Fraser Institute Has Long Been Busy Making The Case For The Amero

The board of governors of the North American Central Bank will consist of members from the United States, Canada, and Mexico chosen by their respective governments in numbers that reflect their economic importance and population. As in Europe, membership in the union will require that countries do not incur persistent budget deficits. The amero notes and coins will have in common abstract designs on one side. Notes and coins will be produced in each of the three countries according to their own demand and show national symbols on the other side. The currencies will circulate at par in all three countries and those spent in other member countries will be returned to their countries of origin whenever they find their way into a commercial bank. Therefore, at all times citizens of each country will deal predominantly in notes and coins that carry their national symbols on one side. Living standards in the short term and the long term It is important to realize that immediately after the adoption of the amero, the living standards and wealth of citizens in all three countries will be completely unchanged. To illustrate, consider a Canadian who earned CDN$3,000 per month. After the monetary union, she earns 1,500 but a new car that cost CDN$30,000 and required 10 months of gross income under the old system, under the new regime will cost 15,000 and still take 10 months of work to buy. Balance sheets, the assets and liabilities of individuals and firms are also not affected by the currency conversion. A bond worth CDN$90,000 can buy three cars at CDN$30,000 each; the bond, when it is worth 45,000 and the cars cost 15,000, can still do so. The merit of adopting the amero depends on gains and losses accruing through time. The remainder of this paper deals with the dynamic effects of monetary union. The next section provides an historic background and conceptual framework for analyzing the costs and benefits of monetary union. Following sections discuss the issues for Canada and Mexico and for the United States. Next, I discuss the merit of alternative institutional arrangements like the fixed exchange rate and currency boards, which have been suggested as remedies for the problems raised by flexible exchange rates. The final parts of the paper analyze a number of technical problems that need to be solved before a union can be established... Full paper, HTML: http://oldfraser.lexi.net/publications/critical_issues/1999/amero/ Full paper, PDF: http://oldfraser.lexi.net/publications/critical_issues/1999/amero/amero.pdf [Proofreader's note: this article was edited for spelling and typos on August 30, 2006]

Note: http://oldfraser.lexi.n... http://oldfraser.lexi.n...