Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
European Central Bank calls for a fixed exchange-rate system
For several reasons, the dollar is falling rapidly against foreign currencies at the moment. This will be good for the American economy. It will make American exports less expensive and foreign imports more expensive. I predict improved U.S. economic growth in the first quarter next year.
The European Central Bank is not happy. Although the U.S. trade imbalance will improve, the euro zone's trade balances will worsen. It called for a fixed exchange-rate system so that it will be justified when it intervenes to keep the dollar up relative to the euro. Here is a selection from a Reuters story:
This idea will be on the agenda when finance ministers and the G-20 meet in the coming months. At that point, finance ministers may think that the only alternative is a dollar collapse.
Last time the dollar was falling like this (U.S. Dollar Now Testing $1.50 per euro), I discussed the possibility of dollar collapse. I wrote:
The world's policy makers will continue to try to postpone the inevitable dollar crash, but they won't be able to prevent it unless they solve the underlying problem, America's huge trade deficits.
Comment by observer, 12/16/2010:
Howard - maybe you should read the Reuters story again... nothing about a fixed exchange-rate system...
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