Subject: AUT: The Dollar v. the Euro
Date: Tue, 1 Apr 2003 11:41:09 +0100
From: "David Joseph" <d.joseph-AT-bathspa.ac.uk>


This is a multi-part message in MIME format.


Hi All,

I've been trying to come to terms with the claim that the principal cause of the war is a struggle between two world currencies - the dollar and the euro - rather than just a struggle to control the world's oil reserves.  The problem I have in trying to reach an informed judgement about this claim is that I just don't know enough about money and its functions.  Can someone enlighten me?

The claim has three components:

1) "The more dollars there are circulating outside the US, or invested by foreign owners in American assets, the more the rest of the world has had to provide the US with goods and services in exchange for these dollars.  The dollars cost the US next to nothing to produce, so the fact the world uses the currency in this way means that the US is importing vast quantities of goods and services virtually for free." (Co=EDl=EDn Nunan: 'The Real Reasons for the Upcoming War With Iraq')

2) The rise the euro means that the dollar's hegemony and the US's scam of 'getting something for nothing' is being challenged.

3) The war is therefore motivated - at least in part - by a need by the US to defend the dollar against the euro.

The problem I have is that I can't see how the dollar can function in the way suggested by Nunun, allowing the US to get something for nothing.  I can see that the dollar being main global currency does benefit the US in three ways:

1) It allows the US Federal Reverse to set interest rates that benefit US firms throughout large parts of the world

2) It reduces the costs of US firms when trading with firms outside the US

3) It has some symbolic value, signalling US military and economic might

But none of these are what Nunan is talking about.  Can somebody therefore explain just how the dollar enables the US to import vast quantities of goods and services virtually for free.  Is there something to be said for this claim?  Why?

David

HTML VERSION:

I=92ve been trying to come to terms with the claim that the principal cause of the war is a struggle between two world currencies =96 the dollar and the euro =96 rather than just a struggle to control the world=92s oil reserves.  The problem I have in trying to reach an informed judgement about this claim is that I just don=92t know enough about money and its functions.  Can someone enlighten me?

The claim has three components:

The problem I have is that I can=92t see how the dollar can function in the way suggested by Nunun, allowing the US to get something for nothing.  I can see that the dollar being main global currency does benefit the US in three ways:

1) It allows the US Federal Reverse to set interest rates that benefit US firms throughout large parts of the world

2) It reduces the costs of US firms when trading with firms outside the US

3) It has some symbolic value, signalling US military and economic might

But none of these are what Nunan is talking about.  Can somebody therefore explain just how the dollar enables the US to import vast quantities of goods and services virtually for free.  Is there something to be said for this claim?  Why?

David