the euro

[Chris Burford]

At 30/11/01 18:27 -0800, you wrote:
>>I'd love to be a fly on the wall at one of the monthly central banker 
>>chatfests at the BIS. I can imagine a bunch of dour Euros telling Alan 
>>that he's got to do something about the c/a deficit. And now they're 
>>going to have a currency that may force him to do it.
>>
>>Doug
>
>I presume that he tells them that they have to do something about their 
>current account *surplus*: the U.S. has low inflation and (near) full 
>employment--the trade imbalance is driven more by a depressed Europe whose 
>imports are too low than by an overly-exuberant U.S. whose imports are too 
>high.
>
>But if they don't, then we are likely to see a large and rapid 
>depreciation of the dollar sometime in the future...
>
>
>Brad DeLong

That would be a welcome potential shift in the balance of world power.

But to be devil's advocate why should it happen? Even if the world 
recession is a U rather than a V, when commercial activity picks up again, 
why should the USA not continue to have its head advantage?

Chris Burford

London