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The Euro-Implications for England and AmericaThe strengthening push for full political union, following monetary union.by Melvin RhodesDue to the sudden and unexpected death of my father, I spent the first few days of January in England. It had only been four months since my previous visit, which included a tour of central Europe, which I wrote about in two recent articles for WNP. Harold Wilson, a British Prime Minister in the 1960s, once said that "a week is a long time in politics;" meaning that things can change dramatically in a very short time. Four months is even longer. On my previous visit, many people in England and on the continent seemed unaware of the euro. You would have to be a hermit today not to have heard of it. The media is dominated by news of the euro, its launch, exchange rates with other currencies, the implications for those involved and for those who are deciding on future involvement, how the growing world recession may impact euro member countries, the strengthening push for full political union following monetary union, and Europe's relationship with the world's main trading currency, the American dollar. Newsweek's "Euroland" special issue introduced the subject in the following way: "In January, the world will start getting used to a new currency. Whether you love the euro or hate it, know this: nothing so big has ever happened before." The euro may not be the main issue on American television news, but its impact on America could be far greater than any issue currently being widely discussed, including President Clinton's trial. In order to understand this, we need to focus on two main areas, economic and political. The Economic Euro Before World War II the British pound sterling was the dominant currency of world trade. Prices of goods traded between nations that had nothing to do with Great Britain were often quoted in pounds because businessmen the world over knew the value of the pound. The pound was printed by the Bank of England. A famous saying during the last century and for much of the current one was: "It's as safe as the Bank of England" (I've heard the expression in different countries around the world). After World War II, the American dollar became the major trading currency but the British pound continued as a reserve currency and was the principal monetary unit of trade between nations of the British Commonwealth (one quarter of the world's countries), and some others that had close ties to Britain. By the early 1970s, sterling was no longer able to carry the burden of being a major international trading currency. The country was too vulnerable to international currency speculation, pressures that built up whenever there was uncertainty over Britain's economy. The American dollar from that point was on its own. Today, the dollar is used all over the world. It is not the legal currency in other nations, but it is a currency that nations use when trading with other countries and that individuals will hoard when their own nation's money is unsettled. High rates of inflation in South America, Russia, many parts of Africa, the Caribbean, and the Pacific, have led people all over the world to trust the U.S. currency more than their own. Additionally, the dollar is the preferred currency of international drug dealing, now the world's biggest business. Because the U.S. dollar is so readily accepted around the world, it has enabled America, and Americans, to overspend, a situation exacerbated in recent months by the collapse of American export markets in Asia. The latest monthly trade deficit was over $15 billion. This means that America spent over 15 billion dollars more on foreign goods than it sold-in just one month. This situation means that over half the dollars in circulation are outside the United States. This makes America very vulnerable today, just as Britain was in the 25 years following World War II. If there is a sudden international loss of confidence in America (the result of uncertainty over the presidency, protracted conflict in the Persian Gulf, financial set-back on Wall Street, Y2K problems, or a pre-Y2K panic?), billions of dollars will suddenly be "dumped," forcing the value of the dollar down against all other currencies. This would result in higher prices for American consumers. Enter the euro. The fledgling European currency is the only credible alternative to the dollar. Euroland's economic output is almost as great as America's. If the economies of European nations considering joining the euro are included, it is greater. More importantly, the currencies of the eleven countries that now constitute the euro have been more stable than the American dollar during the last few years. This little known fact was first realized by international currency speculator George Soros, who transferred billions of dollars into European currencies in September 1998. Mr. Soros was blamed for Russia's economic collapse a few days earlier when he pulled the plug on the country. Even Japan, now the third largest economy in the world, has been selling U.S. Treasury bonds to put more assets into euro-based economies. Other developments have included one Gulf leader suggesting that the world price of oil should be fixed in euros, not dollars, a decision that would increase gas prices at American pumps should the dollar fall in value. It's early days yet, but any uncertainty about America could trigger major changes on world currency markets. Remember: "a week is a long time in politics." The biggest international currency market is in London. "The City" (London's financial district) dominates world financial trading. This could change if Britain stays out of the euro. The fear is that Frankfurt, headquarters of the new European Central Bank, could gradually oust London from its preeminent role. This fear is behind the pressure from many British bankers and businessmen for Britain to join the euro as soon as possible. If a decision were made to enter the single currency, Britain could be ready in as little as eight months. Britain is faced with a dilemma. If it does not switch to the euro it risks economic decline on the periphery of the European Union. But if it does adopt the euro it will also risk economic decline on the periphery of Europe. Yes, you did read that right. Joining could be as detrimental as not joining. Euro members will soon be harmonizing rates of taxation so that no country will have an advantage over any other (something that not even Washington has tried to force on the fifty states). This would mean higher taxes on British businesses, taking away their competitive edge. The Political Euro The New Republic (1/25/99) has become the first American magazine to warn of the dangers of the euro to both Britain and the U.S. "The pragmatic British, as ever, remain wallflowers at the continental dance. But the British see something close up that the Americans would do well to understand from afar. The reason that the French in particular are prepared to countenance such risks is that they seek to convert a united Europe into an alternative world power to the United States. The economic union of Europe is, in Paris's eyes, a mere prelude to political union. And the point of political union is to lessen American influence and involvement on the continent, and elsewhere, by means of an eventual attempt to construct a defense and foreign policy that may well be antagonistic to American interests. The more honest europhiles are not coy about this. Nor should they be. But neither should Americans be complacent. If Britain especially is subsumed within a common European defense policy, the United States will lose its only truly reliable European ally." The push for full political union has now intensified following the very real accomplishment of economic union. Note the following comment from London's Daily Telegraph dated January 13, 1999: "We should be grateful to Joschka Fischer, the German foreign minister, for pressing the cause of European federalism with an honesty that puts British ministers to shame. In an impassioned speech to the European Parliament yesterday, he warned that the European Union would suffer 'an institutional heart attack' unless it moved rapidly to full political integration. The launch of the euro, he said, had set up a 'dynamic' that would inevitably sweep aside the current political arrangements of Europe. 'The introduction of the single currency is not primarily an economic but rather a sovereign and thus eminently political act' he said, adding: 'political union must be our lodestar from now on.'" In the December, 1998 issue of WNP, I showed that Europe is like a citadel, a fortress, which is being built slowly but surely, to last. That's why the European dream of unity has taken so long to be achieved. In the past, all attempts to unify Europe have been through force. This time it is being accomplished peacefully. It takes time, as the sensitivities and concerns of many countries have to be taken into account. It is understandable that many Americans yawn at talk of European unity. Remembering how quickly the Continental Congress was able to bring the original thirteen colonies together, they feel that if Europeans were really going to unite they would have done it long ago. This failure to understand the difference between Europe and America caused problems in the church as many anticipated the imminent fulfillment of biblical prophecy and then lost faith when it didn't happen within their timeframe. Europeans have a long history. If it takes a few decades to unite, so what? They have been working on it for fifty years, and now they are in the final stages. The roof is finally being put on the citadel! In the light of recent developments in Europe, it is interesting to speculate on Revelation 17:12. "And the ten horns which you saw are ten kings, which have received no kingdom as yet; but receive power as kings one hour with the beast." The euro was put together slowly and systematically. It has taken over forty years to get to this point, since the EEC was founded in 1957. It was the Maastricht Treaty earlier this decade that pledged the member countries to form a single currency, which is now well on its way. Many nations needed to discuss it first. Also, France and Denmark put it to a referendum, allowing the people to decide directly. For some years, each country wanting to join had to adopt economic policies that would enable it to qualify. It was a carefully orchestrated, well-planned project. One mistake and the whole thing might have collapsed. Rev 17:12 suggests this could also be the means of achieving full political union. Ten kings (or small groups of nations?) will decide on full political union. From the wording of this verse and looking at the euro precedent, it seems possible that a group of nations could simultaneously hold elections to decide on the issue of full European political union and to choose the new governments that will take them into a United States of Europe. This group of nations would change their leaders at the same time, with the intent that these leaders would then choose a federal leader. Only after this is accomplished would Europe change into the aggressive beast power prophesied in the Scriptures, perhaps due to external threats that a democratic system cannot handle. The New Republic is right: Americans should not be complacent.New power blocs are taking shape in the world which will alter the careful balance shaped by two centuries of dominance by America and England. WNP |
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