Monday, March 27, 2017
COVER: “GET READY FOR A WORLD CURRENCY”
Title of article: Get Ready for the Phoenix
Source: Economist; 01/9/88, Vol. 306, pp 9-10
THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.
At the beginning of 1988 this appears an outlandish prediction. Proposals for eventual monetary union proliferated five and ten years ago, but they hardly envisaged the setbacks of 1987. The governments of the big economies tried to move an inch or two towards a more managed system of exchange rates – a logical preliminary, it might seem, to radical monetary reform. For lack of co-operation in their underlying economic policies they bungled it horribly, and provoked the rise in interest rates that brought on the stock market crash of October. These events have chastened exchange-rate reformers. The market crash taught them that the pretence of policy co-operation can be worse than nothing, and that until real co-operation is feasible (i.e., until governments surrender some economic sovereignty) further attempts to peg currencies will flounder.
The new world economy
The biggest change in the world economy since the early 1970’s is that flows of money have replaced trade in goods as the force that drives exchange rates. as a result of the relentless integration of the world’s financial markets, differences in national economic policies can disturb interest rates (or expectations of future interest rates) only slightly, yet still call forth huge transfers of financial assets from one country to another. These transfers swamp the flow of trade revenues in their effect on the demand and supply for different currencies, and hence in their effect on exchange rates. As telecommunications technology continues to advance, these transactions will be cheaper and faster still. With unco-ordinated economic policies, currencies can get only more volatile.
In all these ways national economic boundaries are slowly dissolving. As the trend continues, the appeal of a currency union across at least the main industrial countries will seem irresistible to everybody except foreign-exchange traders and governments. In the phoenix zone, economic adjustment to shifts in relative prices would happen smoothly and automatically, rather as it does today between different regions within large economies (a brief on pages 74-75 explains how.) The absence of all currency risk would spur trade, investment and employment.
The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate – and hence, within narrow margins, each national inflation rate- would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.
As the next century approaches, the natural forces that are pushing the world towards economic integration will offer governments a broad choice. They can go with the flow, or they can build barricades. Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.
The alternative – to preserve policymaking autonomy- would involve a new proliferation of truly draconian controls on trade and capital flows. This course offers governments a splendid time. They could manage exchange-rate movements, deploy monetary and fiscal policy without inhibition, and tackle the resulting bursts of inflation with prices and incomes polices. It is a growth-crippling prospect. Pencil in the phoenix for around 2018, and welcome it when it comes.
Sunday, March 26, 2017
Chancellor Angela Merkel's conservatives strengthened their position as the largest party in an election in the small state of Saarland on Sunday, in a boost to her quest to win a fourth term in Germany's Sept. 24 national election, exit polls showed.
Merkel's Christian Democrats (CDU) fetched 41 percent of the vote in the Saarland, up from 35.2 percent in the last election there in 2012, an exit poll for broadcaster ARD showed. The Social Democrats (SPD) won 29.5 percent, down from 30.6 percent. [L5N1H308W]
Like federal Germany, Saarland is currently governed by a 'grand coalition' of the CDU and the SPD.
The result leaves the CDU short of sufficient support to rule alone in the state. The SPD and the far-left Linke, which won 13 percent, also lack enough votes to form a left-leaning coalition in the state assembly.
The right-wing Alternative for Germany (AfD) won 6 percent. The environmentalist Greens failed to reach the 5 percent threshold to enter the state assembly.
Saturday, March 25, 2017
#MAGA Vets Rally Alongside #PizzaGate Protesters in Washington, D.C.
Outside the White House, hundreds have gathered to both show support for President Donald J. Trump while others gathered to raise awareness over the controversial #PizzaGate conspiracy. For those of you who might not know, #PizzaGate believers allege that a Washington pizzeria, named Comet Ping-Pong, is the home of a global pedophilia and child sex abuse ring organized by people including Hillary Clinton, Jon Podesta, among and other leading Democrats and members of the DNC.
While a member of The Gateway Pundit reporting staff did venture down to Comet Ping-Pong to investigate, the only thing we came away with is the fact the pizzeria is very creepy and does not seem child-friendly at all. We were not able to prove or confirm allegations of child trafficking, just creepiness (see pictures below, taken by a Gateway Pundit reporter inside Comet Ping-Pong).