Introduction

In order to understand why the arrival of the euro was such an exceptional event, we must first clarify what the concept of money entails; in other words, we must analyze its assigned functions and consider the different forms in which it has appeared, developed and how it exists today. In a second step, we must recall the nature of major monetary zones from throughout history and explain what is meant by "optimal monetary zone" in order to be able to judge, at the close of this book, whether the euro zone meets the generally accepted criteria for such a definition.

I.1. The purposes of money

Since Aristotle1 (the first writer to have highlighted the purposes of money), three purposes have defined money. These are: a tool for transactions, a standard of values and a store of value.

I.1.1. Money as a tool for transactions

The trading of goods and services between people existed long before the use of currency, in the form of bartering: a good or a service was obtained in exchange for another good or service. But this procedure came with its own difficulties because it required:

• - a dual coincidence of needs, in other words, a meeting of two people, one of whom wishes to get rid of a good or provide a service while the other simultaneously wishes to acquire that same good or benefit from the very service;
• - a similarity of respective values of both the goods and services that are the subject of the transaction;
• - divisibility of tradable goods if the value of each is different or, more simply, if the relationship between the two goods is not "exactly equal";
• - the storage of goods that cannot be used as a means of trade in the future.

As the economy developed, the number of people involved increased and the nature of the goods became more complex, such that the four previous conditions became less and less fulfilled: bartering quickly became impractical. A consumer good that was widely used in the considered society was then chosen as an intermediary for trade, before precious metals became more or less essential everywhere.

However, bartering never completely disappeared. It can be found in exceptional situations (wars), during serious monetary disruptions both at the national level (very high price increases or great uncertainty about the value of the currency, as in the case of the economic transition in Russia in the 1990s) and at the international level (deterioration of the system governing monetary relations between countries), in communities where traditional money does not circulate (prisons) or in exchanges with countries that do not have enough of the monetary means required by their contracting partners, but which do have particularly sought-after physical resources (oil from Middle Eastern countries vs. factories from industrialized countries in the 1980s).

Money therefore appears to compensate for the disadvantages of bartering. It leads to the dissociation of a single operation of exchanging two real flows (a good for a good, a service for a service or a good for a service) into two successive transactions: the sale of a good or service that has been agreed to be transferred in order to obtain currency and the purchase of a good or service that is desired to be acquired with prior received currency.

This apparently simple transaction consisting of two real flows is broken down into two transactions that seem more complex, but are in fact much simpler: first, a real flow against a cash flow, then all or part of the resulting cash flow against another real flow.

Thanks to this use of money, labor specialization has emerged and become widespread. Indeed, in order to acquire the good or service one desires, one need no longer manufacture a good or provide a service to offer in exchange, in addition to such a good or service needing to be one that the counterparty will likely accept. All one needs to do is sell the fruit of one's labor and receive the corresponding amount of money, since this currency (which is a common denominator that is accepted by everyone and quickly guaranteed by the State) allows one to buy any good or service. Thus, conceptually, money is all the goods and services offered as means of payment by buyers and accepted by sellers in order to cancel out their mutual debts and claims.

The existence of money simultaneously improves the allocation of resources, the circulation of production and the distribution of income. Therefore, one can consider that from the moment a currency is adopted, economies can develop, thanks to the savings in time and diversification of production that then become possible to acquire. However, in reality, its introduction is also a source of imbalance, as it often breaks the simultaneity of the sale and purchase of goods and services, which is one of the core features of bartering.

I.1.2. Money as a standard of values

In reality, the foremost purpose of money is its purpose as a value standard. Indeed, even with bartering, a single basis for valuing goods and services that can be traded must be found. As soon as transactions become more complex, an account currency appears, "cash flow". An increase in the number of tradable goods multiplies the possible bases of comparison and makes it necessary to use a single valuation reference. The inhabitants of a same payment community then choose a commodity (which may be different from that used as the currency of exchange) as a common denominator for estimating the goods and services that circulate within the community. Over time, a multitude of account currencies have appeared, from the barley spike to the tournament pound (although the payment currency was the louis) and including the bronze tripod.

In modern times, international account currencies have been introduced consisting of a basket of national currencies, which are reserved for States, international institutions, national central banks and large private companies (banks and multinational companies). This is in order to have a stable reference in a world that is confronted with fluctuations in transaction currency rates. This is the case at the global level for Special Drawing Rights (SDRs) and at the European level for the ECU, the account currency that preceded the euro, which we will discuss in depth.

An account currency for which the price is arbitrarily fixed at 1 makes it possible to substitute for a valuation system in the form of relative prices, in other words, the price of a good or service expressed relative to the price of another good or service, a valuation system in the form of an absolute price, with the price of all goods or services expressed as a number relative to a single base. This results in considerable savings in information costs. Not only are the prices of all goods known, even those that are not owned, but there is also a good chance that with an account currency, the prices of different services and goods are more consistent since they are defined independently from each other. As a result, trading markets become more specialized and bring more participants together.

The value standard cannot be considered as "something that already exists in principle and can be discovered, such as the American continent for example. It is the outline of a scientific concept that must be completely invented, such as the concepts of length, temperature."2.

The choice of a value standard results from a decision made by people who live in a same payment community (usually a country, but more exceptionally, as in the case of the euro, an area composed of several countries) and who agree to use it as a reference for the valuation of goods and services that circulate within it. The acceptance of an account currency must therefore be linked to the confidence it inspires, which is one of the required characteristics for currency to exist.

Like any standard, the definition (and therefore the value) of a currency is invariable, meaning that it corresponds to a fixed price in terms of the selected unit of account. It is only the purchasing power of this currency, in other words, the values of the goods and services it acquires, that fluctuates: it decreases during periods of rising prices and increases during periods of falling prices. To speak of depreciation (also known as "devaluation") of a currency therefore only makes sense relatively, compared to another currency, and not absolutely.

I.1.3. Currency as a reserve of value

In addition to the possibility of purchasing a good or service, currency offers its holder the possibility of deferring such an acquisition, reflecting Dostoyevsky's assertion that "money is coined liberty". Indeed, as a reflection of a claim on existing or potential production, the purchasing power that money represents may only be used in the future, thanks to the guarantee of unlimited liberatory power conferred onto it by the State. The currency is then held as a reserve, not as a trading tool: it can be kept as such ("hoarded") to provide a permanent means of storing value.

Thus, currency is an asset of economic agents alongside other types: quasi-monetary (short-term investment tools such as passbook accounts and bank term deposits), financial (long-term investment tools such as shares and bonds) and real (movable and immovable goods).

It has four specific features that differentiate it from its competitors:

• - low transaction...