FINDING A MARKET NICHE FOR THE EURO.

FINDING A MARKET NICHE FOR THE EURO. As any marketer would do, the European Central Bank, which issues Euros have sought out ways to appeal to various segments of the market. As reported in this article in the Wall Street Journal by Stephen Fidler, Willem Buiter has written in a research report that the business of issuing euro notes, produced at almost zero cost, is “wildly profitable” for the ECB…. It amounts to over 50 billion Euros a year. One market niche is the demand for currency by “gangsters, drug dealers and money launderers.” The competitive advantage of the Euro is that it is issued in 200 Euro and 500 Euro denominations while the largest denominator of its main competitor, the United States dollar, is only $100. In the amounts that these disreputable users of currency demand, the difference is significant. The article points out that even in 1998 a United States Treasury official expressed concern about the competitive disadvantage confronting the dollar because “$1 million in $100 bills weighs 22 pounds; in hypothetical $500 bills, it would weigh just 4.4
pounds.” Over one third of Euro currency is in 500 Euro denominations.