Selected Essays of James Tobin
Chapter 13: Currency unions, American v. European
* The United States of America has been a successful currency union for two centuries. Few people – historians, economists or ordinary citizens – doubt that having a single currency, the dollar, contributed mightily to American prosperity and growth. Europeans conﬁdent that the euro can do the same for their Union cite the American experience as a precedent. There are, however, a number of important diﬀerences between the two cases. Now that Europe has crossed the Rubicon to currency union, consciousness of these diﬀerences provides an agenda for the hard work that lies ahead for the European Monetary Union (EMU) and its members if the new regime is to live up to the hopes of its architects. Although many Union-wide institutions are already in place, other important institutions remain to be designed, negotiated and built. PHILADELPHIA V. MAASTRICHT The US Constitution, negotiated in the Philadelphia convention in 1787, came into force in 1789. It vested in the federal Congress the sole power ‘To coin Money, regulate the value thereof, and of foreign Coin’. The Constitution also established free trade, travel and migration among the states, and required each state to give ‘full faith and credit’ to the public acts of other states. There were only 13 states at the time; all the other 37 present members of the dollar currency union joined later as they advanced from territorial status to be admitted as states of the American union. The original states had not had as English colonies their own moneys,...
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