The Euro is doomed? The question 3,000,000,000,000

To read comments from authorities of all kinds, you’d think the Euro is sentenced to death more or less slow. Some media is already writing his obituary and economists, mainly Anglo-Saxon already explained why the Euro will not survive this crisis. Rarely has so much nonsense has been written or said about the Euro. Note that some of the statements of European political leaders do not help, as they maintain a confusion of genres.

If we focus on the financial markets, two considerations are important. Firstly, the size of currency movements on the forex market every day reaches 3,000,000,000,000 Euros per day. A speculator or a group of speculators who would influence prices would therefore need at least 30 billion euros to represent 1% of these volumes.

The second is that the bulk of these movements comes from international trade or investment in assets of another currency area: it is buying and selling of currencies by firms or institutions that have set invoices on a daily basis in foreign currencies: just look at the oil market, which generates massive flows between dollars and euros every day to prove it. These actors anticipate exchange rate movements. They therefore operate cash and futures. Concerns will inevitably create movements that are called “leads and lags” that affect the course of the currency.

On the role of hedge funds, it is ridiculous in these markets. With $ 2,000 billion of capital invested and 80% of their assets in stocks and bonds without currency risk. The “speculative” currency should not exceed 10% of these assets. Although they exchanged all of these alternative asset every day, they would not reach 1% of movements.

Why Has the Euro reaches $ 1.56 at the top last year? Because the U.S. dollar was collapsing and confidence in the U.S. economy and finance was the lowest. Nobody said or claimed that the course was the reference. Viewed from the perspective of our exporters, the high euro was a problem: they sell in dollar properties with a significant portion of costs is in euros, their margins weakened, even disappeared. The exchange rates were due to factors other than foreign trade.

While it is clear that the crisis management of the euro by the European authorities is far from exemplary, it should return to some key considerations. Those who, today, rush by short selling or otherwise of euros for dollars at current prices will gnaw their fingers in the coming months.

It is time to step back. The Euro will not disappear, it is the motto of more than 200 million Europeans and return to the old currency requires both a consensus can not countries in the Eurozone, a change of treaties that nobody (except, as an be Angela Merkel, who seems more and more lost in the European context. The mechanics would at least five years to implement.

The Euro is not a first speculative instrument. It’s the motto of 16 economies that have significant power and at least 80% of trade is internal or al’Eurozone to Europe. All European countries seem to have finally found the political strength of austerity measures are needed to stop living beyond our means. Even the United States and Japan come through. In my contacts in Asia this week, I reassured my interlocutors by saying that Europe finally make the right decision after trying all other solutions.

The search for a preventive mechanism of these crises is by its very nature, complex. But this crisis has demonstrated full-scale budget that complacency leads to disaster. It is more a European leader who may be unaware that the Eurozone needs to have the structure and mechanisms necessary preventive and curative. More importantly, the countries of the Eurozone have become aware of a sense of common purpose that, even if it is difficult to live, is inevitable. The slightest threat weakest overall.

Not just the euro is not condemned, but there is a currency of investment of a tremendous value.

I jealously guard my euros.