Commentary: The Dollar And The D Mark: A Real Love Match

Philippe Seguin smells a rat. Seguin, head of the French Parliament and adviser to French President Jacques Chirac, says recent protests against France's decision to resume nuclear testing are part of an Anglo-Saxon conspiracy. The U.S. wants France's deterrent crippled, Seguin believes, because that would enfeeble French leadership and undermine European unity.

Seguin and his Gaullist peers also suspected a plot three years ago when currency turmoil cracked Europe's system of managed exchange rates.

No doubt Seguin is on to something, and I've discovered a likely mole in this alleged undercover caper: Her name is Fannie Mae. It couldn't have been coincidence that while France was distracted by European Union members and much of Asia denouncing the testing decision, the U.S. Federal National Mortgage Assn. made a clever move. Fannie Mae launched a one-billion German mark offering of global bonds worth $720 million, making it the first U.S. agency to tap the markets with nondollar-denominated debt. Now, it's just a matter of time before the U.S. and Germany forge a monetary union that leaves France and the rest of Europe out in the cold.

PEOPLE WILL TALK. Think about it. Fannie Mae's offering wasn't only a milestone in the financial New World Order. It could be a better marriage than Walt Disney Co. and Capital Cities/ABC Inc. Investors, offered U.S. debt denominated in a dependable currency--like the dollar used to be--snapped up the bonds. The lead manager closed the books in the first hour of trading. How's that for stealth?

You know what happens next, right? Other U.S. agencies will make their own offerings in marks, and they'll all be big successes. Soon people will start talking about how convenient it would be to have just one currency for the U.S. and Germany--and forget about all those fluctuating exchange rates.

After all, the German government has been yearning to create a unified currency with somebody to show how neighborly Germany has become. But the Germans can't find a European partner capable of meeting their monetary standards. Most of Europe is having a devil of a time staying off the slippery slope of fiscal profligacy. Which means European monetary union, if it happens, is likely to do just what the Germans don't want: wreck the currency that the Bundesbank has worked so hard to build faith in.

The U.S. could solve all these problems for Germany. It's a mammoth power where deficit-cutting is all the rage. Can any country in Europe outside Germany say that? It would be a friendly fit, too: Three-quarters of Germans surveyed describe themselves as "pro-American." And America's growing links to Latin America provide growth prospects. Argentina, for instance, may be closer to meeting the European criteria for a single currency than Italy.

The timing couldn't be better. Newt Gingrich (R-Ga.), Speaker of the House of Representatives, is looking to subcontract out functions of the U.S. government. So, to keep the new German-American currency strong, why not let the Bundesbank run the Federal Reserve? Sure, the Fed works hard to uphold its anti-inflation credentials. But when it comes to monetary discipline, nobody does it better than the German Bundesbank.

O.K., maybe this proposal isn't in the textbooks. There could be hitches. But weigh them against the advantages. In one swoop the U.S. could solidify the transatlantic relationship. A monetary marriage with Germany would keep the U.S. engaged in Europe forever. And just think of the imports Americans could buy if armed with a strong currency like the mark.

Not only that, but did you ever notice the words "dollar" and "Deutschemark" begin with the same letter? Finding a name for the new currency would be a lot easier than reaching agreement among 15 European countries. After all, the name "dollar" is derived from the German in the first place--the Austrian "thaler" of the 16th century.

True, Germany's neighbors might feel put out that they can no longer hitch a ride on the credibility of the mark. That includes France, which has been desperate to strengthen the franc. But there will be some consolation. When the U.S. President and the German Chancellor announce their monetary marriage, French officials will be able to say that they suspected the nuptials were coming all along.

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