Querencia and the Euro
The Euro is dropping again today on the European markets, and is approaching its debut level from 1999 ($1.1842). There is fear of an almost-certain sovereign default (Greece being the consensus "victim"), and the seeming lack of commitment to the bailout by the Germans has everyone a little skittish. Things look pretty grim.
One of the prettiest boats I ever sold when I owned a yacht brokerage was a candy-apple red Hunter 456 center cockpit sailboat named Querencia. She turned heads whenever she glided into a marina, and she was beautifully appointed below decks. But it was her name, Querencia, that inspired more conversation at the yacht club than her fit and finish. Unless you're a fan of Hemingway or bullfighting, you've probably never heard the word before, but today I'm wondering if the Euro is finding its querencia.
Bull fights are bloodsport, there's no other way to look at it. Some consider the practice barbaric, and animal rights activists get their panties in a twist over it. I don't have an opinion one way or the other. I've enjoyed a number of bull fights over the years, but I see the other side of the argument as well. All I will say to those who consider it an animal rights issue is that they should rent (or buy) Food, Inc. before their next trip to McDonalds.
Anyway, once a bull fight is underway, things typically go badly for the bull. But not always. Most of us have seen the grisly footage of a matador taking a bull's horn in the throat a few weeks ago. Aficionados believe that the bull senses its imminent demise and stakes out a territory in the bull ring where a sense of calm overcomes the animal and it is therefore most dangerous. This area is known as the "querencia". It's not so much a place as it is a state of mind for the doomed beast. Once the bull finds its querencia, you'd better look out.
In a recent Telegraph survey of the top 25 economists in London, half said the Euro in its current form will no longer exist five years from now, and some went so far as to say that it might not last the week. They could be right. But the Euro won't go gentle into that good night, and its rage against the dying of the light might be a huge economic boon to the Euro zone countries. So much so, that I'm starting to wonder if the ECB mightn't be doing everything they can to stop the slide.
Think about what a Euro at parity with the dollar would mean to European exports and tourism. A weak Euro could go a long way to lifting the economic conditions of Europe, ostensibly on the back of the dollar and yen. I'm not the only one who is thinking about this.
GDP as much as 1 percentage point in 2011, compensating for the brake on growth from lower spending, according to Thomas Stolper, an economist at Goldman Sachs in London. GDP expanded 0.2 percent last quarter from a 2.5 percent contraction a year earlier.The weaker euro will boost the EU's
If the Euro finds its querencia at or near parity, it could be a force to be reckoned with. Ultimately, it may be doomed. But that doesn't mean it will go down without a fight. The death of the Euro might be a foregone conclusion at this point, but its death throes could still hobble our own recovery efforts if it is allowed to languish under life support for years before someone pulls the plug.
Could that be the ECB's strategy?
A very interesting point but wouldn't a long term decline in the euro's value raise the cost of borrowing for countries like Greece and Hungary and the half a dozen other closest (debt) queens we haven't heard about yet? Unless this is a rapid change and then it remains steady for a long time, with low inflation rates in the future.
http://www.telegraph.co.uk/finance/economics/7806064/Euro-will-be-dead-…
More interesting though is that the guy who wrote this article is named Edmund. Not a common name. Notice how we never see Edmundo and Edmund in the same place at the same time? Clearly, there's conspiracy afoot!
HA!
Hadn't noticed that. Nice catch.
http://www.businessweek.com/news/2010-06-07/euro-stronger-than-mark-pro…
Also, I don't really get how this article can say that because the Euro is still worth more in dollars than the deutsche mark, the currency had proven itself.
I'm not an currency trader but isn't the level of currency value less important the rate or inflation/deflation a currency experiences. If the euro is unstable and continues to lose value at high rates, the Germans and perhaps some other countries would have been better off not adopting the Euro as the value of their savings declines and it becomes more expensive to borrow from abroad.
I'd rather hold a more stable currency that is not going to decline against the dollar/pound/yen/gold than lend money to a country whose currency devalues 21% in 12 months.
Any insight from currency experts here? I'm just a curious novice...
Actually, you're right on the money and Trichet is making a largely irrelevant argument in favor of the Euro, which is pretty much his baby. He's comparing apples to oranges.
Apart from the whole euro debacle....thats a great story about querencia , thanks.
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