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I caught my new idol Michael Hudson contradicting himself on this question!
Here he is answering a question from KPFA's Bonnie Faulkner about why the dollar rose the last few months (starting at 33:40, but don't skip - just take in the whole thing).
http://kpfa.org/archive/id/48892
He says "the basis of any country's money supply... is the ability of the government to tax the people to pay." The US has this, one federal government, one federal tax system, and can thus serve. EU doesn't have a national parliament that levies taxes but 16 euro-zone countries taxing individually and bound by the euro treaty provisions (cannot run a deficit above 3% of GDP, whereas US is now at 12%, which he considers proper given the recession as good Keynesian). The euro cannot be a vehicle for central banks to hold their reserves in, he says, and is a "fictitious currency," as Europe cannot run a countercyclical policy and is guaranteed to keep shrinking, and as the different EU countries cannot get together on one policy.
But in Nov. 2007 in an interview with Lewis Lapham on Bloomberg radio he was saying something else, see here:
http://www.michael-hudson.com/audio/071 ... omberg.mp3
Here he held that the dollar was declining (as it was at the time) because US was over-indebted, had seen a long decline in industry and massive trade deficits, and had put out too many dollars to the world in exchange for the world's industrial surplus -- without allowing those dollars to go anywhere but T-bills (since US places restrictions on foreign ownership of its remaining industries for reasons such as "national defense"). Europe by contrast still had an industrial heartland, populations that were paid good wages and saved at a higher rate, a better debt picture, a much better current accounts picture, etc.
I'm going to go with his first idea and guess if the EU nations can coordinate their policies in a crisis (and they will end up doing so) the fact they have an industrial heartland and an oil-gas alliance with Russia is going to leave them in a better position in the depression that follows the crash (which is still ongoing, and is currently unwinding in Europe) and put a higher floor under the euro than the dollar. (Cheaper currency may seem like an advantage for trade, radical devaluation however can quickly lead to disaster and this is what we all seem to suspect can happen easily with the dollar.)
Hudson really is brilliant, by the way, check out the virtuoso "4000-year" history of debt and currency and value theory, in which he highlights the inevitable and perpetually repeated effects of (compound) interest in generating crisis, and of financialization in creating more paper claims to property than the real economic growth can ever support, thus tending to enforce extraction of profit via interest and centralization of ownership through bankruptcy and foreclosure; this process means that an economics worthy of the name must deal with political conflict as central to any serious theory, but economists due to scientific pretense always avoid whatever they cannot easily mathematize, creating models full of unspoken assumptions or entirely ignored factors, always rendering the status quo as a natural state.
The Mathematical Economics
of Compound Rates of Interest:
A Four-Thousand Year Overview
Part I
by Dr. Michael Hudson, ISLET ©
http://www.michael-hudson.com/articles/ ... rest1.html
Part II
http://www.michael-hudson.com/articles/ ... rest2.html
.
