On January 1, 1999, the euro (EUR) made its debut as an official European currency and lawful means of exchange for 12 independent states. Ten short years later, another revolutionary currency was introduced to the world. This new money is the first attempt at a “crypto-currency” and has recently become a topic of immense interest in financial circles, not just for its technical idiosyncrasies (you can “mine”) but its economic rules: decentralization, fixed supply, pure floating currency. We’re talking of course about Bitcoins (BTC). If you read the Wall Street Journal, The Economist, Financial Times, chances are you have come across the concept; maybe you’re one of the few that’s been curious enough to trade. What separates the euro, the US dollar, or other traditional currencies from Bitcoins is that they’re not issued by a central monetary authority. Standing in…

Read More...

Termination Risk Editor’s note: Editor’s note: This is the final episode of a three-part series on a hypothetical breakup of the Eurozone, and the corresponding currency and derivative contract issues that could follow. You can read the past episodes here:Episode 1: The Sovereign Menace Episode 2: Return of the Drachma A long time ago, in a monetary union far, far away… World economies braced for the inevitable breakup. Despite Eurozone members having many more ties than just a single currency, in the end austerity, capital flight, and contagion proved to be too much to overcome. The departing state’s interconnectedness would put many banks and businesses, even other nations, at grave risk of default. The monetary union thus shifted its focus towards shoring up the defenses of other at-risk states, and preparing the way for the first unilateral withdrawal from the…

Read More...

EUROZONE DISSOLUTION Editor’s note: This is part two of a three-part series on a hypothetical breakup of the Eurozone, and the corresponding currency and derivative contract issues that could follow. If you missed part one, Eurozone Dissolution (“Episode I: The Sovereign Menace”), you can find it here: Episode 1: The Sovereign Menace A long time ago, in a monetary union far, far away… The single currency benefitted many and joined them in common interest. The elimination of exchange rates among the 17 member states alone increased efficiencies and competitiveness, resulting in greater economic output. Collectively, the member states in the monetary union rivaled the largest economies on the planet, and the people experienced a financial freedom of movement like never before. But the economic crisis would take its toll and expose weaknesses in the union. Prosperity and growth were not…

Read More...

EUROZONE DISSOLUTION Editor’s note: This is part one of a three-part series on a hypothetical breakup of the Eurozone, and the corresponding currency and derivative contract issues that could follow. A long time ago, in a monetary union far, far away… The alliance had been a dream for many years, and when the euro was introduced on January 1, 1999, bells rang out and people danced in the streets, speaking many languages, but promising to spend, save, and invest in one common currency. Eleven sovereign states had met the convergence criteria and adopted the euro that day, agreeing to fiscal and monetary constraints intended to keep the union strong. Soon, six more nations would follow suit and adopt the new currency, expanding the Eurozone and economic benefits contained therein. But then, a crisis arose. No one expected a global credit…

Read More...