Editor's note: Originally published at tsi-blog.com on August 5, 2019.
The euro may well gain in value relative to the US$ over the next 12 months, but three differences between the monetary systems of the US and the eurozone guarantee that the euro will collapse (cease being a useful medium of exchange) before the US$ collapses.
The first difference is to do with the eurozone system being an attempt to impose common monetary policy across economically and politically disparate countries. This is a problem. A central planning agency imposing monetary policy within a single country is bad enough because it generates false price signals and in so doing reduces the rate of economic progress. However, when monetary policy (the combination of interest-rate and money-supply manipulations) is implemented across several economically-diverse countries, the resulting imbalances grow and become troublesome more quickly.
As an aside, money is supposed to be a medium of exchange and a yardstick, not a tool for economic manipulation. Therefore, it is inherently no more problematic for different countries to use a common currency than it is for different countries to use common measures of length or weight. On the contrary, a common currency makes international trading and investing more efficient. For example, there were long periods in the past when gold was used simultaneously and successfully as money by many different countries. However, if a currency can be created out of nothing then there is no getting around the requirement to have an institution that oversees/manages it. The euro therefore could not be 'fixed' by simply eliminating the ECB. The ECB and the one-size-fits-all monetary policy it imposes are indispensable parts of the eurozone system.
The second difference is linked to the concept that a government with a captive central bank cannot become insolvent with respect to
