Jr, John Barkley]

     Doug H. is right in how this will show up.  The 
analogy is to state governments in the US.  Some have to 
pay higher interest on their bonds because of their 
"unsound" finances.
     We are, however, in a weird and essentially 
unprecedented zone in financial and monetary history as 
near as I can tell.  One can say that that the individual 
remnant national monies are merely "forms of the euro."  
That is true from the standpoint of demand deposits or any 
form of bank money.  The Dutch cannot "expand their money 
supply" through any of the usual textbook methods.  The 
only way they can do so is the old fashioned one, print or 
mint more M0 actual physical guilders.  Now, although most 
eurofinanciers poo-poo the possibility, it is not out of 
the question that black markets in actual currencies could 
develop in the next three years, that somebody might be 
trading guilders for marks on the streets of Amsterdam, or 
wherever, for something other than the rate implied by 
their fixed ratios with the euro.  As long as these 
distinct "national forms of the euro" exist, such an 
outcome is possible.  That it would or could force a change 
in those fixed ratios is highly unlikely.  However, it is 
not totally impossible despite the assurances of the 
eurofinanciers.  To avoid it will involve offsetting 
behavior by the new European Central Bank which will 
probably be forthcoming, not to mention pressure on any 
country whose behavior is leading to such black markets.
Barkley Rosser
On Thu, 21 Jan 1999 08:20:47 -0800 Jim Devine 
<[EMAIL PROTECTED]> wrote:

> At 03:31 AM 1/21/99 -0500, you wrote:
> >There is no longer a free-market exchange rate for the guilder since the
> >guilder no longer exists as an independent currency. It is form in which
> >the euro circulates in the Netherlands pending the introduction of euro
> >notes and coins in 2002. The same is true for the lira in Italy.
> >
> >Under the stability pact, euro-zone countries are required to maintain
> >their fiscal deficit below 3 per cent. This was originally proposed by the
> >German CDU government, who wanted automatic fines introduced for
> >governments that broke the rule. However the French government successfully
> >insisted that any fines must be subject to political approval by the EU
> >authorities. Even though the the current social-democratic governments in
> >France, Italy and Germany are fiscally conservative, it is difficult to
> >envisage them approving fines.
> 
> so what happens if the Dutch (for example) over-spend? would it put stress
> on the unity of the Euro? are there any consequences? 
> 
> Jim Devine [EMAIL PROTECTED] &
> http://clawww.lmu.edu/Faculty/JDevine/jdevine.html
> 

-- 
Rosser Jr, John Barkley
[EMAIL PROTECTED]