Or: why euro and HBD are currencies that have more in common than we usually think.
Like just about everything we’re intimately familiar with on a daily basis - from our mother tongue to our own bodies -, currencies are one of the most common, and least understood, institutions.
Let's take the case of the euro, through a couple of official quotes about it:
« Euro banknotes are expressions of
the same and single currency, and subject to a single legal regime ».
[source: « Decision of the European Central Bank of 6 December 2001 on the issue of Euro banknotes », https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:337:0052:0054:EN:PDF
« This is vital for 27 countries with a common internal market and for a zone of 16 countries sharing a single currency ».
[https://www.consilium.europa.eu/showFocus.aspx?lang=EN&focusID=483]
« Whether we are members or not, Britain's
interest is that the single currency should be a success ».
[http://lalettrediplomatique.fr/contribution.php?choixlang=2&id=37&idrub=160 – translation to English]
The stress might not be so obvious, when we read these statements. But it bursts if we ask ourselves: is the euro really a single currency, or actually a common currency? This difference in adjectives goes far beyond wordplay or debate between purists, and can even have a direct impact on our future wealth. Let's see how.
# The euro as a 22 years old "single currency" psyop
If the euro were, like the dollar, a single currency for the 19 States of the euro zone, by definition, owning euros would give us a claim on the European Central Bank (ECB). However, this is not the case: German euros are owed to the Bundesbank, Spanish euros to the Banco de España, and so on.
In reality, the euro is much more akin to a "stablecoin", to borrow a term from the cryptocurrency world, than to a single currency: it is issued by 19 different Central Banks, which have agreed to change the names of their respective currencies and to establish a 1:1 "peg" between all eurozone member states.
One euro in Ireland is as much « the same » as one euro in Portugal as 1 HBD is the same as 1 US dollar. They tend to maintain the same face value, but are actually different currencies, with different emitors.
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Which euro is it better to own, for when that fiat currency will cease to exist?
This differentiation makes it easier to understand the substantial spread in interest rates applied to the debt of European Union member States.
If the euro were a single currency, when Italy borrows capital on the open markets, for example, it should be able to do so at the same rate as Germany, but that's not what the markets demand. The markets demand a higher interest rate on Italy's 10-year bonds (its State issued official debt) than on those of Germany or the Netherlands, because they anticipate the possibility of a localized euro implosion, limited to Italy. As the euro is a common currency, an Italian return to the lira as the national fiat currency will technically be much easier than if it were a single currency, issued by a single Central Bank for 19 States.
The day that Italy will decide to create a new lira, there's every chance that it will devalue significantly against the euro (some experts estimate this devaluation at between 30% and 40%).
On the other hand, buyers of 10-year German government bonds know that if Germany stops using the euro as its only legal tender currency, they will receive annual interest on an amount in deutschemark, worth substantially more than the same bonds in euros – probably 20 % to 30 % more. The same mechanism applies to having euros stored in a bank in Luxembourg, the Netherlands or Finland : they will see their value rise, when converted back to their respective national currencies.
Our fellow Hivers who live in the European Union now know where to stack their euros – in case they wouldn’t have swapped them all for HBD’s ;-)