Indulge me for a moment through a conjured journey of currency fancy. Let me set the scene for when rather than if an enlarged EU/EZ, investors are surprised by the birth of a brand-new fiat. A crown currency forged not for a European nation somehow magically created out of nowhere, but one blending those that have long existed, and even taking-in a euro defector.
Now, whilst I would not dare suggest the Nordic peoples are facsimiles, I have no hesitation in claiming their economies complement each other more than with those along ClubMed. To be clear, this is NOT about synergies in physiognomies, but sovereign economies.
No doubt many will claim Europe’s highly industrious chilly nations COMPLEMENT those with warm shorelines and sedentary climates. They could well point to a US whose singular currency spans north to south – cold Arctic to a warm water Gulf, and east to west – ocean to ocean; with, in between, a vast varied mass of economics. Whilst all this is perfectly true, few can doubt the US has seldom since 1865, seemed less United; a greenback never more abused by reckless debt excess, as manifest by an ever loftier gold price.
Let me return to Europe’s far north. Looking around Finland’s borders, we see Norway, not only outside the EZ, but sans the formal EU. There is Sweden and Denmark, which though formally within the EU, and with currencies managed close to the €, still have sovereign Crowns. Completing Team Nordic is non-EU Iceland, a nation which at barely 370,000 people, and a recent history of banking and credit failure, could well do with joining up alongside neighbours whose reputations and balance sheets are robust.
Collectively then we see 28m people richly spread across 6 economies, only one formally in the €. There is, to recap, Norway and its vast monetary and energy wealth; Sweden, with its excellence in engineering, and then Denmark with its own impressive tradition in mercantilism, plus resource riches in Greenland/Faroe Isles. Add too Iceland and its hydro-power and aluminium. As for Finland, it too can boast hydro, tech, engineering and forestry; and a unique Xmas present. Plus, all these nations bank under the well-funded coverage of Nordea.
My conjecture then is that in “the future” NEW Nationalist leaders elected in Oslo, Helsinki, Copenhagen, Stockholm and even Reykjavik, realise they could, if they put their minds to it, easily forge a Nordic currency. A fiat which would allow them to cement their complementing economies, escape ECB fealty, and yes, for those in the EU, exit. I conjure then, that Finland could, like no other, well FIXIT.
So much for WHAT, WHY? Well, a deterioration in Finland’s trade position; made worse by ever fiercer competition for export custom being suffered by EZ nations, down to devaluations by free-trade rivals, far and wide. FIXIT too due to an upsurge in Finnish nationalism, part of regional surge in pan-Nordicism.
Do not then rule-out the chance Finns and friends consider the (re)creation of a unified Nordic Krone. One could even go so far as to argue the three Baltic nations ask “why remain in an EZ/EU, facing rising tensions, when we can very well wear a new unifying Crown?”
From why from cold to warm waters currencies will coalesce.
Here is yet more conjecture on individual currencies coming together.
Who knows when, but at some future point, the dollars of Australia and New Zealand will I am sure become one. As to why, well not some strength in merging, but rather the breadth and depth that comes in larger numbers. For I would never dare to claim a future conjoined ANZ$ is certain to be stronger in ALL exchange rate dimensions. After all, the currency landscape we will come to know in the future will be very different from the one we see today; the yen finally accepted as under a gravitational pull and so too the dollar, with the yuan widely known, and owned. This said, I am confident an ANZ$ would be sought after.
The point that cannot be stressed highly enough is that currency unions involving COMPATIBLE nations, give them a single debt market deeper & broader than the sum of the individual parts. As such the singular yield WILL on average come in lower than what is blended in the individual credit markets. In a two-nation model (say Oz and NZ) one can visualise this as a debt curve which is ‘naturally’ convex not complex in nature. This is precisely why compatible nations that can conjoin their currencies, should do so. To repeat, the clue here is compatibility. Returning to this particular point in hand, none can doubt that ClubNordic nations are much more compatible one to another, than with those of ClubMed.
