Com. Dawson asks:
"Please explain: Why do you think the Euro might be such a good thing for upper-3rd-World areas like Russia and Turkey?"
Right now Russia and Turkey can't generate the credit they should. One important reason is that local currency is very risky in major currency terms. That limits the market for Russian and Turkish credit instruments. Denominating credits in the euro has already led to an expansion of, for example, asset-backed securities across Europe. Banking reform has also been necessary across the euro zone and such reform woul dbe a great confidence-builder in Russia and Turkey. Of course we already know that Russians are lookng to price oil in euros. I think that betrays a desire to eventually bring Russia into the euro zone.
Because there so much exchange is done informally, in major currencies, I think it's impossible to determine the real effective interest rate in most third world countries. I believe it is quite high in places like Turkey and Russia and, if so, those countries could expect the positive effect Ireland and Portugal experienced as their interest rates came down.
peace,
boddi
>
>
> Back in the nineties I got it wrong, or at least I've reversed myself
> since then. I thought and wrote that Matahir Mohamad was wrong to peg the
> ringit and limit capital flows and I thought that the euro was a doomed
> concept. What it was really about was the border between the theoretical
> and the practical. Theoretically, I always thought the Euro was a good
idea
> but I thought the practical problems of implementation were too risky.
> Practically, I knew that Malaysia would suffer from the rapid inflows and
> outflows of hot money but I felt that the Matahir represented the old,
> wrongheaded theory of national autarky. I think ATTAC may well represent
> that wrongheaded idea today. I also think the Thai government is probably
> very smart in threatening to use a hot money tax as a way of fighting the
> strength of the baht versus the dollar.
>
> In the nineties I wanted to make the point that there was no use trying
> to go back to a time before hot money. The empire of the dollar has
> developed largely from the need of all people for international liquidity.
> It seemed crazy to think that a country like Malaysia could wall itself
off
> from that flow and prosper. I didn't realize just how vulnerable these
> small currencies are. They are essentially in permanent crisis and all
the
> governments can do is fight to keep the crisis from becoming acute.
>
> I also didn't realize how strong that need for international liquidity
> is. The euro system has many faults, but the fundamental logic of it is
so
> strong that once a nation is in, I think that nation quickly loses any
> thought of getting out. With all its faults, I think it is not
unreasonable
> to say that the euro has the most potential to create meaningful change of
> any concept in political economy right now. Mired as it may be in
Brussels
> for the moment, one can only imagine the transformative effect the euro
may
> have in countries like Turkey and Russia. Hopefully Brussels will get its
> act together and promote the expansion of the Euro with a fair-minded
> federalist approach.
>
> peace,
>
> boddi
>
>
>
>
> ___________________________________
> http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk
___________________________________ http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk