Lately the rumors about a new currency coming into place in United States are getting stronger, and like always is a conspiracy theory “Hollywood Style” that comes with it.
It all star wit the concept of The North American Union, which is in theory a supranational organization, modeled on the European Union that will soon fuse Canada, the United States, and Mexico into a single economic and political unit. The details are still being worked out by the countries’ leaders, but the NAU’s central governing body will have the power to nullify the laws of its member states. Goods and people will flow among the three countries unimpeded, aided by a network of continent-girdling superhighways. The US and Canadian dollars, along with the peso, will be phased out and replaced by a common North American currency called the “Amero”.
They are thousands of email flooding in the Internet urging people to start looking for the “Amero”. Among the many rumors around about this “currency” are:
· United States is secretly moving 800 billion “Ameros” into China Central bank to swap them for the dollar to protect China that has 2.5 trillion dollars worth on American assets.
· The dollar is going to disappear and that United States Is devaluating the dollar until it disappear
· 90% of the value of the dollar will be gone by 2009
To begin I want to go back to 1972, when Richard Nixon detach the dollar of being back up by gold, and instead just back by the faith of the people in a currency, right after this, the Saudis stared selling their Oil in dollars, it’s here when the Petrodollar star, and the rest of the world followed (That’s why US jumped over Hussein’s head, once he was planning to sell his Oil on Euros).
Under the fiat money United States have been able to be in debt as much as they want, that’s why in my opinion it has been one of the best political moves by any American President ever. People just trust that the government will pay their interest on time, is this reason why in times of Turmoil most of the traders put their money on Bonds.
Having said that, once we conceptualize the value of dollar, since the fiat money United States pretty much have the economy of the world hold by the “horns”. They could print as much money as they want, but they also could restraint money as much as they want through the Federal Bank. The dollar in terms of the Euro is exactly where United States wants it value around 1.20-160 dollar per Euro. Why…because American companies could export more, but going back to the Euro, which start in 1999, it has destroy the aspirations of France and Germany of becoming the dominant nations in the world, with the Euro as currency, now the big nations such as the two mention before have to carry with the inflations, and economic issues of the other countries of the Euro Zone.
To give a better perspective of what I am saying Italy has a debt of 114% in terms of their GDP, France has a debt of 78%, Portugal 116% and Spain above 90%. All this numbers in my eyes mean big problems. It’s not a coincidence that England and Switzerland are not using “Euro”.
Part of the strength of the Amero rumor has been of how much United States have been spending and getting in debt, well this is true, but this is the part that we ignore, of the 9.1 trillion dollars the United States public debt, 73% is in hands of American Institutions, this is why the government did not let Bank Santander (Bank of Spain) to buy Wachovia when it collapsed, another important fact that eliminates the rumors of the Amero is the capacity of debt that United States has. The invest of foreigners and loans in United States is around 10 trillion dollars, more than the GDP of Asia and Europe together, and twice the GDP of Spanish America, the credit line of debt for United States is around 57 trillion dollars more GDP of the all the countries of the world and 41% of the reserves of the world are in dollars. Although I do not agree with the Iraq war, the spending on Iraq is just 4% of the GDP, is what US have spent by average every year on wars in the last 50 years.
The Amero at the end is not more than idea by Herbert Gruber economist of Canada, that saw in the Union of North America a strategic answer to the Euro.
Thanks to my friend “Dominicanmacho” for his help with the stats presented here.