Friday, October 27, 2006

Euro in crisis?

I have taken the following from the motion before the EU Parliament where Britain's Conservative Party MEPs were whipped to vote for the pound to be scrapped in favour of the euro. 24. Notes that the value of the euro banknotes in circulation has continued to increase quickly, with a rise of 12,8% in 2005; notes that this steady increase is mainly accounted for by large denomination notes, in particular EUR 500 banknotes, the number of which in circulation has increased by 20,9%; calls on the ECB to examine the reasons for this substantial increase, and to analyse the type of transactions carried out with these notes and the breakdown in demand by country, with a view to identifying the attendant risks; If large denomination, officially issued notes, are increasing in circulation at the rate of almost 13 per cent, what does that say about 'money supply' and by extension 'inflation'?

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