Jim, I disagree with that writer's conclusion that the Euro debacle is due to the "American miracle". I remember late in 1998, before the Euro birth, I wrote a post on the "Asia" thread suggesting that the Euro is doomed to fail. The reason are quite fundamental, IMHO. Valuation of currencies are as much an outcome of political factors as they are of economic conditions. Sovereign countries try to establish a balance between their fiscal and their monetary policies (yes, even when the body responsible for monetary policy is "supposedly" independent, like in the US and few other countries), when that balance gets wrecked, you get currency devaluation (either sudden events or gradual deterioration). In an agglomeration of countries in which respective national pride, diverse economic activities per capita and diverse political agenda, there is no way that an "independent" pan European monetary policy could avoid running, eventually, against a wall of fiscal diversity in the countries constituting its members. Britain and Denmark understood that joining the system will mean some loss of economic independence. Just wait until we get into a real recession (and I for one, do not know, yet, how that can be avoided), suddenly fierce competition within the European market will erupt, with each country trying to do whatever they can (print money?), change trade practices, erect barriers to free trade, to maintain (it will be called "protect") the standard of living of their respective citizenry.
I think it was a bad idea to start with, and frankly, with some other destabilizing trends in Europe, could lead to massive conflicts.
Zeev |
