Euro Survival

Posted on 31 July 2013 by Douglas Chadwick

I have always been inheritantly wary of large entities such as business conglomerates and in particular the European Currency Union. How can it be possible, even with the best management available, to drive and manoeuvre these unwieldy entities towards a common goal? Especially as in the case of the E.U. this task is being attempted by politicians. So surely the Euro must be doomed to failure. Who in their right mind would contemplate trying to orchestrate the people from the Mediterranean regions to walk in step with the people and their work ethics from the Northern climes? I mean, have currency unions ever been attempted before and if so were any successful? Well the answer to that is yes and yes. The Latin Monetary Union in the late nineteenth century failed as did the Scandinavian Monetary Union attempted at around the same time. Both struggled on for about sixty years before throwing in the towel and admitting defeat. The German Zollverein was launched in 1834 and although it had its ups and downs until the Weimer Republic was established in 1919 it must be considered a success. Of course the obvious success was that of the United States and the American dollar which even survived the Civil War during its seventy years of becoming established. So history says that it is possible to achieve a Currency Union, but it is likely to take a long time and it’s not guaranteed to be successful. In today’s world where information passes instantaneously and politicians are subject to tribal self- interest abuse from opposition parties can the Euro succeed? As the Union is formulated today the answer is probably no. However loosening the strings by letting some countries leave and give more financial help to those struggling countries that wish to stay, may help it to succeed. After all there is a huge political will to make the Euro work and the majority of Europeans are still in favour of it so perhaps it will fudge its way to a lasting solution. If one assumes that the Euro remains in existence then along the way there will be more pyrotechnics with accompanying Bank collapses and country crises. These events will provide great opportunities for investors to buy as the markets rise and fall whilst the Euro struggles to become a stable currency. Certainly watching the stronger German stock market may reveal Fund Managers capable of taking advantage of these fluctuations as German stocks become artificially cheap. This should show in the Saltydog numbers. We will have to wait and see.