first majestic silver

Something Fishy in the Market

September 23, 1998

I am holding a flyer distributed by a supermarket chain in northern Spain. It says, across the top of the first page: "Prices in effect from the second until the fourteenth of January, 1998." Obviously, therefore, the booklet was printed at the end of 1997. We got it when we made one of our frequent visits to Spain to visit our daughter, who is married to a Spaniard and lives in the north part of that country.

What makes this advertisement interesting is that the prices are quoted in pesetas and in euros, even though there were no euros in 1997---and still aren't.

A bottle of olive oil is 329 pesetas, or 1.97 euros. Potatoes (2.5 kg) are 139 pesetas, .83 euros. Chicken breasts, per kg., are 795 pesetas, 4.76 euros. The conversion rate is about 167 pesetas to the euro, making the euro a little more "valuable" than the dollar.

How can this be? A country cannot switch to euros just because it might want to. There are "convergence criteria" which must be met. For example, inflation must low, perhaps three percent, tops. The public debt must not exceed sixty percent of the Gross Domestic Product. The government borrowing deficit mustn't be more than three percent of that country's GDP. Did Spain meet these criteria in December, 1997?

When was it learned which countries met these requirements? My information is that it was in April of 1998 that this information was released. Yet in December of 1997 we saw prices of products in a Spanish supermarket quoted in euros.

Our first visit to Spain was in November, 1994. At that time, the peseta was about 100 to the dollar. On our last visit, Christmas of 1997, it was about 140 to the dollar. It certainly isn't obvious that Spain meets the criteria, yet a conversion rate, 167 pesetas to the dollar, had already been established.

I asked my son-in-law if we could go to the bank and obtain some euros, and he said there weren't any. In fact, he expressed skepticism that the Spanish would accept the euro. And, in fact, there aren't any, even today. Not until January of 1999 will the euro be introduced, and then only in electronic form; and even that date is tentative. Actual euro coins and paper will not appear until about 2002.

It's a mind game, you see. Psychology, not weight or purity, gives modern money its value. There isn't any point in printing "money" if nobody takes it seriously. This is why Monopoly money is so poorly printed, and unimpressive: to remind you it's only a game. The actual money monopoly prints its "money" with exquisite care, lest you confuse it with equally worthless game chits.

In Spain, despite an apparent lack of public enthusiasm, and the fact that the euro doesn't even exist, even in electronic form, we nonetheless see prices in a supermaket ad quoted in euros. The only reason for this seems to be to train the Spanish customer to think in terms of that unit--a sort of subliminal conditioning.

Our suspicions aroused, we suspect, additionally, that the criteria may be a ploy also. Issuing a country's currency means obtaining a stranglehold on that country's economy: a means of obtaining its goods and services for nothing. Criteria are window dressing, intended to give the whole process a solemnity and appearance of importance. Does a counterfeiter ask for your financial statement before agreeing to buy your gold watch for a few cents worth of paper? Only if he intends to stay in town, and rob you with regularity. Then he'll get a three-piece suit, build himself a cathedral-like edifice to work in, and call himself a banker!

Perhaps the nations which wish to use euros will simply indicate that they meet the criteria, and that's that. After all, statistics about such things can easily be juggled, if anybody actually cared to examine them. And should the issuers of the euro (headquartered in Frankfurt) have some reason to exclude a certain country, the criteria could easily be used to justify that exclusion. Why exclude a country? A certain cynicism may be allowed: perhaps the appropriate palms have not been greased, or the promised benefits are considered inadequate. Believe it or not, there may be some corruption involved!

Certainly, the man on the street isn't much bothered by the "problem" of multiple currencies. He can buy his bottle of wine and his newspaper with the stuff in his pocket. True, the constant calculation of exchange rates is a nuisance for some, but Europe has survived, despite that inconvenience, for many centuries. If a common currency were to be adopted, there could be no better than gold, or silver, and there's obviously no movement in that direction.

The enthusiasm for the euro is found in government circles, and among international businessmen, not at the local market. And those in government might find themselves richly rewarded for turning their economies over to foreigners.

When, over a year before the tentative introduction of the euro electronically, almost four years before the introduction of the euro coins and currency, and months before the publication of the list of countries eligible to use the stuff, the calamari in my daughters supermarket in Spain is priced in euros, I smell something fishy!

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