C Kahn,
I guess the USD was, and still is, the primary concern for Europe's moneymen because the US is by far Europe's largest trading partner --as far as services and industrial products go. Furthermore, since almost all the commodities and raw materials are quoted in $ (e.g.: oil, gold, coffee, copper,...), the USD/euro ratio directly affects the European trade balance with almost every other third country.
Otherwise, a weak euro places corporate Europe on a vantage ground with regard to US corporations (just think of how a smidgen of change in USD/euro can put an Airbus long-haul aircraft at a bargain compared to Boeing). OTOH, a weakening euro hurts its credibility as a reserve/borrowing currency.
Personally, I don't buy this story about a single currency transforming Europe in a challenger on a level playing field with the US. I believe that the launch of the euro was primarily sponsored by Europe's corporate establishment in order for them to keep up with the Joneses in the brave new global M&A game: every other day there's a headline about the umpteenth biggest merger ever. At random: Citicorp/Travelers; Daimler-Benz/Chrysler; BP/Amoco; Renault/Nissan; TimeWarner/CNN; etc, etc. Corporate Europe was running out of time to catch up with the Anglo-Saxon capitalism: if each Italian, French, or even German corporation with global ambitions remained entrenched in its domestic market, they'd never have been able to command the necessary (stockmarket) valuations to grow on a global scale. That's for the financial aspect.
On a commercial basis, these same European corporations would likely have languished in an already sluggish European environment: without the rationale enforced by a single currency, not only would European companies get hampered by the pecularities of their neighbors (whether in consumer behavior, accounting practices, nationalist cronyism, etc.) but they'd be further outmaneuvered by the threat of 'competitive devaluation' in their attempts to expand Europewise. For, in the past, each European country could sovereignly adjust its currency as it saw fit.
All in all, the most obvious threat to the US is a euro challenging the USD as a reserve currency since the US is still the largest borrower country. But then again: the US ended up in such a financial scrape because of its 'buyer-of-last-resort' status. In order to keep the global, capitalist fabric up-and-running, the US has to keep its domestic market wide open to (mainly Asian) foreign imports.
Hence the question is: what would Europe do with a windfall money supply from international investors? Will it do just as the US? Nope! Because Europe's social fabric won't allow for it to sacrifice its own 'national champions' for the sake of the global economy. Europe's economic dynamics is quite different from the US's.
Besides, there's also the issue of geopolitical stability.... To put it bluntly: which of the US and Europe would some swarthy, wealthy cosmopolitan take up as his/her inviolable refuge? You can bet your boots that the US'll come out on top! The reason's too simple --and MNI's nodding his head: in the US, whether you're black, Chinese, Hispanic, white, Arab, Jewish, Christian, Scientologist, gay, polygamous (Mormon), S&M freak, anarchist, communist, supremacist, Amish, whatever, every penny counts! Which means that the US society is much less likely to prejudice you (and your property) on the basis of such anthropological criteria. But in Europe it's a whole'nother ball-game: from one day to the next, some psychopathic populist can pop up in the government and conduct a witch hunt.... Milosevic comes first to mind but think of all these Jews who, in the 1930s, thought their property couldn't be safer than stashed away in Switzerland --well, they were dead right: 50 years later, even their legitimate heirs can't lay their hands on it! Talk about a safe haven!
So, I think we have to keep in mind that macroeconomics encompasses much more than trade balances, budget deficits, and other financial ratios. Ultimately, any currency's fate is pegged to politics, geostrategy, and History.
My 2 cents,
Gustave. |
