If Greece defaults and goes back to the Drachma, would it be better for me to have my savings in pounds in a UK bank, than in my current Dutch bank in Euros? Or would the economy be so terrible anyway that it wouldn’t even matter?
At the moment I think the Dutch economy is doing pretty ok* (all things considered) and their banks are a hundred billion squillion times better than all English banks put together and improved with fairy dust.**
*IANA knowledgeable person on this subject, so actually, you tell me…?
** I am unfortunately a very knowledgeable person on this subject.
Nobody really knows how the euro will fare vs. the British pound. Current exchange rates reflect the market’s best guess.
There is always extra risk, keeping your savings in a currency other than the one you use yourself, because you’re exposing yourself to exchange rate fluctuations. A rule of investment says that extra risk should earn greater reward. Since there is no obvious reason to think that the pound will appreciate against the euro, I don’t see why you should convert your savings to pounds.
I would keep my euros in a bank located in one of the prosperous northern countries, the Netherlands being a prime example. Even if you have to convert back to guilders, it’s not like your currency will plummet like the drachma would. And if just one or two peripheral countries leave the euro zone, no doubt there will be some wild fluctuations, but in the end the euro could even rise a bit, free of having to worry about its basket-case members any more.
FWIW a lot of people hereabouts seem to be putting some of their savings in other currencies. Although if they have savings in the first place they’re doing better than most!
Thanks Xim! I actually live in both countries and so use both currencies equally, but couldn’t be bothered with UK banks anymore.
An econometrist friend of mine said that if Greece goes it would be better to invest in a vegetable garden and a cow than in either Euros or Pounds (he said the economies were too closely linked anyway) but I don’t know how much of a joke that was…
If Greece defaults it would be better in the short term to have your savings in pounds because the ECB will have eggs on its face after trying so hard to avoid a default and investors will say if they couldn’t do it for Greece how can they do it for Italy. In the long term things are much harder to predict, the weak countries could get kicked out, the ECB might turn dovish, there may be a fiscal union.
However, the pound will probably not do much better than the euro since its economy is doing very poorly and it has alot of exposure to euro risk. I would expect the pound and euro to track pretty closely with the euro having higher volatility.
The Canadian dollar and Canadian money markets are very safe investments. Oh - re-reading your OP, you’re looking at savings, not investments. Uh, I guess you can buy Canadian bonds and kind of use them as savings.
