What the Euro really has me pondering is the viability of cross-national currencies in a recession. Nations are diverse, even in Europe. They have different populations, industries, strengths, weaknesses. To highlight this point, we've seen that certain intra-national sectors are linked with the fortunes of their sovereign debt. It goes beyond the deficits of the Greek government, it goes to the fortunes of Greek industries like banking, manufacturing, etc. How do you fix such economic imbalances within a cross-national economy? What happens when something goes wrong with a few nations within a currency? No reason for me to add to the mountain of stuff that has been written about this but just something I've been thinking about. In good times, cross-national currencies work great, propping up the weak with the strong and giving investors confidence. In bad times where the bad can take down the good, the problems are obvious.
In the end, the EU will have to prop up Greece but they will have to do so in a way that won't increase fear about the other "P.I.G.S" nations, Portugal, Ireland, Greece, Spain, and spell trouble for countries who hover just above. I think what they're doing now is good. Issue broad statements of support but withhold financial support until the very end and hope Greece and the market works itself out.
I doubt we see a pan-Asian currency anytime soon despite discussions by China. The dollar will remain the world's reserve currency for the foreseeable future. For all the problems in the U.S., macroeconomic factors are easy to understand and predict, even if those are all bad right now!
All I got today!
What I'm reading:
So Happy Together: Sex and Spending, Ryan Sager, Market Watch.
Sticking plaster won't solve the euro crisis, Jeremy Warner, Telegraph.
