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Gold/Mining/Energy : Euro Impact on Gold, USD ... -- Ignore unavailable to you. Want to Upgrade?

To: banco$ who wrote (68)	11/13/1998 10:52:00 PM
From: banco$	Respond to of 289

An interesting viewpoint of Britain as home of the "euro-euro" dollar. Part of Patick Young's writing appears after the second web page. adtrading.com History and definition of the original Eurodollar: fame.org "London has long ceased to be the centre of a vibrant empire. The UK's international influence, while significant, is a shadow of its former position. However, where it has been able to maintain substantial growth is within its wholesale financial markets - largely as a direct result of its activity as an offshore financial centre. Not only are large proportions of German and French government bonds traded in London, the UK forex market is still the biggest in the world. Part of this is thanks to London's position in the middle of the global day between the Far East and the United States. However, a substantial proportion of the UK's ongoing financial success is as a result of continuing innovation. Indeed, the prefix "Euro-" first arose as a result of the UK becoming the haven for US currency which had left North America and was looking for a home to be deposited. Thus was the Eurodollar born. Now the thing about the EMU currency (so confusingly also referred to as the "Euro" - demonstrating a tendency for sparkling originality by EU supremos), is that TARGET appears to presume that the payment system will effectively be closed. Not only is this rather naive, but it also appears a remarkably arrogant (or just plain stupid) state of affairs. The reality will be that while direct EMU payments will be restricted to non-EMU members, the opportunity to invest in, lend or trade the currency will not be restricted. First there will be seepage from the system, leading to a flow of Euros looking for a new home. That home will likely be outside the EMU and unlikely to be anywhere other than London if the UK stays out of the currency. So - instantaneously! - the UK will have a completely new status as the EMU offshore centre - i.e. the home of the "Euro-Euro". Of course, the European Central Bank will likely lend at lower levels to its members. However, a quick glance at the Eurodollar deposit market would rapidly disabuse those who feel this will lead to a have-not factor for EMU outsiders. After all, Eurodollar rates, thanks to the globality of credit ratings and the hunger of arbitrageurs to close interest rate differentials in the USA and elsewhere have lead to US dollar rates effectively mirroring each other - regardless of which side of the Atlantic deposits are domiciled. In other words, the UK might actually be better off out of EMU, as the lure of the Euro-Euro to London should be utterly magnetic. For once at least, Britain's European scepticism could be its trump card. Meanwhile fretting bankers, uncertain of being in the vanguard of EMU would be better off worrying about something else... Good Trading Patrick Young