EU vs. US

Interview with US Economist James Rickards

 

US Economist James Rickards New York Times bestselling book, The Death of Money: The Collapse of the International Monetary System, is an extensive reference work on the reasons the dollar will cease to be the world’s reserve currency and provides an overview of the current landscape of the international monetary system.

In an interview with James Rickards he stated that “Europe was doing everything right” and predicted that the euro would most likely overtake the dollar as the world’s reserve but he stated that to be a reserve currency rather than a trade currency the EU needs a “unified sovereign debt market.”

“And that’s where Europe actually falls down today. …they are broken down into these 18 separate debt markets they don’t want to have a unified sovereign debt market. You can see that coming at which point once you take the integration a few steps further…and create this unified European sovereign debt market where the bonds are issued or backed by the full faith and credit of the Eurozone, then it will be in a position to displace the dollar.”

“The next step, the next thing coming is the creation of a true European sovereign debt market, they don’t have that right now.” When “the total amount of euro denominated sovereign debt is comparable to the US treasury market … the euro is positioned to displace the dollar as the global reserve currency.”

“The reason that has not happened so far is because while the total European sovereign debt is comparable to the US treasury market, it is broken into separate markets: you have Italian debt, Spanish debt, German debt, Netherlands debt etc. It’s all denominated in euros, but it comes from numerous different issuers and not one of those markets is able to absorb the capital flows we see going into treasuries.”

“Now what will happen next is that Europe will agree that European sovereign debt going forward will be backed by the full faith and credit of the Eurozone. That is an enormously important development… The euro actually could displace the dollar as the leading reserve currency at that point. Germany is controlling all this. Germany has not wanted to do that yet.”

“Have you had a chance to look that over the Commission Green Paper on Stability Bonds?”

I have and this is coming, but Merkel’s playing a very tough game. She doesn’t want to go there right away because she thinks it would be too easy. ..It would let the Greeks, the Portuguese and the Irish, it would let them off the hook. She wants to see more structural reforms. She wants to see more economic adjustment, fiscal responsibility, improvements in labor laws, and improvements in labor mobility, etc. ….When she gets it then she will embrace this unified debt market that were talking about, but not yet because she wants to see more progress, but we are getting progress. This is moving in the right direction…This might be three or four years away. It’s going to happen, and I expect that it will… I think that you’ll see the Chinese, The Russians, Arabs the remainder of the BRICS, and other countries around the world flocking into European Sovereign Debt, and that will be extremely detrimental to the role of the dollar. That’s kind of best case that’s if we don’t have a crisis.

 

 

 

 

 

 

 

 

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