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Amero - Fact or Fision


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Financial crisis, amero, and Pakistan

 

Fahad Zafar Iqbal

 

The current financial crisis that was ignited by the mortgage fallout is affecting businesses in almost every corner of the globe. The US Congress finally allowed the Bush administration to inject US $700 billion into the financial system to prevent further loss. The US economy is approximately worth US $13.8 trillion (2007 estimate). One fails to understand how US $700 billion might make significant impact on the US economy. The US economy is almost 20 percent of the world?s economy, which stands at approximately US $65 trillion (2006 estimate). One can well imagine what is coming for the majority of the world economies.

 

Almost all of the central banks of the world have dollars in the cash reserves. The Bank of China and the Bank of Tokyo have already swapped their huge cash reserves from the US dollar to euro. At the end of 2007, 63.90 percent of the identified official foreign exchange reserves in the world were held in the US dollars and 26.5 percent in euros.

 

The following is the list of world?s top ten foreign currency reserve holding countries:

 

The above countries account for more than 60 percent of the total world foreign currency reserves. The adequacy of the foreign exchange reserves is more often expressed not as an absolute level, but as a percentage of short-term foreign debt, money supply, or average monthly imports.

 

Currently, OPEC members are compelled to trade in US dollars but there is resistance from some members led by revolutionary leader of Venezuela Hugo Chavez, to trade oil in euros. While Iran has launched its version of international oil exchange known as Iran Oil Bourse, chiefly trading for oil in euros and rubbles, numerous small countries around the world, especially in South America and Africa, use dollar as official currency.

 

A majority of Middle Eastern countries have pegged their currencies with the dollar. Large corporate around the world have stacked huge amounts of dollars in their bank accounts as dollar is considered currency of the world. What if OPEC decides to do away with dollar? What if other central banks follow the Bank of China and move towards euros? A huge amount of dollar outside the US would become useless and would have to be sent back to the US.

 

This influx of dollar notes back in the US would increase supply of dollars and, consequently, result in inflation. This possibly could result in more economic crisis leading to possible recession or even disintegration of the United States of America. The US can save itself from such untoward incident by stopping the flow of dollars back into the US and switching to a new US currency. It might announce that all dollar notes outside the US would become useless and the exchange parity of dollar/new-currency is, e.g, 1000/1.

 

They might go one step ahead and totally refuse to accept these notes coming from outside the US. Such stories are already in the money market. The proposed new currency called ?Amero? would replace the dollar to become the regional currency of Canada, Mexico, and USA, like the euro. According to the book titled, The Case for the Amero by Dr. Herbert Grubel, a monetary arrangement between Canada, Mexico, and the US would create the amero, a North American Monetary Union, and a North American Central Bank. This would also increase the trade between the three countries as the costs and risks of currency exchange would be eliminated.

 

There are positives as well as negatives for the US economy from the adoption of a North American currency. There is large criticism of the Federal Reserve?s practice of printing dollars to pay debts and obligations, which causes the dollar to lose value. With a monetary union, the US would be accountable and less free to continue such practice. The worldwide transition from the dollar to amero could risk the dollar/amero?s status as a global currency, which may cause investors to shift to the more established euro and yen. The Amero might not address problems that currently exist with the dollar, like trade deficits, government debt, and status as a fiat currency. Forex traders would be strongly affected by the introduction of amero, as this could fuel a worldwide trend of consolidating currency. Europe already has euro, GCC countries plan single currency, and other world regions may soon follow. This introduction of amero would create hard to predict fluctuations in the value of American currency. Worldwide uncertainty against the amero could cause a fall in North American currency value and a rally towards the euro or yen. Hence, we conclude that the captain of the sinking boat can do anything to save his skin and the boat, even if it ruins his credibility. We have seen the example of Russia?s financial crisis of the nineties where it refused to honour international financial obligations, even though it had permanent representation in the UN Security Council. Mr Shaukat Tarin, the new Finance Adviser to the Prime Minister of Pakistan should think on strategic terms and swap US$ foreign exchange reserves with euros, before it gets too late.

 

The writer is a freelance columnist, working for the risk management division of a local bank

 

Source: http://thepost.com.pk/OpinionNews.aspx?dtl...04&catid=11

 

Link to watch how the amero looks like: http://video.google.com/videoplay?docid=19...58565&hl=es

 

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The North American Currency Union is a theorized economic and monetary union of the three principal countries of North America, namely Canada, the United States, and Mexico. Implementation would probably involve the three countries giving up their current currency units (Canadian dollar, U.S. dollar, and Mexican pesos) and adopting a new one, created specifically for this purpose. The hypothetical currency for the union is most often referred to as the amero. The concept is modeled on the common European Union currency (the euro), and it is argued to be a natural extension of the North American Free Trade Agreement (NAFTA) and the Security and Prosperity Partnership of North America (SPP). Conspiracy theorists contend that the governments of the United States, Canada, and Mexico are already taking steps to implement such a currency. No current members of any country's government have officially stated a desire to implement a "North American Union.

 

Credit: Wikipedia

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