The Anniversary of the “Esperanto Money”

This week marks the euro’s 10th anniversary.

We remember when it came out. The “Esperanto Money,” we called it, referring to the ersatz language that never quite caught on.

The dollar is bad enough; at least it is supported by the full faith and credit of the United States of America, for whatever that is worth. Whose full faith and credit stood behind the euro? What nation would be willing to stick with the new money when the going really got tough?

The euro opened at $1.12 to the greenback. Then, it sank below 90 cents. It looked doomed; the American paper was stronger, surer, more lasting.

But then our initial skepticism towards Europe’s new money quickly turned to admiration. The euro’s weaknesses were actually its great strength. Since no nation stood behind it, none would knock it down to get where it wanted to go. Just as the Europeans could never agree on sausages or military campaigns, they would never agree on the destruction of their money. If French wanted a weak euro to help enliven their economy, the Germans and the English would tell them to stop whining and show some backbone. If it were the English whose economy went soft and who wanted an easier money policy, likewise, the French would like nothing better than to deny it to them.

That is the charm of the Europeans; they detest each other mutually. The French would rather endure a depression themselves than spare the English one. And as for the Italians, the Irish, the Austrians…and all the other peoples at the periphery – well, they can just look out for themselves!

But rather than leave the European Central Bank weak and subservient, it actually makes it stronger and more independent. Its officials may have no more integrity than officials of the Federal Reserve. Their economic theories may be no better. But at least they are unresponsive. In central banking, the consequence of inertia and inactivity is almost always salutary.

While the Fed has cut rates…raised them…and then cut them again, the ECB has done nothing. And the euro has almost doubled from its low and now trades for $1.55.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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P. Op de Beeck
I am not totally agree with your opinion. The euro is bound to rules committed by all parties. It is true that not 1 partner has the absolut say about what the euro will do. It is a group of people of different nations who think differently and have seperate opinions. Those who convince with the right arguments rules. But for the downgoing of the dollar is only one family responsible : the Bush family : Due to their war policy, the U.S.A has big debts above their lending policy. Which results in a downward spiral (a la ROMAN EMPIRE,… Read more »
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