Re: [Leica] Off-topic: Euro and currency

[Pascal <cyberdog@ibm.net>]

On 19-08-1998 12:38 Dominique PELLISSIER wrote:

>Comment : for an individual, the Euro will allow :
>1=B0) to compare directly the price of goods, Leica for instance, anywhere=
 in
>Europe.Competition between Leica dealers will be stronger.
>2=B0) not to pay the "spread" on the exchange rates between european monie=
s
>as it is the case today. 
>For instance, I read : 322-346 FRF for 100 DEM.The spread is the
>difference. If I buy 100 DEM, my bank asks me 346 FRF. If I don't want my
>Dmarks any more, my bank will buy them again 322 FRF.
>
>I agree with you on the "eurocracy" which is like a federal government.

You are right on the exchange of currency, but that is precisely the main 
point forwarded by Euro-advocates. How many people exchange their own 
currency for some foreign, change that again into another foreign, and so 
on... with the result that you will have paid a very substantial sum as 
exchange costs? Not too many, most only change one time and then back 
into their own currency.
And of course, it will be much easier to compare prices directly, which 
should (but I am not quite sure it will, because European economies tend 
to be less driven by competition than in the US) have a lowering effect 
on prices.

However, and this is my point, euro-advocates tell you that the whole 
Euro-region is going to have benefical effects for their economies.
While this might be true on a macro-economic level (for Europe seen as a 
whole), this is not going to be the reality for all countries within the 
zone. Indeed, you will (and this is what I predict for the following 5 
years) notice a shift within the borders of the Euro-zone because 
industries will re-locate their assets to where they have biggest 
advantage (this is of course only logic seen from their standpoint).
I do not want to sound too pessimistic, but I fear a lot of European 
countries, especially in the northern part of the zone, will feel these 
effects, to the benefit of mainly southern countries within the same 
zone. That this will put additional pressure on governments to do 
something about it, is obvious. Taxes and all kinds of disguised 
contributions are already at a never-seen top level, so it would be 
difficult to go this way. It seems to be this evolution will have mainly 
a negative impact on social security, once you get into such a system, 
where competition can no longer be fueled by monetary measures (the same 
is true for fiscal measures since most, if not all, governments are in 
dire straights and will have to keep on cutting to remain within the 
allowed budget deficit margins), and money will have to be found 
somewhere, and the total cost of employees for industries and trade will 
have to be lowered to be able to compete with countries that do not have 
the same social standards.
In short, it was a good idea to come to a monetary union, but it will 
only work to everybody's satisfaction if there had at the same time been 
a social union (not to speak about a political union...).

OK this was longer than I thought it would be, but I only wanted to set 
the reason for my negative thinking straight.
Just hoping this will not start a lenghty off-topic debate...

Pascal

- --------------------------------------------------------
Check out: http://members.xoom.com/cyberplace/
- --------------------------------------------------------
Macintosh PowerBook G3 - it eats Pentium notebooks for lunch
- --------------------------------------------------------
<<< PGP public key available on request >>>