I’m a few days late, but it’s still worth noting that we’ve just passed the 10 year anniversary of the emergence of the Euro. It was the subject of an enormous amount of speculation and debate, with many predicting its failure as a currency. SuperFrenchie does some dancing on the graves of those predictions here. Jerome a Paris, a banker with no shortage of opinions, provides a useful exploration of the place of the Euro – especially in comparison with the US Dollar – in a global economy:
The dollar is increasingly money backed by financiers-manipulated debt. The euro is fundamentally money backed by real economic activity. The distinction will matter. And the finance industry will follow.
Interested? Read more.
(The kid in me misses the Deutsche Marks, the Pesetas, the Guilders. My interest in currency fluxuation began when we moved to West Germany, and I discovered the wonderful thing that was aribtrage – I could get so much more when I turned my dollars into marks (and that’s not even touching the experience of turning dollars into East German marks on the black market). Of course, with the current exchange rate being €1 = $1.40, I now have some appreciation for the other side of that. )
Peej
Well, if you miss aribtrage so much, you can always take a trip to Iran. (The hotel business has gotten smart, though; if the room is registered under a foreign passport, you pay in foreign currency. But you can make a killing at the bazaars and stores. Course, there’s the little issue of going through the whole visa process, but hey, if Eliza Dushku could do it, so can you!)
Peej
Argh. Arbitrage. Sorry.
tx2vadem
Ugh! “The dollar is money backed by financiers-manipulated debt” I’d remind Europeans that they have a fiat currency too. And their public debt rivals our own and represents a larger percentage of their GDPs (though we are not far behind). And it was their banks involved in this financial mess too. This we’re better than you nonsense really gets my goose.
I’d think their low population growth rates and their massive social welfare programs would give them pause. The fact that they will be relying on Northern Africans, who they treat poorly, to keep their social programs going should give them pause.
But this probably all boils down to them still feeling burned about the financial crisis. That urbane Europeans (or should I limit this to just Parisians) could be duped by the glitz-and-glamor charades of crass Americans must be truly galling.
And this: “Euros are bought to store value, or to buy goods that have value.” Oh really? And that’s not what all currencies do? How silly of me to forget that dollars are bought to piss away on things that have no value. Euros are a piece of paper like dollars are. They have value because we believe they do. Euros are no better than dollars in that respect. Though the one thing you can say in their favor is that they were fortunate not to have Allen Greenspan as a central banker.
MB
Well, that’s the crux of it, isn’t it? And I think Jerome is illustrating why belief (faith?) may shift from the dollar to the euro. FWIW, until this fall, I would have said that the shift (from dollar to euro) was pretty clear. But amidst the clusterfsck that has been the fourth quarter of 2008, I saw a pretty surprising retreat *towards* the dollar.
~
Oh, and speaking of duping, Parisians, and Americans, you should check out Superfrenchie’s next entry.
silence dogood
tx2vadem got here to express the same indignation I was about to express I could get my shoes on and have a cup of tea.