Eurocrisis

The European Debt Crisis For ordinary, non-specialist people just tuning in to the horror-show which is the European crisis, the whole mess can seem daunting and almost hermetic—almost like a secret language, or a really complicated code.

Euro-this and euro-that and euro-the-other—that‘s all everyone seems to be talking about. That, and words liketroika, haircuts, bailouts, yields, not to

mention an alphabet-soup‘s worth of acronyms like EC, ECB (they‘re different), EFSF, PIIGS, IMF, EMU— —OMFG! For us dweebs neck deep in this stuff, it‘s all mother‘s milk. At my Strategic Planning Group, we‘ve been game-playing what do when the eurozone breaks up since May—but for people who‘ve just realized, ―Hey! Something‘s going on over there in Europe!‖, it can be a bit much, like tuning in to a soap opera five minutes before the end of the episode: Everything seems terribly portentous and important and shocking . . . but basically incomprehensible. Which wouldn‘t matter if this was a soap-opera—but this is real life. This European crisis will affect your financial future, no matter if it‘s happening on another continent. This is major— —which is why so many ordinary people are confused and frightened: Because it seems terribly complicated. But like all things which seem complicated at first glance, when you break it down, it‘s simple. This is what happened: In 1999, the Europeans implemented a common currency, the euro. They did it in order to improve trade between the eurozone nations, and thus bind the European countries closer together.

This new currency was centrally managed—that is, there was a single issuer of this new currency. Which of course makes sense: In the United States, you don‘t have 50 states issuing currency—you just have the Federal Reserve, issuing dollars for the entire country. Same with Europe: Thus the eurozone—the zone of countries that had the euro as their currency. This new currency was managed by the European Central Bank—the ECB—out in...