FlashEconomics07February2018-151PatrickArtusTel.(331)58551500patrick.artus@natixis.com@PatrickArtuswww.research.natixis.comThe“reservecurrencycurse”andtheeuroWebeginwiththe“Triffinparadox”describedbyRobertTriffinin1960:theUnitedStatesissuesareservecurrency,whichforcesittohaveanexternaldeficitandexternaldebt,sinceitmustbeabletosupplyassetsindollarsforinvestorsintherestoftheworld.TheresultingincreaseintheUSexternaldebtthenerodesthequalityofthedollarandleadstofinancialvulnerability,hencethe“reservecurrencycurse”.Theeuroisalsoareservecurrency,buttheeurozonehasneitheranexternaldeficitnorexternaldebt.Thismeansthatfinancialassetsineurosarenotavailabletobeboughtbynon-residents,whereastheyoughttobe,giventheeuro’sreserve-currencystatus.Asaresult:Assoonastheworldaccumulatesforeign-exchangereservesandtheeconomicandpoliticalsituationintheeurozoneisnolongeraconcern,theeuroappreciatessharply;Thereisapositivecorrelationbetweenoilpricesandtheeuro’sexchangerate,asariseinoilpricesleadstoanincreaseindemandforeurosinoil-exportingcountries.Itisthereforeimportantthattheeurozone’spoliticalandeconomicauthoritiesunderstandthattheeuro’sreserve-currencystatusisincompatiblewiththeeurozonenothavingexternaldebt,andthatthissituationgeneratesastructuralovervaluationoftheeuro’sexchangerate.DistributionofthisreportintheUnitedStates.Seeimportantdisclosuresattheendofthisreport..FlashEconomics2TheTriffinparadox:Thereserve-currencyroleandexternaldebtAreservecurrencyisacurrencythatisheldbyinvestorswhodonotresideinthecountrythatissuesit.Thiscountrymustthereforesupplyassetsinitscurrencytonon-residentinvestorswhowishtoholdthem.Thismeansthatacountrythatissuesareservecurrency:-Musthaveanexternaldeficit,sinceitalsoneedsthecapitalinflowscorrespondingtonon-residents’purchasesofassetsinitscurrency;-Musthaveexternaldebt,whichcorrespondstothestockofthecountry’sfinancialassetsavailabletobeheldbynon-residents.ThissituationispreciselythatoftheUnitedStates(Charts1AandB).-7-6-5-4-3-2-101-7-6-5-4-3-2-1...
