The Euro Suffers an Identity Crisis

J.D. Foster / December 20, 2010

Pity the poor euro. It’s a currency, but it’s asked to be so much more. More, indeed, than any currency can possibly be.

The euro was born to glorious pomp and circumstance just 12 years ago, replacing a gaggle of currencies (including the mighty German D-Mark) with a single currency and replacing a collection of central bankers with one powerful voice, the European Central Bank.

The intended advantages of a single currency for all of Europe were obvious enough—no more internal exchange rates, no need to carry multiple currencies, no risk of adverse exchange rate movements. The innovation of currency as a medium of exchange and store of value was a tremendous boon to economic growth millennia ago. Having a single currency for a large and largely homogenous economic area would seem to take these advantages to the next logical level. Inconveniently, electronic commerce and high-speed computers mostly achieve these advantages with or without a single currency. (more…)