Euros all look the same. Look closely. They are not.The serial numbers are different.
German Euros are not the same as Euros in France or Spain or Italy. If the Euro does break up, it’s the German ones which will probably soar in value when they are converted into a new Deutschmark.
How much money does Angela Merkel have in ‘her’ Euro fund to fight off the bond markets…… €750 billion. After Portugal is trashed by the markets and the foreign banks (with Portuguese debt) bailed out, half of that will have gone. If Greece suffers another round of problems (it will), and Ireland (after failing to ram through its budget cuts) and the big one, Spain, then the moment of truth will arrive:
Do Germans agree to put in more money to the Euro fund and allow a €2 trillion Euro QE to ‘save’ the Euro, its banks and the European project?
In that scenario, just like John Major did, one or two ‘peripheral countries’ may quit the straitjacket of Euroland… how long can they accept 20% or more unemployment and the coming social strife?
They are talking of Euro-North and Euro-South (where Ireland is a Southern country, yes bond traders aren’t that clued up on geography)… they should say Real Euro and Euro or Euro1 and Euro2.
This would mean that everyone except Germany, Holland and maybe France would hold Euro1 – perhaps 25% stronger than Euro2.
This would be a devaluation for those economies who cannot compete with Germany’s high technology industries.
Do you remember when Gordon Brown and the New Labour government used to scoff at Germany’s ‘malaise’…? Gordon, where are you now?
There are lots of things wrong in Germany but at least they have a 21st century manufacturing industry.
Essentially, by all holding the current Euro, the rest of Europe cannot stand the pace when they lose the ability to devalue their currencies (to make their products relatively cheaper).
There may be another scheme in all this… New York does not want the Euro eclipsing the US dollar as the world’s reserve currency….
So the future for a German note (Euro or otherwise) looks solid, like Swiss Francs. As for the rest, the ‘other Euro’ could be as valuable as ‘Harold Wilson’s pound in your pocket’… they will be worth less, a lot less.
What then happens to sterling? It has devalued by 30% but still not produced an export revival. How can it? Where is the manufacturing industry? In a couple of years down the road, sterling may dip even further, a lot further as it attempts to stay ‘competitive’……. #
If you want to see Berlin, do it the next 24 months….. after that, it will be Auf Wiedersehn.. The Deutsche Bahn trains trundling into St Pancras will be for German passengers coming over here…… a bit like Californians going into Mexico….. for a cheap shopping spree.