The Case for Regional Currencies

[Dover]

One article from Foreign Affairs online mag (1999):

From EMU to AMU? The Case for Regional Currencies
Zanny Minton Beddoes
From Foreign Affairs, July/August 1999


When tomorrow's historians look back at the recent financial crises and subsequent efforts to reform global finance, they will reach two conclusions. First, the grand rhetoric of creating a new global architecture yielded few concrete results. Second, we failed to foresee the most profound consequence of the turmoil: regional currency unions. By 2030 the world will have two major currency zones -- one European, the other American. The euro will be used from Brest to Bucharest, and the dollar from Alaska to Argentina -- perhaps even in Asia. These regional currencies will form the bedrock of the next century's financial stability.
That claim may seem bold, even outlandish. The concept of regionalism, whether financial, military, or commercial, hardly enjoys an auspicious reputation. Free-trade enthusiasts fret that regional trade arrangements divert more trade than they create. Europe's single market was long portrayed as "Fortress Europe" by outsiders. European aspirations for an independent defense initiative raise some eyebrows in Washington. Japan's proposal to create an Asian monetary fund in 1997 was quickly squashed by the Americans. In each case, opponents fear that regional approaches are exclusionary, protectionist, or destabilizing. But in finance, that prejudice is misplaced. Regional currencies will prove the best route to reconciling the economic imperatives of increasing international capital mobility with the political realities of the nation-state.

To understand why regional currency zones are in the cards, start by considering why the status quo is untenable. Over the past five years, financial turmoil has shattered the semi-fixed exchange-rate regimes that much of the developing world once favored. One after the other, countries with pegged (but ultimately adjustable) exchange rates had to devalue in the face of massive capital outflows. The recent crises have taught emerging economies a lesson that rich countries first learned through the collapse of the Bretton Woods system in the early 1970s, later reinforced by the 1993 collapse of the European exchange-rate mechanism: in a world of increasingly mobile capital, countries can either allow their currencies to float or fix them irrevocably, for instance through currency boards. They can even go further and attempt currency union. But the muddled middle ground, so popular in the years when capital was less mobile, has been wiped out by technological innovation and policy liberalization.

So much for the status quo. What might the future offer? Conventional wisdom among elites holds that most countries should opt for floating rates. By allowing their currency to float, the argument goes, emerging economies can maintain an independent monetary policy while insulating themselves from the vicissitudes of global capital flows. This view has gained even more credence in the past few months as Brazil's decision to float its currency, the real, did not produce the high inflation that many observers had feared. Nonetheless, most countries will find that advice sorely mistaken, for the second lesson of the emerging-market turmoil is that floating exchange rates tend not to protect a country from volatility. Indeed, they may even increase financial turbulence.

..cont'd

http://www.foreignaffairs.org/19990701facomment987/zanny-minton-beddoes/from-emu-to-amu-the-case-for-regional-currencies.html

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Response to this article (excerpt):

An American EU

...Of course, what the new world order architects have in mind for the Americas is exactly what they are foisting on Europe in the form of the European Union and the new euro currency. That evolving supranational monstrosity was also presented to unwary Europeans as a “spontaneous” movement aimed at “free trade” and “free markets.” But Europeans are belatedly waking up to the fact that it is no accident that the centralized, socialist bureaucracy of the EU is strangling their freedoms and national sovereignty: It was planned to develop into exactly that from the start.

There is no longer reason for any sensible American to doubt that the CFR coterie intends to take us down the same path. The one-world architects of the European Monetary Union (EMU) are openly advocating an American Monetary Union (AMU). The CFR journal, Foreign Affairs for July/August 1999 provides ample confirmation. In the opening paragraph of his essay, “From EMU to AMU?: The Case for Regional Currencies,” Zanny Minton Beddoes of Britain’s The Economist pronounces with oracular certainty: “By 2030 the world will have two major currency zones — one European, the other American. The euro will be used from Brest to Bucharest, and the dollar from Alaska to Argentina — perhaps even Asia.”

“Skeptics argue that a national currency is a basic symbol of sovereignty that countries choose to forfeit only under extraordinary circumstances,” says Beddoes. Mr. Beddoes and his devious allies would surely like all of us to believe that a national currency is only a “symbol of sovereignty,” but it is much more than that, of course. It is an essential ingredient of sovereignty, and a nation is at the fearful mercy of any entity to whom it may be foolish enough to forfeit so important a power. The Federal Reserve System and the International Monetary Fund have already vindicated that claim a thousand times over, and yet here we are about to be enticed into an even deeper abyss.

Words fail to convey the enormity and audacity of this colossal, dangerous fraud we are witnessing in the current “spontaneous movement” to transform the Western Hemisphere into a carbon copy of the increasingly tyrannical European Union. But even that grim prospect of an America under a EU-style centrally controlled economic bloc does not begin to convey the seriousness of the peril we face if we allow these plans to succeed. Regional “integration” is but a steppingstone to the real objective sought by the Insiders of a self-perpetuating Conspiracy: Total, unrestrained power on a planetary scale. And if it ever succeeds in attaining that monstrous objective, we can be sure that the killing fields of Rwanda, Cambodia, Afghanistan, Ethiopia, China and Russia will pale by comparison to the global bloodbath that will be unleashed. Once we are willing to grasp that fact, we will begin to give even more effort to preventing this nightmare from ever being realized.

-- from The Dollarization of the Americas

http://www.stoptheftaa.org/artman/publish/article_38.shtml

[EVDebs]

1. See E. F. Schumacher Society on local currency projects n/t