What does the Euro measure? Were we living in a classical world, the answer to that question would be simple. The Euro in that case would measure the productivity or value of labor. But, we do not live in a classical world. Rather, we live in a world into which we also factor time and, therefore, the productivity or value of labor between two or more points on a simple investment schedule; and we live in a world where this simple investment schedule operates alongside and shapes (and is in turn shaped by) other investment schedules; and we live in a world where all of these simultaneously, but asynchronously, coordinated investment schedules also must contend with a monetary supply and with interest rates that will change with time and with place. And we live in a world where all of this takes place in markets measured in different currencies with different local laws and tax rates and labor markets, and so on.
What does the Euro measure? Let us say that the Euro measures economic growth. In this case, the Cameron’s decision not to follow Germany and France would appear to signal at the very least that Cameron does not feel that the British Pound will fare better should Great Britain link its budget to other EU budgets than if it does not; or, in the alternative, that the British Pound will fare better relative to the Euro. I say “appear” because, as Cameron himself admitted, he did not feel that he could push such coordination and linkages through Parliament. And this could either mean that Parliament shares Cameron’s lack of confidence in the EU or that Parliament does not feel its members can win the next election based on such a policy. And this in turn means that Parliamentarians believe that their constituents lack confidence in the EU.
So, evidently, the Euro measures public confidence. And whether you share or do not share confidence in the Euro again appears to depend on where you are—in Great Britain or in Germany or in France or elsewhere.
But, confidence in what? Confidence, I suspect, in the EU as a coordinated project, at least in the short run. So are the British saying that they do not believe that this project will succeed? And, if they are saying this, is there any sound basis for their judgment? Or, are they saying that they do not want the EU to succeed? And can we identify political/historical reasons why, regardless of its merits, the EU will lose in its struggle to regain legitimacy and the UK will be vindicated in its decision not to join the party?
Or is Cameron simply making his decision on political expediency; a decision that both he and Great Britain will live to regret? Or is Cameron’s decision a self-fulfilling prophecy? Does the UK’s decision weaken the Euro, and weaken the EU, sufficiently on balance to work to the advantage of the UK?
What does the Euro measure? Is it economic growth? Is it consumer confidence? Is it investor confidence? Is it market confidence?
Is there smart money in these decisions? Or are they all in the end evidence of dumb money?