Curious Snippets from a Cynical Optimist

Timmy points to a great article by Ambrose Evans-Pritchard in the Telegraph on the Euro. Well worth a read. While Timmy doesn't want to add anything, I would make a point which is rarely made.

The big pillar of Euro-think is the elimination of transaction costs. It goes that companies trading across Europe faced multiple currency exchanges and thus unmanageable volatility. Hedging against currency movements was expensive, and volatile exchange rates confused the price signals in the [European] economy. The Euro has eliminated these problems for its members (albeit causing others).

However, today a British company has the best of both worlds. It has none of the problems of a common interest rate, nor the inflexibility caused by lack of exchange rate stabiliser. It does, though, now only need to deal with a single currency for the Eurozone. Hedging against a single currency, which is now less volatile due to its scope, is a safer bet, and price signals are more transparent. So the Eurozone has helped non-Eurozone economies like Britain enormously and eroded the advantages of joining.