Wednesday, July 31, 2002

Ominous Signs Abound

Arnold Beichman, writing in today’s Washingon Times, reminds us that Milton Friedman, Nobel Prize winning economist and defender of the free market, will soon turn 90. Among the many things Beichman recalls about his friend is his uncanny ability to be right while all around him were wrong. On everything from school vouchers to the victory of capitalism, Friedman hit the nail on the head.

Recently, the euobserver reminded us of another of Friedman’s predictions: the fall of the Euro currency. According to the article, Friedman believes the currency will last for five to ten years before collapsing. Arguing that a centralized monetary policy is the Achilles heel for the new money, Friedman notes that a continent-wide monetary policy will ultimately lead to unemployment. In his view, any centralized policy that works for nations like Ireland or Portugal will not work for Germany.

The EU folks might want to heed Friedman’s warning. The latest polls show that increasing unemployment and inflated prices following the introduction of the Euro currency leave many Germans hankering for their old Deutschmark.

And despite Tony Blair’s best efforts, the Brits seems to be reading the signs. While many in Euroland thought the smooth introduction of the currency, along with its recent rise against the US dollar, would convince the British public to drop the pound, the exact opposite is happening. As today’s Times reports, a recent poll shows that only 35% of Brits favor adopting the Euro; down from 42% in January. During the same period, the number opposing entry to the Eurozone rose from 46 to 55%.

Friedman was right about a lot of things in his time, if I were one of the boys over at the European Central Bank, I’d be worried.

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