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The Euro for Beginners The Euro for Beginners
by Mirella Ionta
2017-07-26 09:08:52
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As a philosophy, history, and literature buff, I have never taken too much interest in economics. In university, I took an Intro 101 Micro-Economics Class and remember being bored out of my mind during lectures. During the final exam, I kept nervously moving my toes inside my shoes and grinding my teeth.

Obviously, this subject was not my forte. I would never have thought that the Economics exam would have involved so many graphs and formulas. Each exam question demanded me to analyse a graph and create its corresponding algebraic formula.

eurozoneAnd there I was prepared to explain classic economic theories in words when it dawned on me that my study efforts had been futile. How could one possibly reduce economic behaviour to a single formula with a matching graph? I did not know.

I felt I could not rely on educational institutions to help me understand even the basic concepts of economic systems of the world. As years went by and the Euro was the hot topic people discussed, my limited knowledge of this currency would cut my coffee shop conversations short. All throughout the first seventeen years of the 2000s, I could no longer understand the lingua franca of Generation X coffee shop frequenters engaging in political discussion. In spite of my dressing in the latest European fashion labels that use Chinese sweatshop labour, I just couldn’t keep up with all the sophistication.

From my cursory understanding of the subject, what I know is that nations specializing in different industries benefit from trade and trading in multiple currencies creates additional costs. If these nations trade in one currency, there will be no need for exchange rates. Similar economies can benefit from a single currency.

Fair enough. Then, surrounded by Euro-savvy intellectuals, I asked a taboo question and they all looked at me as if I had just dropped a bomb.

Why would one clump all those different economies together? Each nation’s economy is based on different types of industry. Shouldn’t each nation have its own control over monetary policies and interest rates so that they could be adjusted to suit domestic economic conditions?

It is said The Euro currency was created to avoid a future war in Europe, as well as to compete with powerful economies like China and the United States. The Euro does make the Top Ten List of Most Valuable Currencies in the World, along with the Kuwaiti Dinar, the British Pound, and the Swiss Franc. The US Dollar and Chinese Yuan do not make the cut.

But what I do not understand is this: If a country with an economy dominated by the energy industry trades with a nation whose economy is based on the agriculture industry, what happens when the energy nation has an excess supply of energy and an excess demand for agricultural products? What happens when the energy nation imports more than it exports? What does it do with trade deficits? Wouldn’t the deficit cause the energy country’s currency to depreciate, making its exports worth less?

If the energy economy and the agricultural economy shared a common currency, with the presence of a trade deficit, how would they determine what the value of their common currency is? How would it all even out in the end so that the different economies specializing in different industries and exporting/importing in different quantities could be represented fairly in one single currency?

All these unanswered questions plus another one: Is North America inspired by the creation of the Euro? Are people from everywhere uniting in secret basements across Canada to discuss the possibility of a single currency between the United States of America and Canada?

I went out to ask Montrealers to openly comment on the idea of a currency merge. “It just won’t happen between us! We are too different!” says one guy wearing a Pink Floyd t-shirt. “Are you nuts?” says another guy who had just parked his Harley Davidson motorcycle outside Poutine Express Restaurant. “Who wants to adopt endless American debt and become forever slaves to the Federal Reserve?”

His friend, who was with him and also had just parked his Harley, agreed: “Yeah, you are right, Jean-Guy! Hell knows we already have seen too many loan sharks around here!”


      
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Emanuel Paparella2017-07-26 11:19:40
For a while, in fact, in the US there were different currencies in different states. There were even communities that adopted their own currencies and even the barter system. Alas, some of the founding fathers, Hamilton and Madison among others, noticed that it did not seem to work very very well for the nation as a whole, so they devised the Central Bank and the Federal Reserve and the US Treasury. Has it worked any better in the over-all general global scheme of things? Hard to say.

A modest proposal: how about thinking of the economy as a tool of sort, like a pen: it can be used well, for the benefit of the common good, or and it can be used badly, for the aggrandizement of greedy capitalists who think only of themselves. We have a prime example sitting pretty in the White House. That is an economic lesson in itself.


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