Good and Bad EUR notes … they are not the same!
Asianmacro had the pleasure of living and being based in Europe for a period in the past. The best thing of the Eurozone had always been hassle free travel across one country to another within the EU and without the need to change currencies. You just need EUR and not the FRF (French Franc), DEM (Deutschemark), NLG (Dutch Guilders), ITL (Italian Lira), PST (Spanish Peseta), etc … the list goes on. While it was fun 15 years ago in trading the ECU basket (that led to EUR) against the constituents’ currencies, it is no fun keeping all these notes and coins when travelling across the continent.
Fast forward to present day … where the markets led by CNBC are heaving a sigh of relief of no bank run seen (*what do you expect Cypriots to do when EUR300 was the daily withdrawal limit?). The key is what happens after this initial seven days when capital controls as announced expires, do they get rolled over again and again like Groundhog day?
Maybe it is an opportune time to take out any EUR notes you have and see where they come from, where the prefix on each note tells you which country printed them.
Belgium Z
Germany X
Estonia D
Ireland T
Greece Y
Spain V
France U
Italy S
Cyprus G
Luxembourg 1
Malta F
Netherlands P
Austria N
Portugal M
Slovenia H
Slovakia E
Finland L
Bad money drives out good money! You better offload any EUR notes with prefix G, that is printed by the Cypriots … before the rest of the world catches on that it might just be worth lesser, ex-ante taking into account what that has happened and possibly even worse ex-post, should Cyprus ever leave the EU!
P.S. I only hold EUR notes from Germany and the Netherlands.
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.
Very insightful thanks for the article
Reblogged this on AsianMacro.
You gotta be kidding. Doesnt mean that if Cyprus eventually quit the Eurozone, the euro printed by the Cyprus will become unusable. I doubt that. If anything, those circulating in Cyprus will become their central bank’s new “foreign” reserves. While those circulating outside would probably be exchanged for new euros. As euro members, each member central bank has “surrendered” part of their foreign reserves with the ECB. What would be useful is to find out whether the amount of euro they then print for their own circulation can be adequately supported by the “foreign reserves” – i.e. USD etc – parked at the ECB. I trust that amount at the ECB will be “confiscated” or held back till that country clears its debt etc including euro notes printed.
I would think that should logically be the case, isnt it?
@ Dialastrategist, Singapore and Brunei has a currency interchangeability agreement since 1967 {http://www.mas.gov.sg/currency/currency-interchangeability-agreement-with-brunei.aspx }. However, if you try to pay for your food in the hawker centre with a Brunei note, chances are you will be rejected. This will be the same for most places including taking a cab or subway or pretty much anything else. Good luck to you if you had been given a $10 or $50 Brunei note and chances are you will have to show up at a willing bank or MAS to change it back to SGD. For currency in circulation anywhere, government and central banks can always set their own rules; however it is up to the people out there to believe whether they trust them enough to use the currency since they are all fiat money anyway … it’s the people’s faith in the underlying piece of paper that matters. So in the event Cyprus leaves the EU, they probably may not wish to waste money printing new Cyprus notes immediately but let the current series G EUR notes printed by themselves remain in circulation at some new level fixed or floating against the EUR…. or the people will decide how much it is actually worth. History has always happened this way and it is not up to us to decide.