|How Realistic is a North American Currency?|
By Todd Harrison JAN 28, 2009 7:45 AM
Could a seismic currency shift be in our future?
“World, hold on. Instead of messing with our future, open up inside.” --Bob Sinclair
Thomas Jefferson once said “when you reach the end of your rope, tie a knot in it and hang on.” As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar.
The Minyanville mantra is to provide financial news you need to know before you know you need it. That’s a fine line to walk as foresight often flies in the face of mainstream acceptance.
In 2006, it seemed counter-intuitive to forecast a “prolonged socioeconomic malaise entirely more depressing than a recession.”
For years, the notion of an “invisible hand” was conspiracy theory until we learned that The Working Group on Financial Markets was a central policy tool.
And now, as we gaze across our historically significant horizon, we must open our minds to thoughts and ideas that may seem foreign to folks conditioned by the past and stunned by the present.
As governments take on more risk—as they price assets on behalf of the market and transfer debt from private to public—the common denominator, or release valve, becomes the currency.
If our economic condition is allowed to take medicine in the form of debt destruction, the greenback will appreciate and asset classes, as a whole, will deflate. If we continue to inject drugs that mask symptoms rather than address the disease, the likelihood of a seismic readjustment increases in kind.
The deflationary forces in the marketplace are pervasive and the “other side” of our current equation—hyperinflation—may be years away. Given the magnitude, breadth and pace of the global financial epidemic, however, we must explore each side of the twisted ride.
Years ago, the Federal Reserve wrote a “solution paper” regarding the need to combat zero bound interest rates. The concern was the flight of capital from the U.S. and an option discussed was a two-tiered currency, one for U.S. citizens and one for foreigners.
Canadian economist Herbert G. Grubel first introduced a potential manifestation of this concept in 1999. The North American Currency—called the “Amero” in select circles—would effectively commingle the Canadian Dollar, U.S. Dollar and Mexico Peso.