When Money Destroys Nations – Newsletter Feb 2015

The year has started off with a macro-economic bang.  The excesses of decades past are beginning to show. The world is languishing in debt and money printing will become an increasing theme. Zimbabwe’s money printing lessons are more applicable now than ever before. 2015: Macro-economic fireworks The start of the year has been all about Europe: The Swiss ended its currency peg, the European Central Bank announced a massive round of QE (planning to print over €1.1 trillion to pay off government debt*) and the Greeks voted in a radical leftist party. These are three extremely important events in the context of the euro currency and the world economy. Very briefly, here is a bit of background. Short History In 1999, the European Union introduced the first currency of its kind. Hailed as a major breakthrough for the area, the Euro Project gave the entire region a single currency that allowed people from different countries to trade across borders without the problems that you typically get with multiple currencies. It made imports and exports very simple, transferring money became very easy and generally life improved for all countries in the Euro-zone. Banks also found it beneficial. With one currency banks found it less risky to loan money across borders. Very quickly, they began to lend heavily to one another and the banking system as a whole became very integrated. Many countries that exported goods to the Eurozone began to save their surpluses in euros – it soon developed into the second largest reserve currency in the world. Money flowed into the region and consumption boomed. Life in Europe was...