. May 9, 2006 SouthAmerica: On May 5, 2006 The New York Times had an article that called my attention: âAsian Finance Ministers Seek Common Currency.â The article called my attention because that was the first time I saw anyone mention anywhere about a new Asian currency similar to the euro. I have been predicting a ânew Asian currencyâ similar to the euro since July of 1999 when my article âHow can currency stability be achieved for the Brazilian economy?â was published by âThe Brasiliansâ newspaper. You can read that article on the following location: http://www.elitetrader.com/vb/showthread.php?s=&threadid=49981 Quoting from my article - Brazil and the Euro - Part 1 Part l â Published in July 1999 âHow can currency stability be achieved for the Brazilian economy?â â¦It will not take twenty-five years this time around for this process to develop. This will occur at a very fast pace. It would be a smart move for Brazil to apply for membership in the European Union and to adopt the euro immediately as the new currency in Brazil. Today, countries around the world have official reserves as follows: Percentage share by currency: U.S. Dollar = 60 percent of market Euro Group = 20 percent of market Yen = 6 percent of market Other = 14 percent of market Most people should not be surprised if in ten years the breakdown of official reserves of the countries around the world will be as follows: U.S. Dollar = 35 percent of market Euro Group = 35 percent of market New Asian Group = 25 percent of market Other = 5 percent of market ******* May 9, 2006 SouthAmerica: In the last 2 years I changed my mind regarding Brazil adopting the euro as its new currency and I have been saying that the entire ball game has changed from the Brazilian perspective in the last few years and that Brazil should adopt instead a âNew Asian Currencyâ similar to the euro. ********** The New York Times â May 5, 2006 The New York Times article âAsian Finance Ministers Seek Common Currencyâ â Japan, China, and South Korea on Board - By ANAND GIRIDHARADAS HYDERABAD, India â Finance ministers from China, Japan and South Korea announced tentative steps on Thursday to coordinate their currencies in ways that could ultimately produce a common regional currency like the euro. The ministers, speaking on the sidelines of the annual meeting of the Asian Development Bank here, said that they would work toward closer coordination of their foreign-exchange policies. They also pledged to enhance an existing framework to defend regional currencies against speculators and work toward the development of Asian bond markets. South Korea, Japan and China will "immediately launch discussions on the road map for the system to coordinate foreign exchange policy," the ministers said in a joint statement. "We agreed on further study of related issues, including the usefulness of regional currency units." Although an Asian monetary union is a distant goal, the Asian Development Bank has been pushing the idea of an Asian currency unit, or A.C.U., over the past year. The unit's value would be set by an index of participating currencies. The idea has gained popularity among several Asian finance ministers as a step toward harmonizing regional monetary policies. The development bank's Japanese president, Haruhiko Kuroda, a supporter of an Asian monetary union, had pledged to propose the creation of an A.C.U. at the meeting in Hyderabad, but reportedly held back in light of opposition from Washington. "From the Americans there was an outcry, seeing it as a danger to the dollar," Volker Ducklau, the Asian Development Bank's executive director for Germany and Britain, told Emerging Markets, a newsletter published during bank meetings. The United States and Japan are the two largest shareholders in the bank, each with a 12.85 percent stake. Senior Treasury officials denied that the United States had expressed concern about Asian currency linkage. "We don't oppose it,"' said Timothy D. Adams, the Treasury under secretary for international affairs. "I have no concerns about this issue." The Asian currency unit initiative is now backed by the so-called Asean Plus 3 grouping, which comprises the Association of Southeast Asian Nations, China, Japan and South Korea. The Hyderabad statement was issued after a meeting of Asean Plus 3 finance ministers. Though billed as a small step, the idea of an Asian currency unit mirrors early moves made toward the euro. First, European countries devised a valueless measurement unit reflecting relative currency fluctuations. They then began aligning exchange rates and altering monetary policy to keep those rates in line, a process that took decades. The euro finally emerged as a currency in January 2002. The announcement on Thursday came as the United States appeared increasingly isolated from Asian and European nations on a related issue: whether, and how quickly, China should let its currency appreciate. Washington accuses Beijing of keeping the yuan artificially undervalued to subsidize its exports while deterring imports. "Let markets work," Mr. Adams, the Treasury official, said during a meeting on trade imbalances here, arguing that Beijing should allow the yuan to float freely as soon as possible. But senior finance officials from Japan and Germany appeared to echo the Chinese view that structural reform, rather than quick-fix currency changes, offered the only real answer to global trade imbalances. They saw high savings rates and inefficient use of capital in Japan and China, ballooning fiscal deficits in the United States and languishing European demand as more significant problems than the value of the Chinese currency. Currency disputes "might distract our attention from fundamental structural problems," said Japan's finance minister, Sadakazu Tanigaki. Source: http://www.nytimes.com/2006/05/05/business/worldbusiness/05currency.html?_r=1&oref=slogin .
You are joking, right? Anyway, the asian economies mentioned are still to fragile and different in development that a common currency would not be very wise today and probably very unlikely in the short term.
SouthAmerica wrote: SouthAmerica: In the last 2 years I changed my mind regarding Brazil adopting the euro as its new currency and I have been saying that the entire ball game has changed from the Brazilian perspective in the last few years and that Brazil should adopt instead a âNew Asian Currencyâ similar to the euro. .................................................................................................. This makes more sense in that the average per capita economics are more in line... The predominant reasons that the US is not in line with China are cheap labor.. legal largesse...taxes... Even in the US...the South lagged on average monthly income to that of the Northeast.... And look at what´s left in manufacturing in the NE now... Any new manufacturing today is established in the South...ie BMW...Saturn...in SC...in TN etc.. European labor is far too expensive to that of SA labor...Chinese labor is a lot more like SA labor... But when fragiles unite...this will not solve their indigenous problems...but what it can do is capitalize on each countries comparative advantages...If one country is stronger in one area...then productivity is more efficient and the work will happen there...etc.. Collective currency also eliminates the possibility of a country having all the tools involved in monetary policy...I do not see how these different countries can be in unison.. Even the Euro...which has collective countries whose labor is more similar...regrets not having all the tools of monetary policy and sovereignty... While true efficiency will rule the day....it seems as if it can only rule the day when each countries generations are most in unison with another...the question is...when is that ? Displaced labor representing two generations can not be discarded as if they do not matter...
. Libertad: SouthAmerica wrote: SouthAmerica: In the last 2 years I changed my mind regarding Brazil adopting the euro as its new currency and I have been saying that the entire ball game has changed from the Brazilian perspective in the last few years and that Brazil should adopt instead a âNew Asian Currencyâ similar to the euro. ************ May 9, 2006 SouthAmerica: In the last two years I have been debating inside my mind if Brazil should adopt the "Euro" or the "New Asian Currency." I know that the âNew Asian Currencyâ would be the right move for Brazil, but I am afraid and I am worried of the consequences of the adoption of a âNew Asian Currencyâ would have in the Brazilian economy. You will understand why I have these concerns after you have the chance of reading my next article that should be published in the near future - It is almost ready to be published. But in the meantime Brazil is having a nice run and is enjoying the international currency game at the expense of the United States. Here is what I wrote recently: â¦But right now might be the wrong time for Brazil to adopt the Euro â Brazil should wait another year or two â since Brazil is enjoying such a good ride against the US dollar â the US dollar is losing a lot of its value against the Brazilian currency â and at the same time Brazil is selling everything in sight to China â and Brazilians are able to pass large price increases on many commodities to the Chinese â and at the same time Chinaâs currency is fluctuating just a little bit against the US dollar. This is a win â win situation for Brazil, and hopefully if this game can go on for another 2 years then Brazil would be able to pay all its debts outstanding in US dollars. Right now the âSuckerâ in this game is the United States since the US is playing the game on credit. (The US is borrowing a ton of money from the rest of the world to keep its economy afloat.) http://www.elitetrader.com/vb/showthread.php?s=&threadid=64375 .
. May 9, 2006 SouthAmerica: If you want to see how well the Brazilian Real has performed against the US dollar in the last 2 years â you can see it on the following chart. http://finance.yahoo.com/currency/convert?from=USD&to=BRL&amt=1&t=2y ..
It is impossible for the US economy to lose over $7 trillion ....and not have the US Government print a lot of money... Deflation would end the US Banking system...whereas inflation makes it possible for them to exist...albeit a tumultuous environment,,,, Also interest rates coming into parity at 10% is not such a bad idea...Since when has it paid an American to save money in a bank? Perhaps this is the reason for no longer reporting M3... The US currency valuation ...as can be measured by all norms for any country´s currency points downward... It was also interesting to note that Warren Buffett was not entirely wrong about his early negative call on the dollar,,,He is simply changing these proceeds into another currency which also earns while waiting...This is the point I was making some time ago about playing currencies...I have always played them by not only transferring to that currency...but also earning interest either directly with a central bank or one of the country´s safest banks... Buffett is doing this by investing in strong companies in the currency whereby he thinks he has an advantage which can earn more than the local certificates.....To me it is utter nonsense not to get paid while you wait...You are literally giving your money away... Brazil has been a stellar play versus the dollar because you have received 17 to 22% while waiting around for the currency to move...and it looks like the move has not finished...