Some Euros are More Equal Than Others...
How will the Eurozone crisis resolve itself? The only thing we can say at this stage is that it's going to be ugly, really, really ugly. But precisely what form the inevitable Armageddon will take is anyone's guess. Perhaps there'll be Weimar-style hyperinflation. Perhaps there'll be decades of Japanese-style deflation. Perhaps, it will all work to you Americans' advantage and you'll be able to live as people like Ernest Hemingway did in the ritziest Paris hotels for next to nothing. Or perhaps the dollar, too, will be toast and you'll end up like Europe begging for alms from the Chinese, the Indians and the Brazilians.
Meanwhile, it pays to be prepared. Here's a fascinating blogpost from the Telegraph's Ian Cowie, explaining how to spot a good Euro from a bad Euro. Thought they were all the same? Yeah I did too. But apparently not. Though the notes look more or less identical, it pays to look at the serial numbers. Here's why:
Some euros might be more widely accepted than others, if the crisis takes a turn for the worse, depending on which country issued them. All Euro banknotes have a one-letter, eleven-digit serial number located on the back at the top right and bottom left corners of every denomination.
The letter indicates which country issued the banknote. For a couple of years now, some Germans have insisted on holding on to euros issued in their own country and passing on those backed by southern states. They know from not too distant history what it feels like to be left holding worthless paper which used to be official currency.
All euros are backed by the European Central Bank but the serial numbers prefixed with X may be regarded as most secure because they are issued by Germany. N is also a good prefix, because these come from Austria. P, L, U and Z prefixes may also be favoured because these are issued by the authorities in Holland, Finland, France and Belgium.
If you share widespread fears that the euro cannot last in its present form, you might want to avoid notes with the prefixes F, G, M, S, T or Y. These are issued by Malta, Cyprus, Portugal, Italy, Ireland and Greece.
Personally I'd wait a while if I were you. Give it a few more months - mid 2013 at the latest, I'd say - and for the price of a modest apartment in Florida you'll probably be able to buy enough New Drachma to get yourself a lovely Greek island - and still have change spare for a plate of moussaka, a tomato salad and a cool glass of Retsina.
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Dec '11
Re: Some Euros are More Equal Than Others...
James,
After listening to the Ricochet podcast over the weekend, I have the following question: What do you think will come first?
The collapse of the Euro, the complete write-down of Greek debt, or the emergence of a strongman in Greece that declares martial law and voids all bonds?
Jose
Feb '11
Re: Some Euros are More Equal Than Others...
Do you prefer moussaka or shepherd's pie, James?
It's not unlike our notes A for Boston, B for New York, etc. But could you really see the ECB saying, no notes from PIIGS recognized here? Could definitely see the ECB removing the currency circulating issued by the other banks if they go their own way. And currency is always a tiny fraction of the money supply, so it's not a big deal for the ECB to do that.
Nov '10
Re: Some Euros are More Equal Than Others...
Very interesting phenomenon - the single currency reverting back to individual national currencies, not because the euro-ostriches in Brussels want it to, but because that's the natural shape of money. The real world auto-correcting a mistake. Fascinating, although as an American, it's not really my beeswax.
But this article is too optimistic about us Yanks. We're hurling toward euro-socialism at lightspeed. Our left has for generations pointed to Western Europe as our model, and a little thing like complete collapse doesn't appear to have changed their minds.
And they're pretty firmly in charge now. Westerners voting for leftists is like Arabs voting for Wahabists; once they're in power, you can't get them out.
Wanna bet our collapse is a lot swifter and more painful than yours?
Re: Some Euros are More Equal Than Others...
@starvethebeast. A man after my own heart! I'm WAY more pessimistic about the US than I let on in my piece..
@lastoutpost I think it will go c) then b) then a)
@hangon I like both
Mar '11
Re: Some Euros are More Equal Than Others...
In the latest podcast, Prof Hanson gave the best description I have heard about Greece - the Greeks are sending their Euros outa the country, and will return their money at a great profit when Greece leaves the Euro.
If James' wish comes true, and Mr Obama is returned to Power (to discredit European-style Socialism?), that might be a good time to send Dollars outa the US. I see this a coupla times a year when I visit Japan, and the Dollar is worth less than it was on the last trip - I don't bother converting my Yen back to Dollars for that reason.
On trips to the UK I notice the Dollar and Pound are sinking at about the same rate, while the Euro is sinking faster.
I guess it's too late to buy Gold?
Edited on Feb 20 at 9:14amMar '11
Re: Some Euros are More Equal Than Others...
Europe at least has the option of jettisoning the PIIGS -- we are all going to hit the wall together over here, and the splat we make will be epic.
So James, you and your rock-solid pounds will be able to clean up on two continents.
Apr '11
Re: Some Euros are More Equal Than Others...
China will not be doing very well if Europe and America both collapse. We are the ones who buy all of the shmaltz they make. if we can't afford it their trade will fall, their GDP will stop growing fast enough to keep justifying their oligarchy (as has been suggested). The EU and America going down will be bad for everyone involved in trade...the only places left unchanged will be Afghanistan and Somalia who are already scraping the bottom.
Re: Some Euros are More Equal Than Others...
I don't think it's too late to buy gold. My prediction? $2250 by year end, minimum...
Re: Some Euros are More Equal Than Others...
Based on nothing more solid than a 101 level understanding of Austrian economics and gut instinct.
Oct '10
Re: Some Euros are More Equal Than Others...
It's fascinated to read about the collapse of the ruble zone, after the Soviet Empire (and its fiscal transfers) collapsed. Ruble banknotes were stamped by their country of origin, much as James is saying the euro could be differentiated by the serial numbers on then notes.
Oct '10
Re: Some Euros are More Equal Than Others...
It depends. If I were the Europeans, I would break up the eurozone and create a financial crisis insurance mechanism (a cross between the IMF and deposit insurance would work). There would be a global recession, but it would be short--eight or nine months at the most--as competitive adjustments between currencies took place. The Europeans would then "managed float" their currencies, in a reformed ERM (exchange rate mechanism).
Of course, what will probably happen is some form of fiscal transfers will take place, followed by either political union or total disintegration.
Re: Some Euros are More Equal Than Others...
Do many people in Europe and Britain hold onto actual dead tree currency as part of their investment portfolios? I have maybe...$0.87 in hard cash right now. And the rest of my cash is in my account at the bank in digital form. I can't even fathom what it would mean to hold a pile of paper cash whose serial numbers made any difference to the value of the notes.
Oct '10
Re: Some Euros are More Equal Than Others...
When currency unions collapse, people take their money out of the banking system. They hold much more cash than they otherwise would. That's when the scramble for hard currency begins.