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Should the USD be abolished?
- Thread starter Debaser82
- Start date
No, because the US is more of a single state than the EU. Each EU country has its own taxes, budget, army etc...Quote from Debaser82:
Why is a break up of the US less phantomable then a break up in the Euro?
Just because it's been around longer?
About half of EU countries have their own currency.
European countries are more culturally diverse. People speak, write and watch movies in different languages.
There is European Economic Area (EEA), which includes EU countries + Iceland, Liechtenstein and Norway. These 3 countries teke the advantage of free trade while not being part of the EU political system. Any country that wanted to leave the EU would likely stay a member of EEA and in this way ensure the minimal effect of the change on the economy and immigration. In the US there is no such mechanism.
Why'd you have to post such an interesting topic? I swore I'd never descend into this forum again.
Sigh.
1 - Yes, partially because we've been around longer.
2 - Yes, it makes no economic sense at all for an Alabama farmer to share the same currency with a New York banker. Read Cities and the Wealth of Nations by Jane Jacobs if you want a spirited (if somewhat dated by now) discussion of how little sense it makes. I was bemused by the fact that Europe would go off and put this millstone around its neck in the same way the US already had. It's not like Europe was lacking for prosperity. I still can't figure out why you would. Just think about this: how is a Spanish company that wants to produce something that competes with a German import supposed to get started? If Spain still had a currency, the lower quality would be compensated for by the disproportionately lower price of the Spanish good, which would at least give this company a fighting chance by buying it some time. That's gone now.
3 - However, you're missing one obvious thing: we speak the same language and have pretty much the same culture throughout. There's less difference between living in New York or Atlanta than there is between living in Marseilles or Barcelona.
4 - Combined with that we've had a system in place for more than 200 years that prohibits the states from raising protectionist measures against each other and forces them to recognize each other's certifications, which is why an Alabama driver can drive in New York. The states aren't thought of as being at all different, and ...
5 - only a few have branches of the Federal Reserve. By contrast, each state in the Eurozone still has a central bank, and these banks all issue the euro. It would actually be logistically not that hard to go back to a national currency for the nations in the euro. If Alabama wanted to go its own way, besides the fact it would have to fight off the combined armed forces of the US, it would have to create its own currency and put all the structures in place to support that.
Sigh.
1 - Yes, partially because we've been around longer.
2 - Yes, it makes no economic sense at all for an Alabama farmer to share the same currency with a New York banker. Read Cities and the Wealth of Nations by Jane Jacobs if you want a spirited (if somewhat dated by now) discussion of how little sense it makes. I was bemused by the fact that Europe would go off and put this millstone around its neck in the same way the US already had. It's not like Europe was lacking for prosperity. I still can't figure out why you would. Just think about this: how is a Spanish company that wants to produce something that competes with a German import supposed to get started? If Spain still had a currency, the lower quality would be compensated for by the disproportionately lower price of the Spanish good, which would at least give this company a fighting chance by buying it some time. That's gone now.
3 - However, you're missing one obvious thing: we speak the same language and have pretty much the same culture throughout. There's less difference between living in New York or Atlanta than there is between living in Marseilles or Barcelona.
4 - Combined with that we've had a system in place for more than 200 years that prohibits the states from raising protectionist measures against each other and forces them to recognize each other's certifications, which is why an Alabama driver can drive in New York. The states aren't thought of as being at all different, and ...
5 - only a few have branches of the Federal Reserve. By contrast, each state in the Eurozone still has a central bank, and these banks all issue the euro. It would actually be logistically not that hard to go back to a national currency for the nations in the euro. If Alabama wanted to go its own way, besides the fact it would have to fight off the combined armed forces of the US, it would have to create its own currency and put all the structures in place to support that.
Quote from trefoil:
2 - Yes, it makes no economic sense at all for an Alabama farmer to share the same currency with a New York banker. Read Cities and the Wealth of Nations by Jane Jacobs if you want a spirited (if somewhat dated by now) discussion of how little sense it makes.
Can you summarize?
The argument is as follows:
Economies are built around cities. Thus, for instance, Chicago is a separate and distinct economy from New York. In the same way that I argued above that it's hard for a Spanish company to set itself in competition with a German import, so too cities within a currency union are hobbled by their new companies having to compete against imports from other cities within the union without the shield of a currency.
This works the other way as well: a rapidly advancing economy needs more imports from outside, especially from advanced places like itself, so that it can stay technologically in sync with its neighbors. If it has an undervalued currency, the stuff coming from advanced places outside is more expensive than it should be and so hobbles the businesses in the city with an undervalued currency.
Economies are built around cities. Thus, for instance, Chicago is a separate and distinct economy from New York. In the same way that I argued above that it's hard for a Spanish company to set itself in competition with a German import, so too cities within a currency union are hobbled by their new companies having to compete against imports from other cities within the union without the shield of a currency.
This works the other way as well: a rapidly advancing economy needs more imports from outside, especially from advanced places like itself, so that it can stay technologically in sync with its neighbors. If it has an undervalued currency, the stuff coming from advanced places outside is more expensive than it should be and so hobbles the businesses in the city with an undervalued currency.
Those are all fair points, trefoil. As I see it, however, if there will be a great deal of trading between two currency regines, there will need to be a reliable, predictable mechanism for moving between tbd two currencies. So either one currency will be expressed in terms of the other, or both currencies will be expressed in terms of a third. In either case, they are effectively dealing as if there were one currency.
The more closely coupled the two economies, the more like one currency things will look.
The more closely coupled the two economies, the more like one currency things will look.
This argument doesn't stand scrutiny. Think of an export-based economy such as Czech Republic. With exports making 58% of the GDP and imports at 53% of the GDP the country has a free-floating currency that isn't closely linked to the currency of any of the major trade partners .Quote from Random.Capital:
Those are all fair points, trefoil. As I see it, however, if there will be a great deal of trading between two currency regines, there will need to be a reliable, predictable mechanism for moving between tbd two currencies. So either one currency will be expressed in terms of the other, or both currencies will be expressed in terms of a third. In either case, they are effectively dealing as if there were one currency.
The more closely coupled the two economies, the more like one currency things will look.
Exporters worried about exchange rate fluctuations hedge their revenues via long-term contracts and/or via foreign exchange derivatives.
Currency unions, including both the US and the EMU, are first and foremost political constructs, which with passage of time, as well as some pain and suffering, may evolve into economic unions. The USD currency union is what it is today after a 100+ years of evolution and a lots of conflict. Jury's definitely still out re the EMU.Quote from Debaser82:
People say it makes no (economic) sense at all for a Greek farmer and a German factory worker to share the same currency.
It's an supposed anomaly that benefits neither the Greek nor the German.
Why does it makes sense for an Alabama farmer and a New York banker to share the same currency?
Only because they both feel 'American'?
Quote from jprad:
So, you think this is somehow different than when oil was trading around $140/bbl?
Gold looks awfully high to the uninformed observer. The point being made is the US is in a weakened state financially and we only have ourselves to blame. There is no Volcker to come in and save us this time. Bernanke has no choice but to try and lessen the pain in the short run. He knows the US is in deep doo-doo. If you are of the opinion these conditions will be rectified without future massive dislocation, then sure gold will plummet. What are the odds? Right now slim to none. The global authorities are already talking about some sort of basket of currencies including gold. Who knows where this will all lead, but it does appear gold will play a monetary role in the future. There are some intelligent folks on this board, but without any common sense and blinded by Wall St. propaganda. QE to infinity can only lead to some sort of future currency crisis as it behooves to looks at the facts. It is not a pretty picture.