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The Euro
Dizer writes: "Today sees the historic introduction of the new European Currency (Euro) into European hands. The Eurozone market, with a population
of 300 million people, will be cashing in their Punts, Francs and Deutschmarks in favour of the new common Euro currency. This is the biggest currency transition in history, vive l'Europe! See stories on
ireland.com or the BBC."
Not really, before the euro, the deutchmark was the most stable currency. Remember 199x (x < 5), when the British pound was forced out of the EMU (monetary union) by Soros (amongst others). At that time, which was not too far in the past, the pound was the weakest currency, a state they shared with the Italian lire.
I think it's alt+numeric 0128: Yup :-)
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No, no, no. Don't calculate back to pesetas, francs and guilders for the rest of your natural lifes.
Write down twenty things that you often buy: a weeks worth groceries, CDs, DVDs, whatever. Write down a resonable price in your old currency. Convert. Learn and remember the new decent euro price.
Instead of calculating back to guilders whenever I buy a DVD, I will have remembered that ?25 to ?30 is a reasonable price. That is by far the easiest way to get used to the new currency.
Well.. I'll (almost) pass on the Argentina situation. Argentina does not have the US dollar as a currency. Indeed, it is considering 'dollarisation' where it does adapt the dollar as a currency. Right now, it has a currency board with insufficient reserves to support its chosen exchange rate with the US$ given:
(1) Argentina's budget deficit
(2) its large (private) US dollar borrowings, and
(3) modest US$ export earnings
In this situation, Argentina becomes a sitting duck for currency speculators. Irrespective of the 'true' value of the peso, it is near impossible to maintain the value of the currency. Add in a crazy political situation (most of the public sector deficit in Argentina is from *local* government - where politicans are from different political parties to central government, and hence much to gain from embarassing the central government...). Result, chaos. And that's even before a long running recession, supply-side inefficencies, etc.
Back to Europe.
There is an economics theory called 'optimal currency zones' which makes much the same case you do: how can the central bank pursue a coherent monetary (ie interest rate) policy, when the different countries that make up Europe have such different economies?
We don't know.
Only experience will tell. But one thing seems forgotten: the US has widely differing economic areas. How closely correlated are tobacco farming in Virginia, car manufacturing in Detroit, optical networking in San Francisco and investment banking in Wall Street? When car making is suffering from Japanese competition, it might seem to make sense to devalue the Detroit dollar - yet no-one has ever suggested breaking the US into regional currencies.
And the advantages of a single currency are huge: greater price transparency for consumers, lower inflation from greater competition, lower long-term interest rates, etc.
Most importantly of all: work or not, <b>everyone</b> should hope the Euro is a success. Neither the US, the UK, nor Asia will benefit from an economically weak Europe.
And I'm really looking forward to getting hold of my first Euro notes and coins when I go to France on Friday!
--- My dad's political betting
To think Ireland would use a different currency than the rest of the U.K.
Ireland is not part of the United Kingdom. It's straightforward:
Ireland is a nation. The United Kingdom of Great Britain and Northern Ireland is a nation. This was formed for seperate nations, principalities, and provinces - England, Scotland, Wales, and Ireland. Most of Ireland left, leaving Northern Ireland. Meanwhile Great Britain is an island, which contains most of, but not all, of Scotland, England and Wales. Ireland is also an island, but doesn't only contain Ireland. The British Isles is an archipeligo, which contains Great Britain and all the smaller islands that go to make up the United Kingdom of Great Britain and Northern Ireland, and Ireland, and the Isle of Man. The Isle of Man is not part of the United Kingdom of Great Britain and Northern Ireland, but is a dependancy. The Isle of Man is in the Irish Sea. The Channel Islands are not part of the British Isles, but are dependancies like the Isle of Man.
Because of the internal divisions in the Conservative (Tory) party.
The history is that the Major government took over from Thatcher after she had been governing the country for 11 years and had become amazingly unpopular. The economy was in a mess and headed for a recession, people were fed up with crackpot schemes such as the poll tax, unemployment was high and the public services were collapsing. In many ways the 1992 election was similar to the 2000 US election, the right won an election that on all political calculations they should have lost. But they did so on a minority of the vote and with a very small majority in the Commons.
One of the reasons Thatcher had become unpopular in the party was that she had become anti-European and had refused to countenance going into the then ERM, a currency board that predated the Euro. When Major as Chancellor finally persuaded Thatcher to let him take the country in the pound was unrealistically high. This then led in part to the economic crisis that would peak a few years later in 1993. a bunch of speculators led by Goerge Sorros realised that HMG could not sustain the pound at its then level in the ERM, it was simply unsustainable. But Major and co refused to countenance a devaluation. Finaly the markets won and the pound fell out of the ERM. This had the immediate effect of ending the recession caused by an over-valued pound. The cost however was the Major government's credibility since they had spent $20 billion trying to sustain the higher level - equivalent to the cost of running the air force at the time.
The longer term effect was that a sizable faction in the Tory party began to use anti-Europeanism as a means to snipe at Major. A hard core of about a dozen rebels lost the party whip, but they had a large number of sympathisers. More importantly they were better organized in the constituency parties which are typically racist and reactionary.
In the 1997 election the Tory party was virtually anahilated, loosing 200 seats. That is their worst performance since universal suffrage. As always in the UK the MPs to loose their seats were the ones in the most marginal constituencies. These were also by and large the ones that were industrial rather than agricultural and as a result the ones most likely to have Europhile MPs.
By 1997 there was no prospect of the UK entering the Euro in the first wave even thought the pragmatic Blair administration supported the idea. That meant that there was no prospect of entering in that parliament. By now the Tory party was virulently opposed to the Euro and had made it practically their only campaign issue. If there was a referendum and the Tory party was to win a No vote it could easily allow the Tories to recover their lost momentum, possibly winning the next election. The political cost of negotiating to enter the Euro was consequently high and the benefit negligible since it could not be completed in one parliament.
The political calculation at this point is rather different. It now makes little difference whether the UK joins in 2003 or 2008, having missed the opportunity to set the ground rules the UK might as well watch what happens. The current Euro exchange rate is absurdly low and so a more equitable exchange rate to the pound and dollar is likely to sort itself out. It is likely that HMG will choose that moment to declare some form of currency peg. Over time the peg will become more permanent leading eventually to the UK entering the Euro.
The political advantage to doing so early remains low, the cost high. This is particularly so since 60% of the UK media market is controlled by Rupert Murdoch, an Austrailian with no particular concern for the UK or its inhabitants but a considerable and justified fear of the European Union curtailing his ambitions through anti-monopoly (trust) regulation.
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The exchanges and markets have been working in Euros for the last year. This makes a unified market within the Euro-zone countries. However, until we had a real currency, there was a crisis of confidence.
I duely went out and got my 20DM worth of Euro coins in December. This was part of the so-called familiarity and to try to front-load the system to help with the problem of small change.
A couple of days ago, I had a guy at a bookshop at Frankfurt airport try to pass me off with two 10 year old banknotes of a withdrawn design. I objected because the notes could only be changed at a bank, and he gave me modern notes. The old bank notes were in very good condition and probably genuine, but I still refused.
Well I was out last night, spending Deutschmarks in a pub all night. Did I rush out to get my Euros, no as I anticipated a queue at the cash-points. I stayed away from the ECB because I didn't like the crush.
In the morning, I noted that the region transport company, the RMV seemed to have a lot of ticket machines out of order. However, I was able to get money from an ATM w/o queueing and without problem.
We are relatively lucky in that the exchange rate is set close enough to 2 at 1.95583. However, the retailers have been given a little too much leeway in setting their prices, so there is a lot of retail price inflation (already apparent during December). In France, they introduced a price freeze for three months to prevent this.
In real terms, it will probably start being useful on my next ski-trip. No more currencies to worry about apart from the Swiss Franc, and already, some resorts in Switzerland are saying that they will accept the Euro. Many have been taking Deutschmarks and French Franks already for things like lift-passes.
I expect that there may be some problems tomorrow when the first real business day for the shops starts, probably with availability of change as the public have practically none. Shops should give change in Euros, even if you spend DM.
See my journal, I write things there
I think it's a really stupid idea, and will end in tears or war.
Economic integration is a strong factor in preventing wars, not starting them. Why invade another country when you can get its riches merely by trading? After WW2, the elite of the world got together and said "Never again!", and globalism was born.
With 300-million people on board, the EU will be able to go toe-to-toe with the US economy. As a US citizen, you will be mildly effected by this, as the world outside the US has become a little more competitive, and you, reciprocally, a little less so.
In response, the US has joined free-trade zone of the Organization of American States. This zone has a greater population than the (present) euro-zone, though, besides Canada with a relatively small population, the OAS includes mostly third-world and emerging nations with massive debts.
The long-term prospects for the EU are excellent.