The End of National Currency

[CGowen]

Summary: Global financial instability has sparked a surge in "monetary nationalism" -- the idea that countries must make and control their own currencies. But globalization and monetary nationalism are a dangerous combination, a cause of financial crises and geopolitical tension. The world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn.

Benn Steil is Director of International Economics at the Council on Foreign Relations and a co-author of Financial Statecraft.


THE RISE OF MONETARY NATIONALISM

Capital flows have become globalization's Achilles' heel. Over the past 25 years, devastating currency crises have hit countries across Latin America and Asia, as well as countries just beyond the borders of western Europe -- most notably Russia and Turkey. Even such an impeccably credentialed pro-globalization economist as U.S. Federal Reserve Governor Frederic Mishkin has acknowledged that "opening up the financial system to foreign capital flows has led to some disastrous financial crises causing great pain, suffering, and even violence."

The economics profession has failed to offer anything resembling a coherent and compelling response to currency crises. International Monetary Fund (IMF) analysts have, over the past two decades, endorsed a wide variety of national exchange-rate and monetary policy regimes that have subsequently collapsed in failure. They have fingered numerous culprits, from loose fiscal policy and poor bank regulation to bad industrial policy and official corruption. The financial-crisis literature has yielded policy recommendations so exquisitely hedged and widely contradicted as to be practically useless.

Antiglobalization economists have turned the problem on its head by absolving governments (except the one in Washington) and instead blaming crises on markets and their institutional supporters, such as the IMF -- "dictatorships of international finance," in the words of the Nobel laureate Joseph Stiglitz. "Countries are effectively told that if they don't follow certain conditions, the capital markets or the IMF will refuse to lend them money," writes Stiglitz. "They are basically forced to give up part of their sovereignty."

....

http://www.foreignaffairs.org/20070501faessay86308/benn-steil/the-end-of-national-currency.html

[Warren Stupidity]

1. That worked so well for Argentina.

Argentina's economy was effectively shut down in 2000-2001 because of their misguided IMF directed linkage to the dollar. It was an unmitigated disaster. Meanwhile our government is periodically shitting cows over Bejing's linkage of the yuan to the dollar for similar reasons: they are putting us out of business. What goes around comes around.

[TreasonousBastard]

2. The Euro was a good start, but...

I've always thought we will eventually need a single international currency.

Capital moves so fast&easy now that while a Bhat or Peso fall can be dealt with, a Dollar collapse will not be pretty. If Yen or Sterling were seriously atacked, they might not be able to pull out either.

China and India are growing so fast and sucking up so much capital that they might just lead us into a new era of international currency, swallowing up everything else Asian before they go after the Yen and the Dollar.

If I had any money it would be in secure Euro accounts. Europe has been essentially self-sufficient for years-- the rest of the world could go to hell and they could still feed and clothe themselves.

[Doctor Cynic]

3. Your last point is false.

Europe is hugely dependent on Russia and Central Asia for fuel. That's why Putin is able to bully small countries.

[TreasonousBastard]

5. That's largely Eastern European countries that...

were in the Soviet bloc, although all of Europe does need to import oil.

But, it needs imported fuels less than the US or Japan does, and the way India and China are going, less than them, too. And, it's further along in alternative energy, transportation, and other similar areas.

[CGowen]

4. I've read from several economists that the dollar is just disintegrating faster then the €

...

In recent years, the US has been allowing the dollar to fall in exchange value to moderate the adverse effect of high indebtedness and using depressed wages, both domestic and foreign, to moderate US inflationary pressure. This trend is not sustainable because other governments will intervene in the foreign exchange market to keep their own currencies from appreciating against the dollar to remain competitive in global trade. The net result will be a moderating of drastic changes in the exchange rate regime but not a halt of dollar depreciation.

What has happened is a global devaluation of all currencies with the dollar as the lead sinking anchor in terms of purchasing power. The sharp rise of prices for assets and commodities around the world has been caused by the sinking of the purchasing power of all currencies. This is a trend that will end in hyperinflation while the exchange rate regime remains operational, particularly if central banks continue to follow a coordinated policy of holding up inflated asset and commodities prices globally with loose monetary policies, ie releasing more liquidity every time markets face imminent corrections.

..
http://www.atimes.com/atimes/Global_Economy/JA30Dj02.html

[TreasonousBastard]

6. I've been thinking that is all goes back to sustainability...

For a while, the US, Western Europe and Japan were the industrial world and we just got by with using resources. For a while in the 70s, I remember Japan going on a huge building boom and commodity prices skyrocketed, but htat levelled out.

Now, we got Brazil leading South America, China, India, South Korea and others getting in on the boom and forming prosperous societies competing for everything from oil to iron ore to wheat. Ultimately, the competition for resources will lead to this hyperinflation they speak of unless we come up with some alternatives.

Malthus was proven wrong when we came up with the Green Revolution and managed to feed the millions of new mouths. Food we can probably do, but it remains to be seen how we can put over 6 billion people in suburban homes and cars.

[Boojatta]

7. "If Yen or Sterling were seriously atacked..."

Are you talking about short selling some kind of derivative? Surely nobody can sell short unless somebody else wants to buy what's being offered for sale.

[TreasonousBastard]

8. Just good ol' shorting across markets. It's happened...

in the past and maybe could happen again, although I'm not up on the latest market technical stuff.

I vaguely remember when Britain and Italy were in the crosshairs of mysterious traders and their currencies dropped like rocks. If there's a fall for some of the usual reasons, and you can find a few billion in currency lying around in a friend's basement, one hand sells it off to keep the bear market heading down whilst the other hand shorts it like mad. The spread will be small, only a few cents, but these guys operate without regulation, taxes, or commissions so your $100 million in play could make you 2 or 3 million in a half hour or so if conditions are right. Then, when there's 10 or 20 billion, or more, in play in the schoolyard, all hell can break loose.

Thing is, with the extraordinary amount of cash around now, it might not be possible to have enough of it between yourself and your friends to actually do any deliberate harm. Of course, that also means it might not be possible to bail the system out if it goes down by itself.

So, I like the idea of fewer, but more stable, currencies. But, I'm not really the expert, and certainly don't run the show, so it doesn't make much difference what I like.

[gulfcoastliberal]

9. Sounds like the CFR is paving the way to push the "Amero"

:tinfoilhat:

[dantyrant]

10. This is what the CFR types might want..

But do you think China's ever going to allow THAT to happen? Put their money under the control of the hucksters on Wall St? Look what's happening to their Forex reserves as the dollar plunges.

[CGowen]

11. I was reading a bit history yesterday and the British proposal for a world currency called "Bancor"

came up, I have never heard of it.

http://en.wikipedia.org/wiki/Bancor



It has always been a wet dream for them to establish a world currency...

[dantyrant]

12. Ahh I know it well...

That's an idea of Keynes, IIRC. It wasn't so much that it was a global currency -- we have something similar right now called SDRs which are exchanged at the Bank of International Settlements(the Central Bank of Central Banks, if you will). Keynes' idea was to allow any currency to be freely convertible into the Bancor -- this would eliminate the need for countries to have Forex reserves to protect their currencies, and help ensure stability in the global economy.

The Bancor isn't the NWO 'mark of the beast' currency, don't worry. Nobel Laureate Joe Stiglitz resurrects Keynes' idea, but he calls it 'the global greenback'. Stiglitz isn't one of the bad ones.

[CGowen]

13. It was just mentioned in a sentence and said it would have enhanced the power of the British empire

and diminished the power of the US


In an other article someone mentioned the CFR planning for a postwar world before the war.

A then top-secret Council on Foreign Relations postwar planning group, The War & Peace Studies Group, led by Johns Hopkins President and geo-political geographer, Isaiah Bowman, laid out a series of studies designed to lay the foundations of their postwar world, already beginning 1939, well before German tanks had rolled into Poland. The American Empire was to be an empire indeed. But it would not make the fatal mistake of the British or other European empires before, namely to be an empire of open colonial conquest with costly troops in permanent military occupation.

http://www.globalresearch.ca/index.php?context=va&aid=7813