Monday 23 January 2017

Magic money unlikely to bring fairytale ending to epic battle in Greece

Published 09/07/2015 | 02:30

A Greek flag flies behind a statue depicting European unity outside the European Parliament in Brussels this week – the hard political reality is that when it comes to Greece against the rest, the rest is always going to win
A Greek flag flies behind a statue depicting European unity outside the European Parliament in Brussels this week – the hard political reality is that when it comes to Greece against the rest, the rest is always going to win

How much is a €10 banknote worth? The physical piece of paper itself is effectively worthless. But because everyone accepts that these banknotes are worth €10, we can buy all kinds of stuff with a value up to that amount with the notes. This is the magic of printed money.

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But the magic only works as long as people are confident that the same pieces of paper will be accepted as being worth the number that is printed on them. If that faith evaporates, people begin using other things as a "means of exchange". The last time that happened in Europe was after World War II. Then, cartons of cigarettes and nylon stockings were used as currency amid the devastation.

Most people know that having a reliable currency is vital - despite their vote last Sunday, opinion polls show that a big majority of Greeks want to keep the euro rather than change over to a currency that doesn't (yet) exist.

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