The dollar shoots up, the euro plummets. The European currency is now worth one dollar. There would be something to be said for introducing the dollar here as well. That has its advantages. No more ECB in Frankfurt, no more Eurogroup in Brussels, no more endless political debates about spreads, troika, neuro, zeuro, whatever it takes and aid to Italy or Greece.
The eurozone countries would not be the first. Ecuador and countless islands in the Pacific Ocean and the Caribbean Sea, including the Netherlands Antilles, Bonaire, St. Eustatius and Saba – a Dutch municipality, by the way – have the dollar as their official currency. In many developing countries the dollar is not the official but the actual means of payment.
Now the eurozone countries will not want to give up their monetary sovereignty. But politically, militarily and financially, the eurozone has already been extradited to the US. Since the Marshall Aid in the 1950s, the name of the eurodollar has existed. This includes all dollar deposits placed in banks outside the US and about which the US central banks have nothing to say. The size of this market is estimated at USD 14 trillion (currently EUR 14 trillion). 90 percent of world trade takes place in dollars and the foreign exchange reserves of the eurozone countries also consist mainly of dollars.
The advantage of a euro-dollar union is that no more inflation is imported. Virtually all commodities – including oil – are denominated in dollars. If the dollar appreciates, all those commodities will now become more expensive. Another advantage is that there is no longer any need to haggle over the interest. Euro dollars can always be exchanged 1 to 1 for yankee dollars. The dollar is invulnerable. The US may have infinite trade deficits, but the currency will not suffer. There is no alternative. The yuan, the euro, the yen, the IMF’s SDRs, let alone the so-called cryptocurrencies, can do nothing against the dollar’s monopoly.
American economist Barry Eichengreen, who researched the disproportionate use of dollars in the global economy, cited trust, liquidity, trade relations and the largest financial network as one reason. “We call this the Mercury hypothesis,” he concluded. That is the god of commerce. But there is also another reason: the strategic, diplomatic and military might of the US. “That could be the Mars hypothesis, named after the god of war.”
If the dollar determines everything, then having your own currency is of little use. As a symbol of sovereignty, a flag and anthem are cheaper. With the euro crisis escalating again due to the political crisis in Italy, the best solution would be not to return to the mark, franc, peseta, lira, drachma and guilder, but simply adopt the dollar. Europe has proven that a system of linked coins – the snake, EMS – doesn’t work either.
The ideal time for the transition is now. One euro is one dollar. The EU can arrange it in the summer lee.