Money and war (on the international role of the euro)
… which then, going back to the previous post, as far as I'm concerned, in the end the problem isn't even whether Brexit has been good or bad for the United Kingdom: it will be their business too!
The choice is theirs, the consequences too, or at least that's how those according to whom the main advantage of the EU is that of being a brush, pardon, a large market, and therefore as such capable of absorbing the shock caused by the sinking of a country that represents only 2.1% of world GDP (Italy 1.7%, Europe 14.8% – from 20.4% in 1999, the United States 15.5% %, and China 18.6%: the data is, as always, here ).
Isn't it paradoxical that those who Freudianly see the solution to every problem in size care so much about the demise of a country that has a relatively small GDP?
The real problem, in my opinion, is that an entire class of semi-cultured people, the pseudo elite of the country, precluding any cold rational reasoning, clings in a consolatory way, with sinister fascist consonances, to the idea that perfidious Albion has been punished (?), because the only demonstration of the advantages of the European project that they have is the (indirect) one consisting in showing the irreversible decadence of those who distance themselves from it! What this project entails for a country that deep down they don't love, because they feel better about it (hence the flowering of pretentious and for this reason unintentionally hilarious bay in English ) they don't care much and understand little about it.
I, on the other hand (I don't know about you) are much less interested in what happens in the United Kingdom (to which I send my best wishes on the occasion) than what happens in our home.
By way of example, the current context, in addition to demonstrating that the "hard currency" does not defend us from imported inflation (a self-evident truth that phalanxes of scoundrels have contested us for years on television parterres), I fear it will give a further shock to the granite certainties of those who saw the euro as a potential competitor to the dollar on the international currency market. The two topics were linked, as you will recall from the Sunset of the Euro :
and even in this, unfortunately, we were dramatically right. The EU's difficulties in recovering from its crisis did not help to affirm the credibility of the euro, and the results we predicted (which we were hotly contested at the time) did not fail to materialize:
(graph comes from here ).
It will be that I know how to reason a little (a reason to approach it with respect), it will be that I bring bad luck (if that were the case, if I really possessed this virtue typical of the great economists, it would be appropriate to approach me with further deference), the fact is that after 2012 (year publication of the Sunset of the euro) the downward trend of the euro as an international reserve currency, which began in 2010 with the sympathetic management of the so-called sovereign debt crisis, is accentuated, in an initial period to the advantage of the dollar, to then stabilize around to 2016 (it's the purple line in the graph).
What is my educated guess , which we can happily discuss in ten years' time (because these trends, like the Brexit results, take some time to show up clearly in the data, which is why I apologize to those who in 2012 didn't want to understand that the euro had a credibility problem caused by bailouts that would not have saved us)?
Simple: given that the current conflict has, among other things, advocated a splitting of the international payments system in two (we talked about it in the previous post), and given that the current European political line, a line that I am not interested in contesting, is of loyalty to the Atlantic bloc, it follows that the countries around the world, for one reason or another, want to diversify with respect to the "country risk" that the natural dollar brings (the risk of seeing frozen their assets in dollars , the risk of being excluded from the system of international payments in dollars , etc.) will not turn to the euro, which in geopolitical terms presents the same risks (in these terms it is essentially a dollar that does not have the done), but they will try, determinedly (I don't know if successfully) to create an alternative (in this case, definitely not the pound, for obvious reasons).
If so, in the graph, in ten years' time, we will see a new decline in the purple line (us) and an increase in the green line (the others, probably the yuan).
So will the 21st century be the century of the yuan (after the franc, the pound, the dollar, etc.)?
I didn't say that and I don't necessarily believe that.
I just said (ten years ago) and I repeat it (ten years later) that the idea that monetary economies of scale achieved with the euro would have allowed us sic et simpliciter to enjoy international seigniorage power is stupid, because takes into account geopolitical factors: those that we have always taken into account here, explaining that the real reserve is not that of gold, but that of plutonium, despite the fact that for reasons incomprehensible to me we have been constantly accused of making a narrowly economistic reasoning.
But I'm not interested in making my apology, just as I'm not interested in making that of the United Kingdom. I'm interested in giving perspectives and making verifiable predictions, hoping that someone can benefit from them, or possibly contest them with arguments, in which case I would be the one to benefit from them. Rational debate produces positive externalities. The tantrum of those who cling, livid and rancorous, to Linus' blanket of their own propaganda certainties, on the other hand, produce only a slight annoyance.
Sed de hoc satis . See you in a decade.
(… we will celebrate the first on April 15th in Rome …)
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2023/01/moneta-e-guerra-sul-ruolo.html on Sun, 29 Jan 2023 09:44:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.