Could be. But keep in mind, a united Europe ("It's good to be king" - and
that's as true for currencies as for people - (plagarized!)), IF it happens,
with its investments, debt securities, and commodity prices suddenly
denominated in a single currency, will become an easier place to channel
significant sums of money.
If outsiders were to decide, even gradually, to shift capital away from
the US and to Europe, the results, among others, would be an upward
pressure on our interest rates, which bodes ill for the US stock market
(home buyers, purchasers of large non-durables, etc)
As you point out, however, all this depends on whether the monetary union
will work in Europe. The opposite could happen. Can Europe'sdiverse
countries survive under a single central bank (witness the nasty battle
between Germany and France over the first director) that may
simultaneously be too restrictive for some countries and too loose for
others? But...I would not go so far as to dismiss it as a "house of cards."
Better to wait, watch, pay close attention...
On Mon, 4 May 1998, Bill Schell wrote:
> The Euro will not prove workable. A number of European nations are
> reluctant participants (that is, the measure was barely approved) while
> others (Belgium and Italy) may not meet the stringent requirements of the
> Stability and Growth Pact necessary to participate. The centralization of
> reserves by participating nations will lead the Union to dispose of "excess
> reserves: (ie dollars and gold) which may well do great harm to global
> financial stability. Moreover, as Europe continues to expand to include
> more of the former Soviet empire, there will be increasingly serious policy
> divergences over monetary policy. The whole thing is a house of cards --
> smoke and mirrors. A question in parting -- whu did the proponents of this
> brain-dead scheme always speak of the cost of currency exchange when the
> potential for profitable arbitarge must always coexist?
>
>
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Judi A. Kessler
University of California, Santa Barbara
Department of Sociology
Santa Barbara, California 93106
(805) 893-3751
fax (805) 893-3324
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