The markets are driven by rumors. Of the many currently circulating trader's desks is that the Germans will revert back to the Deutsche Mark. Although this is simply a rumor, we at Obsidian Lightyear Capital would like German decision makers to seriously consider this option.
Various German government officials have shown themselves to be among the few sane people in an increasingly insane world. Germany's experience with hyperinflation in the beginning of the 20th century has continued to resonate with most of the German people and has influenced the rational thinking of some of its officials.
It is a fact of economics that money supply in a healthy economy has to be increased. However, what is not understood by the majority of governments is that money printing is not value creation and you can not simply create value by printing money. All printing money does is devalue the outstanding currency which during times of recession is simply a tax on the holders of the currency. The Federal Reserve is the most famous example of a central bank falsely thinking that printing money can kick start an economy. The Germans were forced to do it in the 20th century and suffered hyperinflation as a result.
Consequently a reintroduction of the Deutsche Mark would result in the DM to replace the US Dollar as the world's reserve currency. The Chinese are very astute investors and would quickly jump on the DM as it would be a real alternative to the USD. (Apologies to any CHF fans, but in the end the Swiss simply do not have a large enough economy to support a reserve currency. The Germans, on the other hand, do have a large enough economy to support a reserve currency.)
Although many have commented that Germany's export sector would get hurt, the net effect of becoming the world's reserve currency would be favorable to Germany even with the hit to its export sector. So once again, we encourage the Germans to seriously think about reintroducing the Deutsche Mark.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.