Looking for a New Thermometer

The leaders of Argentina and Brazil hope to create a common currency to break the trade-denominated link to the US dollar. Joe Blogs compares their efforts to the creation of the Euro around the turn of the century.

Historically, most Euro participants lean towards "easy money" but Germany, having suffered from hyperinflation, is a hard-money, hard-nut to crack. That isn't the case here. Argentina currently suffers from roaring inflation -- not for the first, second, or third time -- which has tanked the value of their currency in dollar terms. Brazil has a similar record. Since their bilateral trade is largely denominated in dollars, this is highly inconvenient for businessmen and, more recently, politicians. The two countries are suffering from inflation fever and the leaders want a new thermometer in lieu of treating their policy problems. Even in the Euro's case, there was a financial crisis in the area because some countries did not follow the program they signed onto (ie limiting budget deficits and so on).

The proposed currency union is a bit like fixing a leaky roof. It's a good idea. What's a bad idea is trusting the job to "roofers" who cause more leaks than they fix. Meanwhile, the bewildered homeowners at the job site find half of their valuables have disappeared before the job is done. When they complain it is explained that the poor result is all the fault of people who live on another continent thousands of miles to the north.