Do we trust the Euro?
You only have to look at tonight’s newspaper to find remarks from politicians, economists and market experts about the weakness of the Euro, and how much trust markets have lost in the Euro.
To tell you the truth, I have lost trust in the experts and economists a while ago – they did not foresee the current crisis, although it is right in the middle of their area of expertise. They didn’t understand their subject. And oh surprise: as if nothing has happened, today they are still predicting the markets and the economy. Did we not learn? They do not know! Experts could not predict, and they still can not predict.
Anyway, back to the subject: I had this feeling that when I am abroad my Euro’s do not buy me less than ten years ago. When I buy, let’s say a bowl of rice in Chiang Mai, I have to pay more Baht today than ten years ago, but hey, that’s Thai inflation. But do I have to exchange more Euro’s just to get the Baht?
It was time for some research. You might be in for a surprise.
About ten years ago, on January 2, 2002, one Euro would get you Baht 40. And today, you will even get one Baht more. That’s not a lot more, but it is more, it is a three per cent appreciation. And it sort of confirms my feeling that I am not paying way more for that beer.
So: is the Baht a weak currency too?
Well, look for yourself:
To me, the Euro does not look like a weak currency (nor does the Baht).
I admit, there are stronger currencies, the Swiss Franc outpaced the Euro with 16%, and that happened in only two years (2010, 2011). And you could still have lost a lot of money if you’d bought Euros with your US Dollars in May this year when the Euro was at its peak of USD 1.50; that’s a loss of over 10% in only a few months. But then again, it is back now at the level of early this year.
Looking at the table again: I don’t see that the Euro is weak. It is the most important currency in the world after the US Dollar, and it performs better than the Dollar. It performs better than one of the major currencies in Europe outside the Euro, the British Pound.
In fact, if you had US Dollars to invest in 2002, you should have stayed away from the stockmarket and invested in Euro instead. You would have earned 49% with it, as opposed to a meagre 20% with the Dow Jones Index.
So, did the markets lose faith in the Euro? I do not think so.
(December 6, 2011)
