The surprisingly long path to US monetary union European monetary union: so troubled, so awkward and ill-conceived, et cetera. We spent a bit of time last year pondering precedents and possible scenarios for monetary union break-ups, of which there are few with much appeal. But Deutsche Bank strategist Stuart Parkinson makes the interesting argument that it took about 147 years for the US to become a monetary union. Specifically, he is talking about the US meeting the following conditions of monetary union: One unit of account; 2. One circulating medium of exchange; 3. A fully functioning Central Bank; 4. An optimum currency area. One hundred and forty-seven years is rather a long time, and it does seem to correspond rather depressingly to the rate at which eurozone officials and their constituencies are moving towards adding a solid fiscal element to the currency union (or alternatively, perhaps, giving up on the whole thing altogether). But Parkinson has an optimistic take on this long road to US monetary union - look how much the eurozone has achieved in a relatively short period! Seventeen countries use the Euro now versus just sixteen states that were in the US Union by 1802 (in today's numbers, by the way, those sixteen states make up barely one-third of US GDP); - The Euro-area had one circulating medium of exchange within three years (aka the Euro) whereas it took the US more than 70 years until the National Banking Act was introduced for modern-day Greenbacks to drive out private banknotes; - The ECB actually preceded the introduction of the Euro by six months whereas it took the US 150 years to build the Federal Reserve System as we know it today; - The Euro may admittedly struggle to qualify as an Optimal Currency area as of today - 14 years in - but it took the US 150 years to achieve that status. You can read the full note in the usual place, but we'll highlight Parkinson's fourth condition - "optimal currency area." Partly because it's the most vexxed of those four conditions for the eurozone, and also because we were a little surprised at Parkinson's assertion: it took 150s for the US to get to that sorted out? Here's what he says on the eurozone vs the US as optimum currency areas: The final issue I want to address in passing is the debate about whether the Euro-zone is an Optimum Currency area. It's a bit of an academic term but it also roughly means what it says. How, the critics argue, can the Euro-area be an Optimal Currency area when it doesn't speak a common language; when actual mobility across the nation borders is limited (theoretical mobility is not the problem); when different countries within the Union are hit by different shocks; and when fiscal transfers from rich to poor are not material enough to offset the aforementioned differences? It's easy to think of the US as being an Optimum Currency area if for no other reason than it is there (if it didn't work, it wouldn't be, right?). But, again, the history is less clear cut than you might think. In fact, I've seen estimates that the US didn't become an Optimum Currency area until well into the 1930s when the main pillars of the New Deal (e.g. Federal unemployment Insurance) were introduced. So, the US was not an Optimum Currency area the day the Constitution took effect; actually it took the small matter of 150 years! Parkinson stresses he's not a historian, but you might find some more of interest in his reading list, which includes Milton Friedman & Anna Schwarz; Gary Gorton; the Fed's history of the Fed, and this NBER paper by Hugh Rockoff. Related links: "Grexit" - FT Alphaville Learning by imagining (nightmare Grexit scenarios) - FT Alphaville