Friday, 26 November 2010


I don’t know the exact words of the popular refrain now doing the rounds, but I think it goes something like this: “Now Greece. Now Ireland. Next Belgium, then Spain—panic, panic, panic—collapse of the €uro, blah blah blah, etc., etc.”

When it comes to the Euro, we’ve been treated to one gleeful prophecy of doom after another. And, actually, such doom would be something of a blessing in terms of stopping the worrying march of Euro Federalism, but as with a lot of popular predictions, there is a sizable chunk of wishful thinking involved.

OK, the Euro looks crap right now, but what a lot of people don’t realize—including many who should know better—is that it was always intended to be a bit crap, unlike the Deutschmark that it replaced—more Vorsprung Durch Scheiße than Vorsprung Durch Technik.

This might not be so obvious to those of you living in the import economies of the Anglo World—effectively still living off their WWII laurels—but it’s pretty clear from here in Japan, another ultra-efficient, high-exporting ex-Axis country with a large, hard-working, conscientious labour force.

Back before the inception of the Euro, Germany and Japan had exactly the same problem—or rather the companies that ran them had the same problem: the faster they ran the more they stood still or even went backwards. As their quality products gained more and more overseas markets, there was increased currency exchange with the importing nations, driving up the value of their currencies while pushing down that of the importers. The more Germany and Japan exported, the more dollars and pounds they got, but the more devalued that money became. This meant that Japanese and German tourists could have a great time anywhere in the world, but their companies were hurting.

It was this, seen in the constantly climbing value of the yen, which put the dampeners on the Japanese economy. And it was to escape the same trap that the Germans—with the semi-bribed connivance of a few other key EU players—came up with the “Euro” scheme. This was launched as a bright, shining, financial Brave New World, trumpets blaring and the rest. However, the inclusion in the new system of the joke economies of the Irish, Greeks, and Portuguese was clear evidence of what was afoot. The ultra-efficient economy of the Germans, needed them on board as ballast to stop the new German currency—the Euro—from overvaluing to the point where the Rhur stopped making enormous profits.

While Japanese companies stagnated and gradually turned to more and more outsourcing and belt-tightening to survive, the German economy roared ahead becoming the number one export economy, until it was recently overtaken by the Chinese, another country that had also done badly in WWII, but which had finally learned the lessons of export driven growth underpinned by depressing the value of its currency.

So, now that the media is abuzz with premature rumours of its demise, what is the future of the Euro? I suspect that the shakiness of the Greeks, Irish, and whoever’s next with the begging bowl, is simply grist for the mill of a currency system that was essentially designed to solve the problem of an overvaluing currency cutting into profits, by being a bit crap.

The latest evidence seems to support this. While Ireland goes through turmoil and storm clouds build up over Belgium, Portugal, and Spain, the German economy is basking in the sunshine, with German business confidence at a 20-year high and the economy heading for full employment. The Irish crisis has seen the Euro fall by three cents against the dollar this week, making it even easier for German companies to boost sales and profits. With these kinds of benefits, the Germans are not about to allow the Euro to collapse and disappear. Indeed, any talk of it collapsing merely strengthens its reason for existing.

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