Eleven European nations unveiled a new common currency on Friday, and millions of American eyes glazed over at the thought. "Whatever it is, it has absolutely no effect on me," a typically bored worker at a Times Square deli told a Wall Street Journal reporter who asked him about the euro. Duller than utility deregulation, as incomprehensible as Whitewater, more important than the North American Free Trade Agreement, the dawn of the euro is, next to Social Security reform, the great journalistic nightmare of our time. Not even media mogul Rupert Murdoch can get a catchy headline out of this story: "Eleven European Nations Move Cautiously Toward Currency Union." It's no "Ford to City: Drop Dead."
In one sense, the Times Square deli man had it right. For at least two more years, the euro will only be a unit of account, a kind of virtual money that only exists in computers. There won't be any euro coins or bank notes; euros won't be used in stores. Travelers to Europe will still deal with lira, schillings, kroner, pesetas, deutsch marks and francs, and the number of francs, marks and lira Americans get for their dollars will continue to vary from day to day. Even in 2001, when euro notes and coins appear, most Americans figure that euros will be like the metric system or French: annoying, foreign and tricky, but something you only have to deal with abroad.
The United States has been lucky since World War II. Demand for the dollar has stayed high because corporations, governments, banks and private citizens abroad have chosen to keep large portions of their assets in dollars, or in dollar-denominated assets like U.S. stocks and bonds. Take the extreme example of Russia: Millions of Russians are keeping billions of dollars under their mattresses because they don't trust either Russian rubles or Russian banks. Around the world, central banks keep most of their foreign reserves in dollars. The Bank of China has about $162-billion worth of foreign reserves, 62% of that in dollars.