I was for it before I was against it. I thought the concept of a European Union would offer the ultimate testament to the wisdom of our Founding Fathers. Then I saw the leaders of the European Union use it to muscle American companies (e.g. Microsoft) into regulatory submission rather than focus on a necessarily slow absorption of 27 different countries, each with more than a millennia of history, culture and politics.
Instead, the EU moved with the speed of the market, in part because the market was driving the union. In 2003, the Euro began replacing the national currency of some of the EU members. Today, 17 of the 27 countries use the Euro. Significantly, the United Kingdom opted out of the Euro, and as things stand today, that looks like it might have been a smart move.
I just spent two weeks in Italy, one of the countries that booted its own currency for the Euro. For those who don't remember, the Italian Lira was one of the most laughable currencies ever to exist. Near the end of its existence, it took on almost the demeanor of play money, with thousands of over inflated Lira equaling a single dollar. The first time I visited Italy in 1987, I discovered how unserious a currency the Euro was. Many Italians would gladly accept my dollars in lieu of Lira. Along with the bulk of the EU, Italy gladly jettisoned the much mocked money in hopes of gaining some respect with the Euro.
Recommended For You
During this visit, everyone wanted Euros, not dollars. But even those Euros have not prevented inflation. For example, a tea set I bought from a Murano factory in Venice in 1987 cost $275. Today, that same tea set from that same factory costs $4,000. It's not just the drop in value of the American dollar that caused this. I would maintain it's the very presence of the Euro.
Now that continental Europe has a fungible currency, the healthier economies have thrived while the desperate economies continue to dwell in, well, desperation. The strength of the Euro has helped boost the strong while leaving the weak in an ever deeper abyss. This is what we're seeing in Greece and the other weaker Euro countries like Italy, Spain and Ireland.
Unlike America, the strong in Europe appear to have driven up the cost of necessities to the point the weak cannot sustain themselves without subsidization. This is something best seen with your feet on the ground of the ancient sod, not merely by viewing the latest from CNN. This is something best felt by talking to the locals, not by contemplating the latest musing from a star analyst. This is something best understood by buying local goods using the local currency, not by scanning the For-X on your screen.
This is a bubble begging to burst.
And that's an important insight to investors, especially 401(k) investors and plan sponsors who may be placing too much emphasis on international-based investment funds.
There's an old adage on Wall Street – if you want to invest internationally, invest in a domestic company that has international markets. Local corporate managers can navigate the treacherous waters far better than any portfolio manager sitting in the comfort of his high rise office whose only connection with the foreign land is through the internet.
There are too many variables when considering international investing. As a fiduciary, plan sponsors are signing onto understanding the impact of these variables. This is not to say international investing won't yield dramatic returns, but remember, risk and return share the same place at the table. A fiduciary must know this and walk warily before venturing beyond the shore.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
