[PEN-L:2695] Re: Re: Re. euro-query

["Rosser Jr, John Barkley" <rosserjb@xxxxxxx>]

Trevor,
    You are right about how the nineteenth century US case
differs from the euro case.  But, how do you answer my
arguments about a possible black market in cash, with my
potential Dutch drug dealers as a possibility.  Answering
that Moroccan hashish dealers don't prefer marks or
something like that is not an answer.  We are dealing with
a _potential_ problem.  You have ruled it out "by
definition" because "there are no national currencies."  I
contend that there still are.  They are just very strongly
fixed in rates with each other through the euro, almost as
strongly as dollars printed by the Richmond Fed are to
those printed by the New York Fed, but not quite as
strongly.   Again, a currency can trade against itself in
the real world at varying rates under weird conditions,
e.g. my rubles for kopecks example that really happened in
August 1992 in Moscow.
Barkley Rosser
On Thu, 28 Jan 1999 17:40:26 -0500 Trevor Evans
<Trevor_Evans@xxxxxxxxxxxxxx> wrote:

> I think that Barkley's examples differ from the situation regarding the
> euro. Notes issued by US banks in the nineteenth century exchanged at
> varying discounts because there was no central bank that integrated the
> monetary system. In the case of the euro, the European System of Central
> Banks stands ready to convert all currency issued by member states at the
> official rate.
>
> Before answering Jim Devine's important question about thinking the
> impossible - what could lead to the break up of the european monetary
> system -  I wanted to consult with some comrades here who I meet with in a
> discussion group every couple of weeks.
>
> The first response was to ask, what could lead to the collapse of the US
> monetary system.
>
> The next suggestion was a revolution in France. Unfortunately this doesn't
> look very likely in the near future.
>
> A last response was that, if the European Central Bank pursued a highly
> restrictive monetary policy, some countries might chose to opt out of the
> system - something for which there is no provision, but would  be difficult
> to prevent if a government was really determined. But even then, unless it
> were Germany or France, its not clear that this would threaten the euro;
> and its also very difficult to envisage realistic conditions under which a
> member country would wish to do so, given the increasing  degree of
> integration of the economies, and also that the euro is an attempt to
> reduce countries vulnerability to external financial crisis.
>
> As I have already said, in my opion, the time when the system of exchage
> rates was potentially at risk was between last summer, when the decision
> was taken  to adopt the central EMS rates as the basis for the euro
> conversion rates, and the end of the year, when the rates were fixed
> irrevocably. Now that the rates are fixed, euro-zone countries have ensured
> themselves against exchange-rate instability within the zone.
>
> Trevor Evans
> Paul Lincke Ufer 44
> 10999 Berlin
>
> Tel. & fax: +49 30 612 3951
> Email: Trevor_Evans@xxxxxxxxxxxxxx
>

--
Rosser Jr, John Barkley
rosserjb@xxxxxxx