Euro vs. Amero?

[Bushdoctor]

Euro questions

There is talk of replacing the dollar with the 'Amero'. This would be a common currency for the US, Canada, and Mexico similar to the Euro. Some people think it could happen by 2010. Personally I doubt it will ever happen at all. My question is for those familiar with the Euro. How has it affected the countries that took part? Has it helped or hurt the richer nations? Has it helped or hurt the poorer ones, has it just made everyone involved stronger, or weaker? Has this been a positive or a negative overall?

I know it is supposed to be for the common good, I'm all for lifting people out of poverty and all that, but it looks to me that the Euro is getting too strong against the dollar now and it is starting to slow exports into the USA. This could slow the economies for those European nations. It's helping big American businesses that compete in Europe.

It seems to me (as a US citizen) that sharing currency with Canada wouldn't be a problem, but I can't see Mexico contributing anything good. They have had a corrupt government for as long as I can remember. I'm not bad mouthing Mexican people, just their government. My first instinct is that it would drain the USA of the dollars power that it has gained through our reputation of stability and fairness over the years.

I'd be interested in hearing how the Euro has affected Germany, and if England made a good or bad decision by keeping with the pound.

[Nanook]

Originally Posted by Bushdoctor

Euro questions

There is talk of replacing the dollar with the 'Amero'. This would be a common currency for the US, Canada, and Mexico similar to the Euro. Some people think it could happen by 2010. Personally I doubt it will ever happen at all. My question is for those familiar with the Euro. How has it affected the countries that took part? Has it helped or hurt the richer nations? Has it helped or hurt the poorer ones, has it just made everyone involved stronger, or weaker? Has this been a positive or a negative overall?

I know it is supposed to be for the common good, I'm all for lifting people out of poverty and all that, but it looks to me that the Euro is getting too strong against the dollar now and it is starting to slow exports into the USA. This could slow the economies for those European nations. It's helping big American businesses that compete in Europe.

It seems to me (as a US citizen) that sharing currency with Canada wouldn't be a problem, but I can't see Mexico contributing anything good. They have had a corrupt government for as long as I can remember. I'm not bad mouthing Mexican people, just their government. My first instinct is that it would drain the USA of the dollars power that it has gained through our reputation of stability and fairness over the years.

I'd be interested in hearing how the Euro has affected Germany, and if England made a good or bad decision by keeping with the pound.

Interesting to read. Here in Holland we have always been very much in favour of getting the Euro. This mainly because we are a trading and traveling nation. Having one currency for about 12 countries then saves you a lot of hassle with exchange rates etc.

During the first year especially, prices have risen considerably. The best example to give is when you bought a cup of coffee at any terrace. The bar owners basically change the sign for the Dutch Guilder by that of the Euro. Bear in mind taht 1 Euro = Nlg 2.2031. In the bars it was quite extreme, but in general one can say that the cost of life increased by about 6-7% that year.

On the other hand, since I work in International Business, I can say it is quite good to have, because now the Euro has settled down and has proven to be a pretty stable currency. And again, it also limits our risks on exchange rates.

Finally, about 2 months ago, they had a poll here in Holland. A big majority of the population would like to go back to the guilder time for all kind of reasons, but especially, because the overall thought is that life got much more expensive.

I hope I gave you some further info.

Nanook

[K2]

I'll make this a short one as I feel really tempted to write a mini-novel ....

Considering that the US has not changed the greenback for 70+ years - can just imagine the delight from the right wingers and traditionalist for attempting a new currency. The US dollar is so much a part of the US identity any thought of an 'Amero' is so unlikely.

US-Canadian combined currency would make sense and would be called funny enough - the US Dollar - after all Quebec is now a separate country with Canada - perhaps they want the Franc back or do thay want to adopt the Euro?!! Inclusion of Mexico in a combined currency is as likely as the UK joining the Euro!

OK now to the Euro - the Euro has a fatal flaw. Its ok setting up a pan european currency if you hand over soverign debt issuing to a central debt issuing agency. However no Euro using memer of course wants to loose the power to issue its own soveriegn debt - so what a mess we have now. Shall we say the less prudent countries like Greece, Portugal, Spain (and heaven forbid they ever let Turkey in) issue away like crazy (in excess of their limit - 4% of GDP) while prudent countries like say Luxemburg, Holland behave 'resonsibly'. So whats the result - no policing mechanism for the bad boys (Germany is in this club too). But have to say (because no-one cares about risk any more) that price of debt issuing has plummeted because of the Euro - all rates converging to the ECB rate (read Germany). So while you may moan about you ouzo being more expensive in Euro's - you lucky lot have have benifitted hugely from artifically cheap credit (national debt).

Perhaps one day (not in the next 10 generations) the Fed will impose the US dollar on the whole world and the US treasury will be the world debt issuing agency - that way the the US truly would have complete power over everyone.

By the way the little Austian with the moustache and swastika would have been delighted to see his economic dream for Europe come true.

[shark1963]

Inclusion of Mexico in a combined currency is as likely as the UK joining the Euro!
So whats the result - no policing mechanism for the bad boys (Germany is in this club too). But have to say (because no-one cares about risk any more) that price of debt issuing has plummeted because of the Euro - all rates converging to the ECB rate (read Germany). So while you may moan about you ouzo being more expensive in Euro's - you lucky lot have have benifitted hugely from artifically cheap credit (national debt).

[/quote]

Funny post K2.As its part of the EU, all members have to join the euro.Of course there are time frames for each member. Nobody will force the brits to introduce the euro soon, but they have to do or just leave the EU, which will be much more unlikely.An isolated Brit economy wouldnt be much appreciated by the brits i guess.Standing outside between the US and the EU like other east europaen countries.Also many new members from east europe will join.

After the euro was introduced , the prices where going up , but not because of the euro itself but because of some "business man" using the situation that people havent been used to the new currency and just changed the sign to their prices. As Nannok said especially in bars,restaurants and tourist spots they used this trick.But now the people are used to the new currancy .There have been made some mistakes by the goverments to avoid this but now its already over and just the past.

Germany is already under the 3% mark this year again and will be also next year. The economy growth in germany was 3.4 % this year , no.1 from the G7 nations!!)And not to forget that germany has still to pay 70 bill. euro transfers from west to east germany each year and is also paying the biggest transfers to the EU!!Some of the old members which got money out of the EU wallet in the past years, like Ireland, will have to change into payers in the future.

The strength of the Euro against the US $ doesnt really affects the exports as the east europaen market is running high that fast.The exports to the US markets will be still important for a long time but imho will get more and more unimportant.Also to see the China market wich just eats a lot of exports.I know many companies which have already problems to deliver the amounts (especially in the construction branches) they ask for!!!

Finally to compare the euro to the US currancy isnt that "fair" as you dont have to forget that the EU isnt one nation with one policy.

Just my 2cents to this

[K2]

Originally Posted by shark1963

Funny post K2.

I don't make 'funny posts' about economics or financial markets

Sorry Shark you may not like this, but this is one area I really do care a lot about - so here goes.....

Under Protocol A14 (July 2004) here:

http://ec.europa.eu/economy_finance/...dfs/a14_en.pdf

The UK does not EVER have to join the Euro unless a decision is made by the UK Goverment. The current Labour Goverment promised that if such a decision were to be taken it would would be put to a national referendum. As the Labour Party is more europhile than the Concervative ooposition - after the French "non'' to the European Consitution, the UK shelved all idea of UK euro entry under this paliament.

The UK decision

The government is in principle in favour of entry. It has said that it would hold a vote in Parliament followed by a referendum, and that it would do this if it seemed clearly in the country's economic interests to join, on the basis of five economic criteria. The summary of the government's position on the Treasury website has been removed.

Does that mean it would not take a decision just on political grounds?

At least one Treasury official seems to have admitted that the five tests cannot be met unambiguously, and that any decision will ultimately be made on political grounds and not economic ones. In any public debate, the boundaries between political and economic reasons for joining are likely to be blurred, and also mixed up with general reasons for belonging to the EU (of which the UK is already a member). It is likely that the outcome will be determined more by the relative effectiveness of the two public campaigns waged by the two side's supporters, each of whom has an emotional commitment for or against (i.e. a commitment regardless of the correctness of the arguments). The Blair government seems to be broadly pro-euro and will probably try to argue that the five tests have been met, however inconclusive the outcome of the Treasury study. There is some polling evidence that suggests this might be an effective tactic, and the Chairman of the Labour Party has indicated that he thinks they should seek to join the euro even if the arguments are only "50-50".

What are the UK government's 5 criteria for joining the euro?

1. Sustainable convergence between Britain and the economies of a single currency;
including:
* monetary transmission mechanisms
* the housing market
* national business cycles
* sustainable real exchange rate
2. Whether there is sufficient flexibility to cope with economic change;
including:
* labour markets
* adjustment mechanisms
* fiscal policy as an economic stabiliser
3. The effect on investment;
including:
* the cost of capital
* the impact of joining on different economic sectors
4. The impact on our financial services industry;
including:
* why financial services companies are located in cities like London and Edinburgh
5. Whether it is good for employment;
including:
* the euro's impact on external trade
* lessons from American monetary union
* the stability and growth pact
* price differentials in the euro zone

The Treasury and the Bank of England had about 30 officials undertaking an assessment of the five tests. They published their conclusions in June 2003. On 9th June 2003, the Chancellor announced that only one of the five tests (no 4) had been met, and that there would be no early entry into the EMU. He said that the situation would be reviewed in the following year's Budget. Even this is probably well before any potential problems due to the single currency could surface. A really adequate assessment would need to cover the working of the euro over the whole economic cycle, and consider the effect on the system of other new members joining it.

All new entrants to the EU must join the Euro - this is fact. (Protocol A.05).

For Germany - I have to feel sorry for the West Germans who got completely stitched up by the Kohl Governement on 6th Feb 1990 when he declared West Germany would form monetary union with East Germany. This has to be one of the greatest economic blunders on earth - and Kaminsky's greatest victory for the East Germans. Pohl was then head of the Buba (Bundesbank) - then as respected if not even more so than the Fed (Federal Reserve). The conversion cost Germany perhaps 1.5 trillion EUR and crushed economic growth in Europes largest economy.

Having the strongest growth in the G7 - Huh ..... where did you hear that?

According to the Economist (Sept 06) - Germany will just nudge out Italy at the bottom of the pile. India and China at the top. As for the EUR strength (or rather USD weakness - twin deficits, dovish FED, housing market in decline etc etc) - this WILL impact Europe exports and the UK is not left out - the GBP is approaching 2.00 vs. USD - so watch for export driven companies to take a big hit on their bottom line in the first half of '07.

GDP forecasts | Economist.com

[shark1963]

Originally Posted by K2

I don't make 'funny posts' about economics or financial markets

Sorry Shark you may not like this, but this is one area I really do care a lot about - so here goes.....

Under Protocol A14 (July 2004) here:

http://ec.europa.eu/economy_finance/...dfs/a14_en.pdf

The UK does not EVER have to join the Euro unless a decision is made by the UK Goverment. The current Labour Goverment promised that if such a decision were to be taken it would would be put to a national referendum. As the Labour Party is more europhile than the Concervative ooposition - after the French "non'' to the European Consitution, the UK shelved all idea of UK euro entry under this paliament.

The UK decision

The government is in principle in favour of entry. It has said that it would hold a vote in Parliament followed by a referendum, and that it would do this if it seemed clearly in the country's economic interests to join, on the basis of five economic criteria. The summary of the government's position on the Treasury website has been removed.

Does that mean it would not take a decision just on political grounds?

At least one Treasury official seems to have admitted that the five tests cannot be met unambiguously, and that any decision will ultimately be made on political grounds and not economic ones. In any public debate, the boundaries between political and economic reasons for joining are likely to be blurred, and also mixed up with general reasons for belonging to the EU (of which the UK is already a member). It is likely that the outcome will be determined more by the relative effectiveness of the two public campaigns waged by the two side's supporters, each of whom has an emotional commitment for or against (i.e. a commitment regardless of the correctness of the arguments). The Blair government seems to be broadly pro-euro and will probably try to argue that the five tests have been met, however inconclusive the outcome of the Treasury study. There is some polling evidence that suggests this might be an effective tactic, and the Chairman of the Labour Party has indicated that he thinks they should seek to join the euro even if the arguments are only "50-50".

What are the UK government's 5 criteria for joining the euro?

1. Sustainable convergence between Britain and the economies of a single currency;
including:
* monetary transmission mechanisms
* the housing market
* national business cycles
* sustainable real exchange rate
2. Whether there is sufficient flexibility to cope with economic change;
including:
* labour markets
* adjustment mechanisms
* fiscal policy as an economic stabiliser
3. The effect on investment;
including:
* the cost of capital
* the impact of joining on different economic sectors
4. The impact on our financial services industry;
including:
* why financial services companies are located in cities like London and Edinburgh
5. Whether it is good for employment;
including:
* the euro's impact on external trade
* lessons from American monetary union
* the stability and growth pact
* price differentials in the euro zone

The Treasury and the Bank of England had about 30 officials undertaking an assessment of the five tests. They published their conclusions in June 2003. On 9th June 2003, the Chancellor announced that only one of the five tests (no 4) had been met, and that there would be no early entry into the EMU. He said that the situation would be reviewed in the following year's Budget. Even this is probably well before any potential problems due to the single currency could surface. A really adequate assessment would need to cover the working of the euro over the whole economic cycle, and consider the effect on the system of other new members joining it.

All new entrants to the EU must join the Euro - this is fact. (Protocol A.05).

For Germany - I have to feel sorry for the West Germans who got completely stitched up by the Kohl Governement on 6th Feb 1990 when he declared West Germany would form monetary union with East Germany. This has to be one of the greatest economic blunders on earth - and Kaminsky's greatest victory for the East Germans. Pohl was then head of the Buba (Bundesbank) - then as respected if not even more so than the Fed (Federal Reserve). The conversion cost Germany perhaps 1.5 trillion EUR and crushed economic growth in Europes largest economy.

Having the strongest growth in the G7 - Huh ..... where did you hear that?

According to the Economist (Sept 06) - Germany will just nudge out Italy at the bottom of the pile. India and China at the top. As for the EUR strength (or rather USD weakness - twin deficits, dovish FED, housing market in decline etc etc) - this WILL impact Europe exports and the UK is not left out - the GBP is approaching 2.00 vs. USD - so watch for export driven companies to take a big hit on their bottom line in the first half of '07.

GDP forecasts | Economist.com

This is exactly what i wrote!! I didnt say they have to join by any law but they have to join by the presure of the other EU members or it will come that GB cant be a member any longer. Thats what i meant and i think i wrote it like that to understand. Anyway.Just an misunderstanding.

The numbers i posted have been the latest number published this week. German economy growth this year 3.x , dont fix me about the number behind. Amercia following with 2.x etc...
Also Germany will be about 2.7 % this year, which means to be under the 3% debt line and also is expected to be far less then 3% next year.And even with the strong euro the german exports are higher then the past 5 years!!

[JayBee]

Originally Posted by Bushdoctor

There is talk of replacing the dollar with the 'Amero'. This would be a common currency for the US, Canada, and Mexico similar to the Euro. Some people think it could happen by 2010.

It will never happen!

[MrDK]

Originally Posted by JayBee

It will never happen!

So far it has taken 20 years to change form a dollar bill to a dollar coin. That may happen in the next 5 years.
Changing currency all together, you are right, never!

[marc26]

Originally Posted by MrDK

So far it has taken 20 years to change form a dollar bill to a dollar coin. That may happen in the next 5 years.
Changing currency all together, you are right, never!

you dont know how much i hate loonies and toonies