_____ Record: 1 Title: a New Merger: the Dollar, Yen, and Euro? Author(S): Francis, David

_____
Record: 1
Title: A new merger: the dollar, yen, and euro?
Author(s): Francis, David R.
Source: Christian Science Monitor; 6/14/99, Vol. 91 Issue 138,
p17, 0p
Document Type: Article
Subject(s): COINAGE, International
CURRENCY question
MONETARY unions
COOPER, Richard
Abstract: Presents a discussion by finance experts on why a single
world currency would be beneficial. Why Harvard University economist
Richard Cooper believes a single currency would deal with the fragility
of financial markets; Advantages such as the elimination of
foreign-exchange volatility; Nations that are discussing a dollar-based
currency.
Full Text Word Count: 719
ISSN: 08827729
Accession Number: 1922976
Database: Academic Search Premier
Section WORK&MONEY
A NEW MERGER: THE DOLLAR, YEN, AND EURO?
Finance experts from 14 nations discuss the merits of a single currency
Dateline: CHATHAM, MASS.
Europe, Japan, and the United States will all have a common currency at
some point.
Not now, says Richard Cooper, an economist at Harvard University,
Cambridge, Mass. It is not politically realistic. Rather, in a decade or
two.
Mr. Cooper sees a common currency as a logical way to deal with the
fragility and fickleness of financial markets. Over time, this shakiness
could worsen. One reason is that financial transactions between nations,
as versus trade, will dominate foreign-exchange markets even more than
they do today.
A currency union would eliminate foreign-exchange volatility in these
three industrial areas, which produce two-thirds of the world's output.
It would add stability to what is fast becoming a global economic
system. It would facilitate trade and investment.
Cooper tossed out the idea at a conference here on "Rethinking the
International Monetary System," put on last week by the Federal Reserve
Bank of Boston.
The timing was appropriate. At the end of this week, there is a summit
of the Group of Eight in Cologne, Germany. Kosovo promises to be the
hottest topic on the agenda of President Clinton and the leaders of
Germany, Japan, Britain, France, Italy, Canada, and Russia.
But the leaders will also look at what can be done to make the global
system less crisis prone.
They may peek briefly at whether private financial institutions in rich
countries should be required to help pay for losses emerging nations
incur during a crisis. It's not likely.
Also on the table: Whether the International Monetary Fund should be
strengthened to become a genuine "lender of last resort" in an
international crisis, much the way a national central bank will rescue
an important domestic bank in financial jeopardy. Not likely either.
But they are likely to move ahead with greater debt relief for the
world's poorest nations, most of them in Africa.
Experts at the Fed conference, coming from 14 nations, do not expect the
Eight to make major changes in the architecture of the international
financial system anytime soon.
"What we are going to see is tinkering at the margin," says Sebastian
Edwards, an economist at the University of California, Los Angeles.
What's more probable, says Mr. Edwards, will be changes by individual
nations. Some will impose controls on short-term capital movements. More
countries will "float" their currencies, that is, let their value in
relation to the US dollar and other currencies be determined by sales
and purchases on the foreign exchange market. Currencies worth trillions
of dollars trade on that market every day.
Also, more nations will attach their currencies to the dollar, the euro,
or the yen through what are known as "currency boards." And some will go
whole hog and "dollarize," that is, replace their own currency with the
US dollar.
Panama already uses the dollar as its currency. In Argentina, the dollar
is legal tender and widely used along with the peso. A currency board
keeps the value of one peso fixed to one dollar.
There has been considerable discussion in Argentina about going fully
with the dollar and abandoning the peso.
Pedro Pou, Argentina's top central banker, complained here that despite
eight years of a relatively inflation-free peso, it is still not "a true
national currency." People, citizens or foreigners, are reluctant to
borrow long-term in pesos, still remembering years of hyperinflation.
This raises the cost of capital used to develop the nation.
Full adoption of the US dollar, he says, would improve Argentina's
economic performance over the next 10 years.
One theory is that currency blocs will form around the dollar, the euro,
and the yen. Then the three currency "biggies" would merge into a single
currency.
Cooper sees the creation this year of the euro by 11 European nations as
a major step in the direction of a single currency for the industrial
democracies.
But Paul Volcker, former chairman of the Federal Reserve, doubts that
any step will end financial crises, as long as greed, fear, and hubris
are "built into the human genome." It is these characteristics that are
behind crises.
~~~~~~~~
David R. Francis, Staff writer of The Christian Science Monitor
_____
Copyright of Christian Science Monitor is the property of Christian
Science Publishing Society and its content may not be copied or emailed
to multiple sites or posted to a listserv without the copyright holder's
express written permission. However, users may print, download, or email
articles for individual use.
Source: Christian Science Monitor, 6/14/99, Vol. 91 Issue 138, p17, 1p
Item: 1922976
_____
This email was generated by a user of EBSCOhost who gained access via
the UNIV OF SOUTHERN MAINE account. Neither EBSCO nor UNIV OF SOUTHERN
MAINE are responsible for the content of this e-mail.