Monetary Unions Galore

♠ Posted by Emmanuel in at 5/22/2007 02:53:00 AM
I still remember way back when the Euro was in the $0.80 range. Folks were dumping all over it as a dumb idea that would soon end in disaster, particularly the Euroskeptics who dominate the English media. Then a funny thing happened: the Euro rose to $1.3680 and has never looked back since. The Euro has passed the el crappo worthless little green depreciation machines in terms of both bond issuance and currency in worldwide circulation. Now, everyone seems keen on setting up similar monetary unions. Let's tackle them in order:

1. Asian monetary union - the Asian Development Bank has been investigating the possibility of creating an Asian Currency Unit (ACU). However, its prospects are hindered by political horseplay ("whore's play"?...sorry for the pun). From the Vietnam Economic Times:
It is now too early to talk about issuance of an Asian common currency despite increasing economic independence between countries in this region. Many mistake the Asian Currency Unit (ACU) which will be launched by the Asian Development Bank (ADB) in March or April this year for an Asian common currency (note or coin). Such an understanding views the ACU similar to the euro which is circulating in the world. ADB representative at Manila (Philippines) headquarters talked with VnEconomy about this issuing plan.

The trend of individual Asian currencies vis-à-vis the US dollar, the euro, or the yen, is well known. However, while economic interdependence in Asia is rapidly increasing, it is still difficult to observe how Asian currencies are moving against each other and how Asian currencies as a whole are moving against external currencies, such as the US dollar, the euro, or the British pound. We intend to calculate an Asian Currency Unit as a weighted index of East Asian currencies in order to create a regional benchmark to monitor such trends.

ADB is currently reviewing different options concerning the technical aspects related to ACU calculation, including the nature of the basket, the choice of fixed weights vs. fixed units, the selection of currencies to be included in the basket, the choice of weights, the criteria for their periodical revision, and other aspects as well. After completing an internal review of these technical aspects, we expect to post several indexes for ACU on the ADB website in the next few months.
View this presentation by no less than Robert Barro from the ADB website if you're really interested.

2. Gulf Cooperation Council (GCC) monetary union - this one is already underway to some extent, though the Middle East oilers are in danger of not meeting planned dates:
Saudi Arabia, Kuwait, Bahrain and three other Gulf Arab oil producers may miss a 2010 deadline to create a single currency because their economic systems are not yet aligned, Bahrain's Crown Prince said on Tuesday.

"I find it increasingly unlikely to meet that date," Sheikh Salman bin Hamad al-Khalifa told reporters on the sidelines of an exhibition in the Bahraini capital, Manama. He was responding to questions about whether the states could meet the deadline.

The six states, including the United Arab Emirates, Qatar, and Oman, suffer from a "lack of complementary systems", Sheikh Salman said, without being more specific.

The Gulf Cooperation Council countries plan to establish a single currency on January 1, 2010. Gulf officials have raised doubts in the past few months about whether the target could be met.

Asked whether he was concerned about the US dollar's recent slide to a record low against the euro, Sheikh Salman said: "It's not a situation that we haven't been in before. We can handle it, I think."

3. North American monetary union (choke! gasp!) - yessiree Bob, even the Americans might soon junk the wretched dollar. Bank of Canada Governor David Dodge had this to say:
Bank of Canada Governor David Dodge said on Monday it was "possible" there could at some point be a unified North American currency similar to Europe's euro.

However, Dodge, answering questions from the audience after a speech on global economic institutions, said the countries involved would have to "tear down borders in terms of labor flows" to make a joint currency work.

Instead, borders between Canada, the United States and Mexico have "gotten a bit thicker" in recent years, he said.

I am least sanguine on the prospects for an "Amero." This one's a long shot, baby :-)