Is there an International "Euro" on the Horizon?

[Laughing_Lagomorph]

*Originally posted by Chronos *
**…

Given that all of Europe is about comparable in size to the United States, in area and population, and presumably in “size of the economy”, however one measures that, how are the two situations different? Would it be better to go back to separate currencies for each state? **

One of the major differences often cited between the situation in the US and the situation in Europe under the Euro is that in spite of the ongoing integration of the separate economies in Europe, workers are still much less likely to migrate between different countries in Europe to find better jobs or cheaper housing than they are in the US. The US enjoys a level of worker mobility that Europe hasn’t acheived yet (primarily for longstanding cultural and linguistic reasons, I think).

*Originally posted by Sagrilarus *
**

Oh, and I don’t plenty of republicans that would accept a world currency – as long as it has George’s face on the front of it!
**

Washington, or W. Bush?

[Chronos]

One of the major differences often cited between the situation in the US and the situation in Europe under the Euro is that in spite of the ongoing integration of the separate economies in Europe, workers are still much less likely to migrate between different countries in Europe to find better jobs or cheaper housing than they are in the US. The US enjoys a level of worker mobility that Europe hasn’t acheived yet (primarily for longstanding cultural and linguistic reasons, I think).

OK, I can accept that, and it does seem like a real and relevant distinction between Europe and the U. S. Of course, the differing currencies would also have been a barrier to worker mobility, in which case one would expect to see a higher rate of worker mobility in Europe now than a few years ago (although still less than the U. S.). Has this been the case? Also, some European countries speak the same language and share other cultural ties. Has worker migration between, say, Austria and Germany been comparable, or is it now, to that between neighboring American states?

[yesterday]

A good question. Here’s something from a year and a half ago:

Dr. Silvia noted that labor mobility in Europe is low and there is no sign that this will change anytime soon. This is significant because labor mobility is the principal means of adjustment in the dollar area. As a result, the euro area must achieve quick adjustment through other vectors if it is to be optimal. Some look to factor mobility to achieve this. However, the European financial markets still fall short of seamlessness. A system of counter-cyclical, cross-regional fiscal transfers - the other major vehicle for quick adjustment in the dollar area - is also not in place in the euro area. The final option rests on a system of fiscal transfers.

The implication is that any labor mobility there exists was already there before the introduction of the Euro, such as what Marty Feldstein said here:

As Robert Mundell taught us many years ago, a single currency is appropriate in an area where labor and product markets are flexible, where labor is mobile among regions within the area, and where a central fiscal authority automatically provides counterbalancing fiscal transfers. These conditions are satisfied in the United States but not in Europe. European wages are very inflexible. Labor’s mobility is severely limited by barriers of language and custom even if legal barriers are no longer present. And there is no significant offsetting fiscal transfer to compare to the roughly 40 percent offset that US taxes and transfers achieve.

Source: http://www.nber.org/feldstein/euro.html

Not exactly a glass half-full guy on this topic.

[Spectre_of_Pithecanthropus]

*Originally posted by John W. Kennedy *
**The dollar will be replaced by the Euro on the day the last Republican dies. **

Also after the last penny freak dies, and the last paper dollar freak.

[John_W.Kennedy]

Anent worker mobility, what about the Gastarbeiter factor?

[Captain_Amazing]

Not to nitpick, but I just wanted to remind everyone that the Euro is an international currency.

[MpathE]

There are many good reasons for an international currency, and yes the $ US is currently the De Facto currency used for exchange worldwide. But it ain’t quite a world dollar.

Having said this, making an international Euro ain’t quite as easy as saying “hey I made a new international currency guys!!” Countries have long used their currencies and particularly the exchange rate (relative value) of their currencies to control their economies. This “monetary policy” is why interest rates, buying power and so on vary from nation to nation - it is also responsible for setting the price of foreign goods, and determining how much money an exporter gets for their goods overseas. To a certain extent a country is better served by having it’s own currency (if the U.S didn’t have it’s own currency and couldn’t set it’s own monetary policy you can bet the U.S. economy wouldn’t be showing signs of a recovery now!).

If a country joins a “group currency” it loses a lot of it’s ability to control it’s own economy, which sucks when the shit hits the fan. Normally a country could lower interst rates in order to promt people to spend more and stave off a recession, but in a “group currency” the interst rates would be set for the benefit of the whole group, making an immediate change unlikely.

Becase of this, in order to form a group currency the member nations have to synchronise their economies, so that the economy can operate as a whole, and the group currency can effectivly respond to the needs of that groups economy. This is pretty much what Europe has done, with the Eurozone economies being more-or-less synchronised, although in typical european fashion the job has only been half done, and several of the member nations are finding it a little uncomfortable as their economies are performing better or wose than the greater whole, giving rise to occasional problems.

In even more typical European fashion France and Germany are throwing their weight around to get things done their way, at the expense of the other, smaller nations and are breaking all sorts of stability and spending pacts designed to put and keep their economies in sync (France makes a habit of insisting on stringent rules which it then breaks, leaving everyone else disadvantged).

A little off topic, but I guess you can see now why it isn’t a simple mattter of printing some notes with pictures of the globe on them.

So! - to answer your question “Is an International ‘Euro’ on the horizon?” We have to ask, can we see every single country in the world synchronising it’s economies and letting most trade barriers fall? Do we reckon many big nations be willing to give up power and control of their own economy?

Nah.

Sadly, an group currency is not really a way as such, of bringing a group of nations together, more a further step that can only be taken once a group of nations are already well along the road to becoming one entity.

Having said that it I’d have to bet on it happening one day, and yes it will bring us all together like never before, but it won’t be the first sign of true “Internationalism” we’ll see.

y’all have a good day wherever U are

Alex Whitehouse, Auckland, New Zealand.
joinalex@paradise.net.nz (comments or questions welcome)

PLUR