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... reason for the currency union is to eliminate foreign exchange rate uncertainty from cross-EU production chains, a SEuro would require production chains primarily passing between SEuro countries.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Fri Sep 20th, 2013 at 01:14:41 PM EST
[ Parent ]
The initial reason for creating the Seuro would be to protect its citizens from the ill effects of the Euro. I think a lot of Greeks and Portuguese would understand that reasoning. Being part of a single union that entails being raped daily somehow does not seem attractive to me. The initial countries would be those for whom the current Euro policies are the least optimal. IMO they would benefit merely from being in a union that had policies far closer to their individual needs. Production chains could follow. Meanwhile existing, beneficial (to Seuro zone members) production chains could be given special treatment.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 20th, 2013 at 01:54:19 PM EST
[ Parent ]
But what is the benefit of the SEuro over having their own currency?

Their core problem is the relegation of their national governments to subsovereign status while retaining responsibility for stabilizing fiscal policy. Going back to a sovereign national currency directly fixes that problem. So why does establishing a SEuro fix it better?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Sep 20th, 2013 at 07:52:59 PM EST
[ Parent ]
So why does establishing a SEuro fix it better?

By providing greater size and weight and thus more resilience to the pressures originating from the other monetary union and by being able to demonstrate the benefits of a Monetary Union run on lines designed to raise all member economies while providing some of those benefits to its members. If a group of nations are being pillaged and smothered by the strongest members of their present monetary union and are then likely to be ejected they would be better off to join together and preempt such ejection by leaving together. And, in the beginning, they are likely to very closely resemble an optimal currency area in the new union. But these benefits depend strongly on the new union being run and continuing to be run on the basis of the principles outlined above.      

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 20th, 2013 at 08:20:03 PM EST
[ Parent ]
... risk that the demonstration will fail ~ after all, the demonstration is needed because it hasn't yet been done successfully.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Sep 21st, 2013 at 03:08:57 PM EST
[ Parent ]
South America might turn out to provide a test. Many countries there are trying to protect themselves from the depredations of Dollarworld. Or, if the Euro continues on its present course an opportunity to try a union based on better foundations and principles may emerge. But, of course, the biggest danger any society or group of societies face with their monetary system is having control of it hijacked by financial elites and the use of it perverted from the development of the society or societies to the enrichment of the few. That, effectively is what has happened in the USA, the UK and in the Eurozone.  

The Latin Monetary Union lasted for more than 50 years despite having a bi-metalic standard for the first 13 years and having the problem of some countries issuing bank notes based on union standard coins. World War I effectively ended the union but there were reasons it endured so long as it did. Having standards of weight and purity of coins amongst numerous countries was seen as facilitating trade, at a minimum.

The USA at its founding was a collection of sovereign states somewhat comparable in size and economic diversity to the states of the Latin Monetary Union but it became a de facto monetary union with the adoption of the US Constitution and had two national banks over different periods until 1836. I suppose we could have continued with just the National Bank system established during the Civil War, augmented by private clearinghouses, but the creation of the Federal Reserve System on the eve of WWI greatly aided the US in financing that war. Despite the actions of the Fed from 1928 until the appointment of Marriner Eccles, I shudder to think of managing such recovery as we had during the Great Depression under the old National Bank system, let alone trying to finance WWII without the Fed.

Under current policies in the EMU I don't see the peripheral countries enjoying ANY net benefits from the union and it seems that more and more members will fall into the status of Ireland, Greece and Portugal. But I don't see any of them as having sufficient weight to thrive alone, though I may be wrong. Hence my proposal. I just wish I could see even as good a potential solution to the problems the USA faces.    

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Sep 21st, 2013 at 10:17:22 PM EST
[ Parent ]
... neither of them encouraging to the SEuro organized around a group with no fiscal authority. The Latin American example is advancing a monetary union in support of governments pursuing the interests of a wealthy few and a misery for the majority, and of course the US Federal government was a federation with fiscal authority, even if only light used, after a confederation more along EU lines had previously failed.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Sep 21st, 2013 at 11:07:29 PM EST
[ Parent ]
I wasn't proposing a Seuro organized around a group with no fiscal authority. I was proposing a Seuro organized with a fiscal authority consisting of an SCB, a treasury and an elected board of governors to oversee policy for both, including the issue of bonds of joint liability and the uses to which the funds so generated would be used. I am not really familiar with the details of Mercousur, though the 'free movement of capital' is worrying. I was expressing a hope with regard to the possible future development of a monetary union in South America, but would be concerned about one that is set off on the wrong path already. Dilma Rousseff had an interesting background and is encountering push back from the population with regard to elite excesses surrounding the Olympics and World Cup. There are at least some hopeful possibilities there.

As I have noted I think my proposed plan could work, IF PROPERLY IMPLEMENTED, but proper implementation is rather improbable, especially as such a large portion of the population has no idea of what is required for a system to work in their favor and most seem inclined to trust the thieves currently looting them while thinking 'they would never do something like that.'

As the song said:

Here I stand, ticket in my hand,
waiting on the train to the promised land.
Waiting for EVERYMAN.

A better system is possible, but perhaps not with the people we have.  Yet.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 22nd, 2013 at 12:35:57 AM EST
[ Parent ]
Do you see a substantial likelihood that the existing EMU will, on its own or through EU institutions, evolve into a union that will promote the interests of all members to a reasonable degree? Is that more probable than developing a separate union along lines I have proposed?  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 22nd, 2013 at 12:45:25 AM EST
[ Parent ]
Not very much, but more so than the SEuro. In either case, it requires closing the democracy deficit. For the EU as a whole there is the European Parliament, but an egregious degree of indirect representation with all of its anti-democratic tendencies. For the SEuro, it wouldn't even have that much direct representation.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Sep 24th, 2013 at 02:09:37 PM EST
[ Parent ]
For the SEuro, it wouldn't even have that much direct representation.

That is why I proposed an elected board of economic governors to set economic policy for the overall Seuro zone and the SCB. That would include interest rates, prudential regulation, Seuro bond issuance, purpose and oversight and recommendations for uniform legislation to be adopted in each member state. They would be selected by popular vote in each country. Perhaps the head of an executive could be elected by popular vote amongst all zone members. Such a structure could, if found beneficial by the member populations, move quickly towards greater political unity.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Sep 24th, 2013 at 02:28:53 PM EST
[ Parent ]

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