Thursday, 3 February 2011

If the Euro is a failure

what do you make of the US Dollar, and the British Pound?
When the Euro first came into existence, its trading value was $1.17. After the run on the currency following the financial crisis in Greece in 2010, it fell to .... $1.19. Yesterday, it was $1.36.
Meanwhile I can recall that at the start of 2009, the Pound was worth €1.43. Yesterday, it was worth €1.16!
Whatever the problems that the Euro has, and there are plenty, it still seems more appealing to the speculators who run the world economy (well, let us be real - the world economy belongs to the speculators, not to governments and definitely not to the people who elect them) than the Dollar or the Pound.
The British media (and many of the politicians there) have difficulties coping with this fact, but it is nonethless borne out by the facts.
If you want a weak, ever-devaluing, currency, the Pound is a great place to look. It lost something like 500% of its value against the Deutschmark between 1971 and 2002, and even with Europe "in crisis", it still is not gaining.
As for the Dollar, there are very obvious reasons for its weakness - the US trade gap, and deficit problems being the obvious ones. The Chinese (who should be obliged to float the Yuan - the fixed rate for the currency gives them a ridiculous advantage in trade, and unbalances the whole world economy) are tired of the large pile of US treasury bills building up - which they cannot seem to use for anything - and want a different reserve currency.
It would make sense to have one. At the same times there have to be rules which work to even out the glitches in the current system.
It would also make sense to have a world economy where ordinary people, and the governments that they elect, had more control over economic affairs, and were not controlled by the whims of speculators, gamblers and the like - but that would be whistling for the moon!

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