Date: Thu Oct 16 2003 13:51
trotsky (the Euro) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
a quick word on the euro debate: as i have always pointed out here, the euro is objectively a superior currency to the dollar simply based on the fact that the ECB's mandate is extremely narrow: it only entails the maintenance of the currency's internal and external value. no rules about achieving 'maximum employment' ( as if a central bank could do that, LOL! ) . therefore, the ECB is far more conservative than the Fed. note also that the new incoming ECB chief Trichet, just as his predecessor, insists that the Maastricht stability pact MUST be adhered to. the fact that the euro is 'stateless', i.e. not depending on the promises of a SINGLE government is not a disadvantage, but rather the opposite: it ensures that the member states of the euro-area watch each other like hawks lest one of them become negligent. all the attempts by Keynesian statists to weaken the stability pact have so far been rebuffed for this very reason - and the dollar has no such limitations, as the Shrubs government has demonstrated.
when considering the relative merits of a currency, it is not so important what 'growth rates' the governments of the currency area report ( and as we know, US growth is ACTUALLY currently inferior to euro-area growth, if one strips out the hedonic indexing tricks ) , what is important is how the central bank acts. and the Greenspan Fed is the modern-day equivalent of John Law's Mississippi bubble scheme...totally reckless, accommodating rank speculation on a vast scale, and furthering the accumulation of debt far beyond the economy's prospective ability to service said debt.
the ECB is by comparison a paragon of conservatism and stability. it CARES about money supply growth rates for instance. it does NOT let politicians and the markets badger it into loosening its stance unnecessarily. of course the euro is still a fiat currency, but that characteristic is shared with all the world's currencies. i am only talking about the euro's RELATIVE merits, and it is clear to me that it beats the dollar hands down in every aspect that counts. take the international oil trade away from the dollar, and you could begin thinking about alternative uses for it ( toilet paper, sealing leaky roofs, etc... ) |
