Musing: €urosophy

Despite the fact that I have arranged multiple means of “electronic” access to funds -- including debit cards, credit cards, online banking, PayPal and ATMs (which are now quite ubiquitous around the world) -- I have decided to carry a modest amount of cash on the Voyage. After all, you just never know when a little cash will facilitate the speedy resolution of certain... er... “circumstances.” After some research and deliberation, I have elected to carry about half the amount in euros. Among my reasons: 1) using euros will enable me to appear a little less “American” whenever that may be prudent, 2) the €500 note -- equal to more than $600 -- allows me to “pack more punch” into a much smaller wad of bills and 3) the euro has clearly become a robust, valuable, worldwide alternative to the “almighty dollar.” It is this third reason in particular which got me musing: “How did I miss the euro?”

You see, when the euro was proposed as the “single currency” of the fledgling European Union, I was convinced it wouldn’t happen. There was just no way so many sovereign nations would subordinate their monetary policy to a central bank. Even if the euro was created, I figured it would be a flop. Who outside the Eurozone would want the thing? Let’s face it, the dollar was pretty well entrenched as the international currency of choice. Well, it turns out I was wrong. The euro is now the official currency for 12 nations (and counting) -- more than 300 million people -- and it has been heartily accepted by much if the world. What did I miss? The answer, I think, is that my US myopia blinded me to just how much the rest of the world wanted an alternative to the US dollar and the US hegemony it represents. If you give people something they want, they’ll buy it -- even if it isn’t perfect. The world wanted an alternative to US currency, and the world has been buying euros. So simple. I missed it.

(PS -- First, I think it was an excellent strategy for the EU to issue the “jumbo” €200 and €500 denomination notes which offer such “efficient” alternatives -- and competition -- to the $100 note. Let’s face it, if the €500 is good for Macgellan to carry, it is also good for every smuggler, drug-dealer and “under-the-mattress-stasher” in the world. Thus, for many people, the euro is not just an alternative to the dollar, it is a “better” product. [For an “interesting” dialogue about the impact of “jumbo” euro notes on the more than $250 billion worth of $100 bills held abroad, click here.] Second, although I have bought some euros and do a little bit of currency hedging with them, I am still not convinced of their long-term viability. I just cannot make myself believe that all of the member nations will indefinitely adhere to the EU’s strict monetary policies. Sooner or later, some of them will need to solve their massive internal debt problems by doing what all governments -- including the US -- have always done: inflate their currency. When the bills come due, I think the euro -- perhaps the entire EU -- will be in jeopardy. But who knows? I’ve been wrong before.)