EAC Monetary Union: Learning from others

Editor, Refer to Adam Kyamatare’s article, “The EAC Monetary Union will be a success” (The New Times, December 16). I doubt there are many East Africans that do not wish our putative regional monetary union success. But wishing it and being sure that we will be better at making it work than the Eurozone are two different things. As that old English proverb warns, “There’s many a slip twixt the cup and the lip.” If we are having problems getting all five East African member states in order to implement decisions for greater integration in much easier areas, just ask yourself how much more difficulty this will be in the complex area of a shared currency. The so-called Coalition of the Willing (CoW) is the most dramatic response by three of those member states who are frustrated with the foot-dragging or outright reversal of direction by some of their fellow member states on the integration front in areas that should be much easier than monetary union. I’m not sure there are willing participants who understand the benefit to be derived from the EAMU (EAC Monetary Union). There was also suggestion that Central Bank independence would allow “the Central Bank to primarily maneuvre in the public interest ...”, giving as an example of the actions of the US Federal Reserve and its head Ben “Helicopter” Bernanke. Let us put aside for the moment the fact that the Fed is primarily owned by its private member banks (the behemoth Too-Big-To-Fail, Too-Big-to-Jail and Too-Big-To-Rescue financial institutions that now control about 80 per cent of all U.S banking assets) and that, as a result of regulatory capture, the US Central Bank now works principally for its financial sector constituent-owners (Wall Street) at the expense of the real economy (Main Street). The other major mandate of the Fed, in addition to price stability, is to ensure monetary policy that promotes full employment. In reality, the Bernanke Fed’s post-2008 zero interest Quantitative Easing (electronic “money printing”) policies have transferred trillions of dollars from savers and the rest of the economy into the bank reserves of the large banks which have used it to speculate on a wide range of financial assets. The Fed has done extraordinarily poorly in promoting employment to such an extent that six years after the near-crash of the US economy and the collateral sinking of the global economy in its wake, the real US unemployment figures (U-6 rather than the narrower and more frequently quoted U-2 which does not include discouraged workers and underemployed workers in involuntary part-time work when they would prefer full-time jobs) is currently estimated at 14.4 per cent rather than the 7.9 per cent provided by the US Bureau of Labor Statistics (BLS). The Japanese Central Bank performance is even infinitely worse. That similarly independent institution has maintained a zero-interest rate policy for almost two decades since the onset of the country’s economic crisis. It has thrown gazillions of yen at the banks but the only result has been to push the country into a liquidity trap that it seems unable to pull out of despite the fact that Japan is now the most indebted developed country in the world (over 200 per cent of GDP). The only reason Japan is not yet a basket-case is the legendary savings rate of its households and the fact that the overwhelming proportion of its public debt is owed to its citizens and domestic savers rather than to outside creditors. Mwene Kalinda, Kigali

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EAC Monetary Union: Learning from others