Thurow and Euro & some loose ends.

Wed Dec 30 02:55:30 PST 1998

At 09:29 PM 12/29/98 -0500, you wrote:
>Dear Doug and the LBOers,
>Anyone read Lester Thurow on the Euro in the January 11th edition of the
>Nation. Anything tu-it.
>Your email pal,
>Tom L.

They also have an article by Thurow on Euro at .

Sounds right to me, maybe. I imagine some countries will be real happy not to have to rely on our money system. Not because it's not stable, but cause we piss them off. And was it here or in BW where I just read about the net outflow of money. So maybe it's not as stable as it used to be? I wish you econ guys would talk about this stuff.


an econ guy writes: the real issue here is that the dollar is run by hard money "nuts" whereas the euro is run by cold-eyed psychos. Even a man as obsessed with "franc fort" and as indifferent to the suffering of his countrymen as Trichet was considered too soft for the ECB. The currency is bound to rise, just for this reason. Also interesting to see what's been happening to sterling and the swiss franc, both of which seem to be taking over some of the greenback's role as a haven currency.


However I can't see countries rushing to keep their reserves in the Euro until it's been around awhile, but who knows, maybe they've been panting for the opportunity. Course, since US consumer demand is supposedly keeping the global economy afloat( which I'm not sure I buy )they might think twice. But the future possibilities for problems seems high. I mean if we've been top money-dog all this time, then a lot of the system must be set up to take advantage of that situation.


Seignorage revenue is not really all that important to the US economy, so monetary hegemony not all that important from this angle. But the US consumer really is a problem -- the US is currently "importer of last resort" to the world. Europe could (but won't) play this role, Japan would but can't, leaving the Asian crisis to potentially be much worse than it otherwise could have been. The only way out I can see is for serious budget surpluses in the US -- financing the trade deficit with domestic government saving rather than foreign portfolio flows.


The domestic economy is being fueled by the consumer. The consumer is giddy with market profits. Earnings are already a problem, what will all these trading households do if there's more bad news from south of the border? It seems to me that a big market drop would be very dangerous at this time. Because consumption would come to a screeching halt. How many more people can refinance?


I've looked for a well-formed theoretical or empirical model which links consumption to current stock market movements, but there isn't one. This idea of "consumer confidence" underpinned by a stock market boom is really a financial journalists concoction. Ignore it, it's voodoo economics in the purest sense. Consumption only depends on long term factors.


Thurow mentioins possibility that int. rates would have to go up to compete with Euro, but aren't EU interest rates quite a bit lower than ours?


Quite. The answer here is that Thurow doesn't always exercise quality control over this kind of writing


As the IMF forcast concluded, it all depends on what US investors do when faced with increasingly perilous market conditions.


see point above -- the IMF know better than to merely assume that this link exists.


___________________________________________________________________________ _____ -----------------------------------------------------------------------

The recipient acknowledges that Flemings is unable to exercise control

over the content of information contained in transmissions made via the

Internet. Flemings hereby excludes any warranty as to the quality or

accuracy of any information contained in this message and any liability

of any kind for the information contained in it, or for its

transmission, reception, storage or use in any way whatsoever.


More information about the lbo-talk mailing list