A strong euro may actually be the trigger for the next round of instability in the world financial markets and could ultimately undermine Europe's export competitiveness, if the current crisis in Brazil blows over as expected.
According to NCB economist Mr Eunan King, the very fact of establishing the euro as a competitor to the dollar may lead to a weaker US currency, a collapse in stock markets and a loss of confidence among consumers.
Mr King points out that the world's major stock markets continue to rally beyond the wildest dreams of even the most bullish. Indeed just three years ago a report entitled Dow 8000 from Prudential Securities in the US caused a stir. Most analysts agreed that such levels could not be seen this side of the millennium. But over the past year we have been there and back again and even gained a little.
Almost all professional investors agree that equities are expensive but there is simply so much money chasing around the system looking for the next acquisition that markets are almost by definition driven higher. The fact that many of the mergers and acquisitions are driven by downward pressure on prices hitting profits passes by with hardly a remark.
And boosting liquidity even further, Japan has been printing money in recent years in an attempt to kick-start its economy once more. While the Asian crisis did destroy some liquidity through property and other asset price busts, the IMF stepped in and replaced much of it, particularly that held by western bankers and fund managers.
On top of that equity markets are convinced that the US Federal Reserve will do for them what the IMF has done for emerging markets investors - that is bail them out should trouble appear. Following the share price collapse last August, the Fed chairman, Mr Alan Greenspan, obliged by cutting interest rates and the medicine worked so well that by the first week of 1999 new records were being set once again.
Ironically, however, Mr Greenspan has singularly failed to cure what over two years ago he called "irrational exuberance" and that is probably the single biggest threat to economic stability. It is not that the equity markets per se provide the threat but rather the inability of rate moves to prevent recession, if the markets do run into a sharp and sustained decline.
The US consumer is the main reason for this. It is the robust punter who has driven much of the gains on Wall Street, pouring money into mutual funds in a belief of an everlasting bull market. He is also still buying housing as well as cars and trucks. But the problem is that US manufacturing, like its British counterpart, is in recession and it may be that the economy is not that far behind. More worryingly the US is still running a balance of payments deficit of close to 3 per cent of Gross Domestic Product as well as a record $76 billion (#65.2 billion) government surplus on top of a negative savings rate.
That is a very similar situation to the Asian economies and one which with hindsight was blamed for most of their problems.
Of course, the US has run balance of payments deficits for many years and they have rarely caused a problem. With dollars in demand across the globe it was easy to simply print money to fund the deficit. But now for the first time the dollar has a serious rival in the form of the euro.
Trading has not yet settled down but when it does there is the distinct possibility that the huge surplus in Europe will lead to a stronger euro, while the resolution of the imbalances in the US should lead to a weaker dollar as investors refuse to continue funding the US's current account hole.
And that is the rub. A lower dollar is likely to be accompanied by a fall in the stock market because foreign holders of US equities will sell. That is the one thing which is guaranteed to dent US consumer confidence leading to further falls and slowing the overall growth of consumption.
And, in the rush, prices may overshoot on the downside. The other side of this, Mr King points out, is that European assets are likely to benefit from the rush out of the US and as a result European interest rates may be next to fall sharply, while a too-strong euro would make European exports, including Ireland's, uncompetitive. And to compound this, a US recession would not only hurt global growth, it could hurt other countries' exports as the American turn to more protectionism measures.
The other potential trigger is, of course, Brazil. The devaluation and resignation of the central bank governor could still have serious repercussions for the US markets.
And problems posed by Brazil are dwarfed by those of the colossus of emerging economies, China. There are now fears that it might default on some of its debts or even devalue the yuan.
Much of this is generating fears not only among European politicians but also the Japanese and has led to calls for target zones for the three big currencies. Whether or not such a project is workable is still an open question but progress on this front will certainly be interesting to watch.
