Transcript
Bailey Morris-Eck: ... present Bob to you today. As many of you know he spent most of his career at the Federal Reserve and I, in my prior life as a journalist, used to regularly consult him on a variety of issues in which he was always very cogent, succinct and not terribly headline making because that's not his style. I would like to suggest that Bob is a modest man but I've been in many conferences with him. And at one conference in particular, I remember being with Solo, Samuelson and Solomon and at the end of the day it was Solomon who carried the day much to his surprise. He would never admit it.
Today he's written, as you know, a policy brief, which we've tried to — hope all of you have seen. It's on the euro. It sets the base for much of our conversation today. And without taking up any more of your time, I'm going to turn this over to Bob and we hope we'll have a most spirited Q&A session with you afterwards.
Thank you for being here.
R. Solomon: Thank you, Bailey. Since most of you had not, apparently not seen the paper before arriving this morning. Is that correct? I'll briefly summarize it before we get into questions and answers and so on — about the general issue. On the question Bailey wrote how interested are Americans in this issue the story's told that a while back a professor was asked to give a talk at an American university about the euro. And he showed up at the seminar room on time and there was one person sitting there in the room. He waited a while and nobody else came so he gave his talk. And then he asked for questions and the man who was sitting there asked some very perceptive questions. And he packed up his stuff and was just about to leave. And the man said, "wait, wait don't go anywhere I'm the second speaker." Well, it's clear that that's no longer true from what I see before me today. There is an interest in this question of the new currency, monetary area among eleven countries and in Europe, which has been said is a historic event for the first time since the Roman Empire a good part of Europe will have a single currency. It's a rather noteworthy fact.
Let me just run over the main points that are made in this paper. Most of you, I assume, know the elements of what's going on there. There are eleven countries out of the fifty members of the European union, in the European monetary union, which is now being referred to as the euro zone or Euroland. Their exchange rates are now locked together with the euro. Almost all financial transactions are now taking place in euros rather than in the individual currencies. But hand to hand currencies, francs, marks, Belgian francs and so on are still being used by individuals in their shops and that will go on for two and a half years. By the middle of 2002, those individual hand to hand currencies will also disappear and there will be only the euro for all forms of transactions within Euroland. There is a European Central Bank, of course, established and it has the structure similar to the Federal Reserve system, not precisely the same but similar. There's a central European, called the European Central Bank situated in Frankfurt which is comparable to the Federal Reserve Board. It doesn't do transactions itself. The transactions will be done by the national central banks, the eleven national central banks, which are comparable to our Federal Reserve Banks. And there is a governing council comparable to the Federal Open Market Committee, which is the principal policymaking body here in the United States. The governing council in Euroland consists of the six members of the European Central Bank Executive Board comparable to the Federal Reserve Board, I repeat, and the eleven presidents of the national central banks. That's the group that will make monetary policy for the group as a whole. And it has already set a basic interest rate of about three percent for all the entire area. Okay, that's the background.
A number of questions arise about how it will work. And as I say in the paper, the questions are easy to formulate but the answers are not so obvious as is usual. One question is, you know, what will be the affects on trade both within the area and with the rest of the world. Another question has been raised rather widely in Europe, in Japan as well as in the United States is what, to what extent will the euro become a reserve currency. The dollar is currently the principal reserve currency in the world. That is the currency that is all held in the foreign exchange reserves of countries around the world. And I think some fifty percent, of all total foreign, of total foreign exchange reserves in the world something like fifty-seven percent is held in the form of dollars. Deutschemark, the Deutschemark percentage is oh, much, much smaller than that, I think twelve percent. The dollar is clearly the dominant reserve currency in the world today. Question: will the euro take over a good part of that role? Fred Bergsten had an article in The Washington Post two or three days ago in which he predicted that that would happen. I'll get back to that issue in a while. I'm disagreeing slightly with my good friend Fred. Questions about the euro's exchange rate, how will it move? The euro is a privately used currency. In the world as a whole it's remarkable that some eighty percent of all international financial assets, international financial assets held whether it may be in bank deposits or securities, however they're held, are in the form of dollars. The dollar is the main private currency for investment purposes, for transactions purposes, as a vehicle currency as it's called. The dollar performs internationally all three functions of money, as a medium of exchange, a unit of account and a standard of value. Will the euro take over some of those functions, another question? Okay, that's basically, those are basically the issues that are discussed in this paper. One final question is how will the euro, which still consists of eleven sovereign countries with their own political structures — they've just, they've just melded together their monetary systems — how will it function politically in the world including the United States? Suppose an international crisis arises, who represents Euroland? Or as the question is sometimes put, if a real problem arises, whom does the U.S. Secretary of the Treasury telephone in Europe? Those are the major questions.
Let me say a few words about the answers. In general I think it's going to be predicted that given the fact that there will no longer be transactions costs in trade among the eleven euro countries — they all have the same currency. They don't have to buy and sell foreign exchange to do transactions with each other. And there will not be uncertainty about future exchange rates. Taking both of those facts into account, it's very likely that trade among the eleven will increase relative to their total trade. A third reason why that will happen is that companies that deal in the same currency are more likely to do business with each other than those that have different currencies. It's natural. Everything is more transparent. So for those reasons trade will likely increase, imports and exports among the eleven, which at, sort of at the expense to some degree to external trade, very likely, affecting both exports and imports.
The exchange rate of the euro, how will it move? It's quite unpredictable. It's not likely to rise up sharply or plummet steeply at least in the early days. Chances are the movements of the euro as against the dollar will be relatively moderate. Interest rates are a little bit lower in Europe than they are in the United States. But the inflation rate is also a little bit lower. The real interest rates aren't all that far apart between the two areas. That's one reason why one should think, expect the exchange rate to be relatively stable. The United States as usual has a sizable deficit in the current account of its balance of payments, trade account and other current accounts, current account items. Whereas the euro area, Euroland, has a surplus in the current account of its balance of payments. But the United States has had this deficit for sometime. The deficit has increased in the past year or two given the crisis in Asia. That has not seriously affected the dollar's exchange rate. Our current account deficit is being easily financed with, by inflows of private capital. There's no reason to think that will not continue. So even that difference in balance of payment's position should not have a significant affect on exchange rates. I'm predicting and Niels Bohr who said prediction is difficult especially about the future, I'm predicting that the exchange rate will be relatively stable between these two areas in the short run.
Now the question of reserve currency, this has taken on an importance, seems to have taken on political importance. It goes way back to Charles de Gaulle. President de Gaulle of France, way back in the 1960s spoke about the dollar being an exorbitant privilege that the United States had. Back in those days, in the fifties and sixties, countries had balance of payment's deficits or surpluses, those were reflected much more than today in movements of reserves among countries. That's how they were financed. Today we have so much more flow of private capital that most international imbalances are financed that way, by private capital movements. So what impressed de Gaulle, what impressed de Gaulle in the sixties is that when France had a deficit in its balance of payments, it either had to buckle down and get rid of the deficit or give up reserves. When the United States had a deficit, all it did was, all that happened was other countries took on the dollars and held them. And that's what bothered de Gaulle. But as I say things have changed a lot. I made the calculation just last night. We had a current account deficit last year of over $150 billion, the United States did. How much of that was financed by foreign acquisition, official acquisitions of dollars, in other words increases in dollar reserves of the rest of the world? Ten percent of the deficit was financed that way. The other ninety percent was financed by capital, private capital. So reserve currency movements are much less important today than they were when Charles de Gaulle made his famous statement.
Nevertheless, the question still arises and to some people it still seems important. The reserve currency role seems to add prestige to an area and some people in Europe have talked about the desirability of the euro becoming an international reserve currency. That would somehow in their mind increase the importance of Euroland in the world, its political importance, its influence, its prestige. Will that happen? I think one can say that, well as you may know, maybe I've already said this but of all official reserves held in foreign currency around the world as of the last count, fifty-seven percent were in dollars. I mentioned that earlier. Okay. Will the euro take over some of that? Some countries that are close to Europe that already hold Deutschemarks, clearly would automatically hold euros, those are countries in Eastern Europe mainly, a few countries in Africa. Will countries elsewhere that now hold dollars switch into euros in the form of reserves? Well, it's obvious that a sensible central bank if it starts selling dollars to buy euros, is going to lower the value of the dollar and lower the value of its remaining dollar reserves. So you can be pretty sure that central banks around the world will not start dumping dollars on the market in order to buy euros. If there is a shift from dollars to euros as a reserve currency, it will be a very gradual process. I think that's fairly obvious and that's a point that Fred Bergsten should have made in his article in The Washington Post and I think failed to make, with all respect to Fred Bergsten.
Another technical point but an important one. Not all technical points are unimportant. If a currency is to become a growing, an increasing reserve currency, there has to be not only a demand for it there has to be a supply of it. And how do you supply, how does a country supply its currency as a reserve? It incurs a deficit, an overall deficit in its balance of payments, either by having a current account deficit as the United States has or by having an excess of capital outflows over and above a current account surplus. Those are the only ways in which the rest of the world can acquire its currency. So if the euro, if Euroland is to become a reserve center, if the euro is to become a reserve currency, Euroland will have to have a deficit in its overall balance of payments. It has a current account surplus now. Will there be sufficient capital outflows to provide that supply, making it possible growth of reserves in euros around the world?
I also raise the question, does it matter whether or not the United States loses some of its status as a reserve currency to the euro? And my answer is no it doesn't. It's not all that important to the United States. I already mentioned what a small part of our deficit is covered that way. There has been talk in Europe about American hegemony being somehow based upon the use of the dollar in the world. I just don't see that connection at all. To the extent that the United States has, I don't like the word hegemony, the United States has influence around the world, I don't think that's based on to any significant degree on the fact that countries use the dollar as their major reserve. It's based on obviously the military power of the United States, its size and economic weight, perhaps its culture, all sorts of other explanations that I would put long, way up on the list above the fact that it happens to provide the major reserve currency to the world. So from that point of view, it's not all that important to the United States if it loses some of its reserve currency status. Beyond that remember that we pay interest on dollar holdings of the rest of the world. It's like borrowing except that it comes in automatically.
The major material advantage, financial advantage from having a reserve currency is that between 200 and 300 billion dollar bills, that may be twenty, fifty, hundred dollar bills as well as ones, exist in the world — a lot of them in Russia as you all know I'm sure. This is known as seigniorage. When one's currency is acquired outside the country, one doesn't pay interest on that. And that's a pure loan, interest free loan to the United States, to the U.S. Treasury. And that's sort of a major material advantage that exist, the seigniorage function rather than the reserve currency function.
On private transactions, I'll just go very quickly now, a major difference between the United States and Euroland is that in Europe banks are much more important in financial transactions than in the United States. In the United States, securities markets are much more developed than they are in Europe. I think something like half of all financial assets are in banks in Euroland. Less than one fourth are in banks in the United States. Now, it's very likely that securities markets will develop in Europe, London. Well, there has already been talk about linking up Frankfurt, Paris and London stock exchanges. There will be other such moves. And I have no doubt that in this larger area, the financial markets will develop gradually. And that will make Euroland a more attractive place for private individuals around the world to hold assets. But it will also make Euroland an attractive place for private people around the world to borrow. Both will happen. So one can't predict from this whether that development that I just described will either put upward or downward pressure on the value of the euro.
Okay, finally part of the paper has to, talks about representation in the world. How will Euroland be represented in the International Monetary Fund, (IMF), in the Group of Seven, the Group of Ten, the various other international fora? It's not clear. There's only one central bank present right now. Duisenberg, Wim Duisenberg, the President of the European Central Bank, he will no doubt show up at the IMF and other meetings. On the finance ministry side, you still have eleven finance ministers. And it's not clear how Europe will be represented on that side. Maybe the president of the European Council — the European Council, which is the heads of the states of government of the eleven, the fifteen countries I should say, that presidency rotates every six months and you can have maybe the current president of the council will be the representative on the finance ministry side. It isn't clear. And the question which I raised earlier still exists. Whom does our Secretary of the Treasury call when there's a real problem. If Alan Greenspan has a real problem, there's no question about whom he'll call, he'll call Wim Duisenberg, the president of the European Central Bank.
Okay, that's the paper. I think what I should do now is open to questions and then I can raise other topics if you would like me to. The floor is open. Yeah.
Participant: [Inaudible.]
R. Solomon: Well, I think there's a bit of a difference. I mean the dollar reserves earn interest, gold does not. There was an expectation that the gold price would continue to go down, I think, which is probably one reason why they sold in anticipation that the price would be even lower. I don't think there will be an expectation that the dollar will have a steady downward movement. So I see a difference between the two.
Yes.
Participant: ... Your remarks seem to echo the comments of the U.S. government officials like Larry Summers and Robert Rubin who welcome the euro, don't see as much of a threat for the U.S. I wouldn't go as far as some of the people like Martin Feldstein who are worried about war breaking out. But I would be a little bit more concerned than you're saying today. For example, the major commodities that are currently priced in dollars such as oil and if the euro becomes big enough, if these commodities are not priced in dollars any more, are priced in euros then we will be much more susceptible to exchange rate changes in the dollar that we've not had to worry about previously. Isn't there more reason for concern than you're letting on?
R. Solomon: Well, I don't know if that's a reason for concern. Would it make an enormous difference to the United States if we had to pay for oil in, by buying euros rather than directly with dollars? I don't see that it makes an enormous difference to the United States. If the price of oil goes up, we pay more dollars for it. If the price of oil went up when it was priced in euros, we would pay more, we'd still pay more then also. Now, if the dollar should depreciate, if oil were priced in euros and the dollar should be depreciate then, of course, the price of oil would rise for us even though the euro price of oil did not go up. The prices of all imports would rise if the dollar depreciates. You know, I see that there would be some economic financial affects but it doesn't strike me as being, you know, a major, major problem. I may be missing something. I'm displaying the modesty that Bailey exaggerated a little while ago.
Carol Acaps.
Participant: ... You might have addressed the question already but I heard that you said at least in the short run that there won't be any big currency fluctuations in the euro and the dollar. Would you extend that to the long term as well, and is it necessary, as some people talk about in my new government, to somehow go into the target zones or corporations to ...?
R. Solomon: Your name isn't Fleischbech, is it? A private joke. Carol, the opinion of target zones, I don't want to say is universally negative but predominately negative these days, as you know. Sergeant Fred Bergsten and Monsieur, excuse me not Monsieur, Herr Lafontaine — may I interrupt. I hope you haven't all heard this joke. International relations between, economic international relations between France and Germany have to improve greatly now that we have a French finance minister with a German name and a German finance minister with a French name. So I went to the extent of calling Lafontaine, Monsieur Lafontaine.
Herr Lafontaine did recommend target zones. It was rejected interestingly by Monsieur Chirac, president of France, where over the years the French have been much less, much less happy about floating exchange rates and more interested in some sort of stabilization of exchange rates than most other governments. But Chirac rejected it. I don't see much likelihood that this will happen in the near future. There are so many — I think you can occasionally if exchange rates move widely in a way that's disturbing, you can have agreements like the Plaza or the Louvre agreement that are designed to have an influence on exchange rates by actions among the Group of Seven or I suspect now a broader group of countries than the Group of Seven, even perhaps the new group of twenty-two. I can imagine ad hoc agreements to try to do something about an exchange rate movement when it appears it be going too far. I'd be very surprised if a formal system of target zones is adopted in anything like the foreseeable future, an answer that doesn't surprise you.
Any other questions?
Participant: [Inaudible.]
R. Solomon: The question was in this Euroland where you have a single monetary policy, that's implicit in your question, suppose there were differences, if I understood you, differences but one country has a problem, more unemployment than the others, what does it do about it. Is that a general summary of your question?
Participant: [Inaudible.]
R. Solomon: There's one answer to that question and it's in my list of topics. There will be a single monetary policy and therefore a single, basic interest rates throughout the whole area. There may be differences in long-term rates among the regions just as there are differences in interest rates on the bonds of different states in the United States, depending upon expectations of repayment, basically. But those differences are not very large.
So an individual, let's say an individual country goes into recession whereas the rest of the area — one of the eleven goes into recession, the other ten are still moving along at a good pace. And therefore the European Central Bank keeps interest rates relatively high because it has to look at the majority. What does that one individual country do? It can't change its — it doesn't have a monetary policy. It can't change its exchange rate. There's only one instrument left and that is fiscal policy. And I am a firm believer and it's in the paper that if this system is going to work — another difference, let me say this also. In the United States if a particular state or region goes into recession while the rest of the country does not, it will get some net payments from Washington. It will — taxes paid to Washington will do down as income goes down. And unemployment insurance payments from Washington will go up.
So there is some — it has been estimated that that type of built in, that type of flow from individual states offsets something like a quarter, not all, but something like one fourth of any downward movement relative to the rest of the country. You don't have that, a big central government in Europe. So that will not happen. The only thing left is for the individual government itself to either cut taxes or increase spending at least enough to try to get itself back out of that recession we're assuming will happen. Or if on the other hand, it has a severe, a more severe inflation than the rest of the region, it should impose a restrictive fiscal policy by raising taxes or cutting government spending. I think flexibility of fiscal policy among the eleven countries is more important now than in the past since they will not have a monetary policy individually. I hope that answers your question.
Participant: [Inaudible.]
R. Solomon: All right. I don't know if anybody heard. His question was suppose that an individual state among the eleven lets its budget deficit increase sizably. That's your point, your question. What happens? There might be economic affects within the region which would spill over elsewhere. I mean that would tend to have a positive impact or even an inflationary impact on that particular region. But it would also probably mean that the interest rate on the debt of that state, interest rates would go up on the debts of that state. They would have to pay more to borrow and to finance their deficit. And the prices of their outstanding bonds would undoubtedly go down in situations like that just as would happen here. I don't know how else to answer your question besides that.
Participant: Aren't there penalties also?
R. Solomon: Pardon me?
Participant: Aren't there penalties in the region —
R. Solomon: Oh, I'm sorry. There's something. Thank you for reminding me. There's a stability and growth pact which was agreed for the eleven countries which tries to limit the size of budget deficits among the eleven countries. Understandably, if one region goes into a large budget deficit, that will affect other regions, other states of Euroland, of course. And the other ten would worry about it. And the German people, German leaders were particularly concerned about that when EMU was being put together and Finance Minister Vigal proposed a stability pact, which was amended to become a stability and growth pact. It does put a limit on budget deficits of three percent of GDP. But it recognizes that a business cycle can exist. If a country's GDP, gross domestic product, falls by at least two percent then that limit no longer applies. And it can have a larger deficit. So it, the stability and growth pact recognizes the business cycle in effect and permits some degree of compensation with fiscal policy, about which I was just speaking.
Barry?
Participant: I wonder if for consumers you would expect lower prices because of the transparency now and the ability to compare shop because there are very great disparities between countries and if this isn't going to be good for consumers. And second, would you expect a big wave of mergers now that there is a common denominator currency of the kinds of which we've seen in the States in 1998 and to a lesser extent ...
R. Solomon: Yeah, I'm inclined to say yes, yes to your questions. Those are good questions. Certainly, I start right off by saying there's going to be increased competition given the fact that now everything is priced in a single currency; there are no transactions costs; and there's no uncertainty about future exchange rates. That increased competition is likely to put downward pressure on prices as you say, Barry. I agree. It's hard to quantify that, but the direction is fairly clear. Mergers also, I suppose. I'm not an expert on that issue. I suppose that if two industrial units are somehow using the same currency rather than different currencies, there's a greater tendency for them to merge. I'm not sure about that. It may be that they can look right through the exchange rate and see the other advantages even before Euroland was created. I'm less sure about the second question than I am about the first. But there's no reason to think that the creation of Euroland will discourage mergers. That's for sure.
Yes.
Participant: I came a little late so I don't know if you've addressed this question of international stability for the overall system. But there are, of course, some theories that single, having an overwhelmingly strong single reserve currency has been a strength for international stability over many years of history, our history. And as you know Paul Volcker was concerned sometime that the formation of the euro might lead to a breaking up, for example, into trade regions. It's not something to see in the immediate, immediately forming. But we did hear calls out of Asia for some kind of an Asian version of the euro, which is a bit in the distant future. But anyway it's an idea. So the question really is whether there is an impact, long term, on, if the euro is successful, on the international stability and international ...
R. Solomon: That's a hard question, Steve. I see no reason why it should make the international system less stable. But some people could argue that. Whereas if you wanted to speculate against the dollar, you'd have to, earlier there were at least eleven currencies against which, that you'd have to think about in relationship to the dollar and now there's just one. It's easier as it were to take a position against the dollar, a large position against the dollar by simply buying a euro. You're buying the equivalent of what were eleven currencies. Where earlier there were much smaller. That could lead to a greater degree of speculation and therefore, instability. I'm not predicting a lot of instability. I'm just trying to answer your question. But I think it's a difficult one to come up with a sure forecast about.
Participant: [Inaudible.]
R. Solomon: A little louder, please, Steve.
Participant: ... economic power, that that nation's interest in the stability of the world system and can make sacrifices to maintain that stability when both those elements are not present. The question is, what does it take to make those kind of trade offs and ...?
R. Solomon: I'm not sure everybody would agree that the, as one of the people that lives in this hegemonic place, I'm not sure everyone would agree that the dominant, having one dominate reserve currency and vehicle currency in the world made for stability. Look at what happened to the dollar exchange rate in the first half of the 1980s. The largest movement in real exchange rate of a major currency in the history of the world, as far as I know, at least in modern history. The dollar went up some eighty percent in real terms as I recall now or something like that — from '80 to '85.
You've had other — then, of course, from '85 to '87 or '88, you had the opposite movement. You've had some fluctuations in the nineties. The dollar went down for a couple years until April, the date still sticks in my mind, April 1995. You've had some significant movements in exchange rates. Look at the yen. Okay, the yen is a different story. Let's leave the yen out of this. The main point I want to make is that a major international currency is not necessarily a stable currency.
Participant: [Inaudible.]
R. Solomon: You noticed how slowly I walked back to the microphone. That's a good question and I don't know. I don't see why it should change. There are differences in, I mean, what are the differences? The relative prices will not change as they might have done in the past because you will not get fluctuations as among the Spanish peseta, the French franc and the Italian lira, as you know. That's the one difference.
But in so far as, say, that there's a comparative advantage in the production of perfume in France as against bags, I think you said, in Spain, that will not change. So I don't see why those relative prices should be altered by the creation of the euro. But in so far as those products are produced in more than one country and many of them are, it will be easier to compare prices now than it was in the past. And you don't have to go through the exchange rate to make that price comparison. And therefore, there will be a tendency for the prices to come together, to be equalized simply by competition. I don't know what to say beyond that. I see an affirmative nod on that. Good.
Barry. Ah, Bailey.
Participant: [Inaudible.]
R. Solomon: Everybody hear?
Participant: We were talking earlier about governance within the system itself, the lack of a finance ministry and to whom one speaks when you're in a crisis period. Maybe you could reflect a little beyond your statement that the revolving head of the, revolving presidency would take it into what you think should happen. Because it is an issue in Europe which is highly debated and I don't think there's any consensus on how to do this yet. And with the kind of governments that we're seeing there who are not necessarily walking in sync on policy, it's a rather critical issue how they handle the internal governance on this. So in your own view if you had to project ahead, what do you think should happen?
R. Solomon: It's a very tough one. If you asked this question, if you had asked this question to Helmut Kohl, his answer would immediately have been we should be having political unification along with monetary unification. And that was his major objective. And in a way going all the way back to de Gaulle and Adenauer, there was a thought about political unification.
I should have said at the beginning, incidentally, that a major motivation for everything we're talking about here today, of course, is political rather than monetary and economic. The history — you all know this but it should be said because it's part of the story we're discussing, the history between Germany and France over the past hundred years, helps to explain this movement toward European integration that has been going on since the Marshall Plan in which Dr. Lincoln Gordon, sitting right here, was a major player. It has been going on since 1948, this movement toward gradual, gradual integration, economic and monetary. Political integration was not politically feasible. But it was feasible to integrate in various ways in the economic area. So trade was freed up. Common agricultural policy was established. The coal and steel community was established. The common market was established. The European monetary system was established in 1979, trying to keep exchange rates together and finally European monetary union. Economic and monetary union is what EMU stands for. All these being in an economic and monetary area, you have not had a political, a movement toward a political union in Europe. It is not feasible, so far, for reasons that I won't try to explain. But we do know that some people in Europe are in favor of it and some Germans; Mr. Kohl was. I don't know the attitude of Mr. Schroeder on this. Carol do you want to answer that question? Is Schroeder also in favor of political unification?
Participant: [Inaudible.]
R. Solomon: So there we are. I don't know if I fully answered your question.
Participant: [Inaudible.]
R. Solomon: Yeah, well.
Participant: Could you comment please on the likely impact on the currencies of the pre-ins. The Greeks are working very hard to try and get in by the time we actually have euro coins and bills. But what if the British stay out for a few more years until after the next election and maybe the referendum doesn't do so well and they can't get in or it's delayed further. What's likely to be the impact on the stability of the British pound, particularly? And also what is, are there likely to be any changes or any impact on the role of the city of London? Are we likely to see rival financial centers, for example, set up in Frankfurt? Thank you.
R. Solomon: The four countries that are not in, three of them voluntarily, Britain, Sweden and Denmark and one didn't qualify, Greece. They're referred to as the pre-ins. The question was now what will happen? I don't see any — well first I don't know when this will change, I can't predict that. It's clear that Tony Blair has an interest in moving in this direction. He has opposition in his own country, even within his own party if I'm not mistaken, euro skeptics.
But I guess my, if I have to make a guess, I would predict that in three or four years they will go in. At each step of European monetary integration, the U.K. has lagged. It hasn't joined at the beginning but it has come along and joined after the thing got started. And one can sort of generalize from that history that they would do the same thing once again. I don't see that, between now and then I don't see enormous effects on the British pound. I don't see why it should suffer in any way. I do believe that a lot of euro transactions will take place in London whether the U.K. is in or not. I mean, it has much more highly developed financial markets than the continent. Those on the continent will probably develop as I said earlier. But I suspect — it's already happening that London is, transactions of the euro are taking place in London. There's no reason why in this world with the communication facilities we have that transactions involving the euro have to take place within the euro area. They can take place on the moon if we get enough computers up there.
Other questions? Want me to stop or do you want me to raise other issues?
B. Morris-Eck: I thank everybody for coming and if there are any more questions, Bob will happily answer them for you here.
Thank you.