THE PLANK JANUARY 2, 2009
It’s the euro’s tenth birthday, and the Wall Street Journal
editorial page wishes
it well. But the paper’s enthusiasm for the increasingly linked European
economies drives it to an unpredictable ecstasy: While considering, then
rejecting as implausible the idea of a global currency, it calls for the world’s
leading economies to pursue much tighter exchange rate coordination, a la the
The decade of the euro has demonstrated
that there is an alternative to the instability and volatility of the era of
floating exchange rates that began with the collapse of Bretton Woods in 1971.
It's time to build on that lesson for the good of free markets and global
Hear, hear. But isn’t it a little odd for an editorial page
known for bashing pretty much every multilateral organization, and often the
very idea of multilateralism, to be calling for, in effect, a global eurozone?
Obviously, military policy and monetary policy are two very separate kettles.
But underlying the eurozone’s success is the political and military
interdependence of its major players. Confidence in the euro is built on the
assumption that the participating countries will operate more and more like one
nation, and that their disagreements on the spectrum of policy issues will span
a smaller and smaller bandwidth. Would the Journal
endorse coordination beyond exchange rates? I doubt it.
The page rightly criticizes the Bush administration for
clueless on monetary issues, with all
three of its Treasury Secretaries repeating that the price of currencies should
be set like the price of any other commodity. But the supply of corn, say,
isn't set by a cartel of central banks and copper isn't a medium of global
Again, true dat. But the Journal’s
implicit alternative--an administration atavistically bound to a radical
unilateralism in all things but monetary policy, where it is nothing but
multilateral--is beyond wishful thinking. Not only would no administration act
so disparately, but if it did, its on-our-own (say) military and environmental
policies would undermine the public confidence necessary to make a common exchange-rate