The euro has arisen as a credible eventual competitor to the dollar as leading international currency, much as the dollar rose to challenge the pound 70 years ago. This paper uses econometrically-estimated determinants of the shares of major currencies in the reserve holdings of the world’s central banks. Significant factors include: size of the home country, rate of return, and liquidity in the relevant home financial center (as measured by the turnover in its foreign exchange market). There is a tipping phenomenon, but changes are felt only with a long lag (we estimate a weight on the preceding year’s currency share around .9). The equation correctly predicts out-of-sample a (small) narrowing in the gap between the dollar and euro over the period 1999-2007. This paper updates calculations regarding possible scenarios for the future. We exclude the scenario where the United Kingdom joins euroland. But we do take into account of the fact that London has nonetheless become the de facto financial center of the euro, more so than Frankfurt. We also assume that the dollar continues in the future to depreciate at the trend rate that it has shown on average over the last 20 years. The conclusion is that the euro may surpass the dollar as leading international reserve currency as early as 2025.

The Euro May over the Next 15 Years Surpass the Dollar as Leading International Currency

Samantha Power in conversation with Howie Kahn

Akhmatova in Azerbaijan

Over the past decade, voters have had many legitimate worries: stagnant wages, corruption in Washington, terrorism, and a botched war in Iraq. But we believe that when Americans look back years from now, what will shame us most is that our country abandoned a bedrock principle of civilized nations: that torture is without exception wrong.

Have you seen Taxi to the Dark Side?

No Torture. No Exceptions.

After failing to anticipate Hamas’s victory over Fatah in the 2006 Palestinian election, the White House cooked up yet another scandalously covert and self-defeating Middle East debacle: part Iran-contra, part Bay of Pigs. With confidential documents, corroborated by outraged former and current U.S. officials, David Rose reveals how President Bush, Condoleezza Rice, and Deputy National-Security Adviser Elliott Abrams backed an armed force under Fatah strongman Muhammad Dahlan, touching off a bloody civil war in Gaza and leaving Hamas stronger than ever.

The Gaza Bombshell

The United Nations has declared 2008 the International Year of the Potato.

Spud we like

Despite the global interest in the rise of China, no one is paying much attention to its ideas and who produces them. Yet China has a surprisingly lively intellectual class whose ideas may prove a serious challenge to western liberal hegemony

China's new intelligentsia

Marine ecologist writes book, fights terror.

Paleobiologist meets neoconservative, spawns book.

Arms races among invertebrates, intelligence gathering by the immune system and alarm calls by marmots are but a few of nature's security strategies that have been tested and modified over billions of years. This provocative book applies lessons from nature to our own toughest security problems--from global terrorism to the rise of infectious disease to natural disasters. Written by a truly multidisciplinary group including paleobiologists, anthropologists, psychologists, ecologists, and national security experts, it considers how models and ideas from evolutionary biology can improve national security strategies ranging from risk assessment, security analysis, and public policy to long-term strategic goals.

Read the first chapter, then visit the companion web site, Darwinian Security (not much there yet).

Recent news coverage is collected at the author's web site, although the link to a recent interview instead (mysteriously, obscurely) points to a simply named Thai Cafe near Duke.

Some of this analysis seems like overkill:

A biological assessment of the TSA’s methods found that the agency’s well advertised screening procedures may lead to a kind of natural adaption by terrorists.

Was such an "assessment" really necessary to reach that conclusion?

Natural Security: A Darwinian Approach to a Dangerous World

Francis Fukuyama reviews Samantha Power's new book, "Chasing the Flame".

Samantha Power, whose earlier book, “‘A Problem From Hell’: America and the Age of Genocide,” won a Pulitzer Prize, has written a comprehensive biography of Vieira de Mello that explains how his personal evolution paralleled that of the United Nations and how his contradictions and failures were rooted in those of the institution he so loyally served.

In the wake of the Iraq debacle, the idea that strong countries like the United States should use their power to defend human rights or promote democracy around the world has become widely discredited. From an overmilitarized foreign policy, we are in danger of going to the opposite extreme, forgetting the lessons of the 1990s that hard power is sometimes needed to resolve political conflicts, and that we do not yet have an adequate set of international institutions to deploy it legitimately and effectively.

“Chasing the Flame” argues, as Vieira de Mello himself once did, that the United Nations is often unfairly blamed for failures to protect the vulnerable or deter aggression, when the real failure is that of the great powers standing behind it. Those powers are seldom willing to give it sufficient resources, attention and boots on the ground to accomplish the ambitious mandates they set for it. At present, the United Nations is involved in eight separate peacekeeping operations in Africa alone; failure in a high-profile case like Darfur (which seems likely) will once again discredit the organization. Power (who has been a foreign policy adviser to Barack Obama) makes the case for powerful countries like the United States putting much greater effort into making the institution work.

In the end, the book does not make a persuasive case that the United Nations will ever be able to evolve into an organization that can deploy adequate amounts of hard power or take sides in contentious political disputes. Its weaknesses as a bureaucracy and its political constraints make it very unlikely that the United States and other powerful countries will ever delegate to it direct control over their soldiers or trust it with large sums of money. But surely the life and death of Sergio Vieira de Mello is a good place to begin a serious debate about the proper way to manage world order in the future.

The Internationalist

Pangea Day taps the power of film to strengthen tolerance and compassion while uniting millions of people to build a better future.

In a world where people are often divided by borders, difference, and conflict, it’s easy to lose sight of what we all have in common. Pangea Day seeks to overcome that – to help people see themselves in others – through the power of film.

On May 10, 2008 -- Pangea Day -- sites in Cairo, Dharamsala, Kigali, London, New York City, Ramallah, Rio de Janeiro, and Tel Aviv will be videoconferenced live to produce a 4-hour program of powerful films, visionary speakers, and uplifting music.

Pangea Day

ONE year after Israel’s devastating 34-day war with Hezbollah, it seems as though both sides are readying themselves for another round. Recent statements by American and Israeli officials, as well as the United Nations, assert that Hezbollah has largely re-equipped and refortified, compliments of Syria and Iran. On the other side of the border, the news media report that the Israeli Defense Force has done the same, with, of course, the help of American military aid.

Given what may be a regional movement toward conflict, the United States and Israel would do well to pause and take stock of the nonviolent alternatives that Hezbollah itself says would lead it to shun military action. Indeed, the best way to contain Hezbollah may be to give it some of what it says it wants.

Getting Hezbollah to Behave