This highly stimulating column — one of the best of this year — may be gated for you (try googling “The riddle of Europe’s single currency with many values”), so let me redo my own version of the argument (modified a bit from his claims):

1. Wealth measures in the eurozone portray Germany as relatively poor.

2. Germany cannot be so poor and Spain and Cyprus cannot be so rich.

3. Therefore there must already be “more than one euro” in the eurozone.

4. Therefore the “value of a euro in Spain” must fall relative to the value of a euro in Germany, so that (eventually) Germany rightfully appears to be the wealthier country. The single currency has to break up, and/or we need to see a mix of high inflation in Germany (unlikely) or extreme deflation in Spain, Cyprus and other locales.

TC: Now that is either somewhat false, or perhaps a new and Nobel-worthy theory of exchange rate movements, with added oomph for the wealth and perceived relative wealth variables. Since I do think the euro is likely to split into pieces, I do not disagree with the conclusion, but I am less sure about this stated reason. Here is one excerpt from the article:

Since the start of the eurozone, wages and consumer prices have remained broadly constant in Germany. In southern Europe, the general level of wages and prices has increased year-in, year-out. Over the period, this persistent inflation gap has led to a large discrepancy in asset prices. This is why an apartment in Milan costs much more than one in Munich, the city with the highest property prices in Germany. A German euro buys more real estate in Munich than an Italian euro buys in Milan.

You will note, by the way, that this differs from the usual story of these economies being whacked over the head with the deficient aggregate demand hammer (thank goodness we are getting away from that distorting obsession, though let’s not throw out the bebe with the bathwater).

In any case, I would redo the argument with these:

5. The extent of labor migration from Spain to Germany will be high and is being underestimated, precisely because Germany is so cheap in some parts.

6. Spain, Cyprus and other countries are not as wealthy as is currently measured by market prices. The world has (perhaps) not yet seen that those locales are due to lose a permanent 15% to 20% of wealth or more, relative to current measurements. How does this sound: “We are not as wealthy as the ECB research department thought we were”?

6b. Average, marginal, total, private vs. social value, what do those home prices really mean? Keep in mind that varying home ownership rates are driving the varying wealth measures. Recently I read this: “German house prices are actually lower in real terms than they were in 1970” and thought it was a sign of German wealth and wisdom rather than poverty. I thought it was a sign that in Germany the young are not merely in thrall to the elderly. The correct metric here is lifetime consumption and by that measure I strongly suspect the Germans come ahead of most of the other European nations. Still I find it a residual puzzle that the higher Mediterranean wealth measures do not get converted into higher lifetime consumption (if indeed they do not).

7. Most wealth is held in the form of human capital, and that is another unmeasured plus for Germany. (By the way, there is a recent claim that the Irish are the most educated people in the EU.) Let’s compare two societies. In one you move to Stuttgart to learn how to become a Flugzeugmaschinenmechaniker. In the other you hang around Genoa to rent-seek and make sure you inherit Daddy’s paid-off house. The latter may produce higher measured net median wealth, but the resulting society will be less flexible and produce lower positive social externalities from such “labor market decisions.”

8. #5-7 together.

9. We badly need new theories of how Mediterranean Europe can have positive inflation (for the most part), nominally overinflated wealth levels, and yet be crushed by some kind of destructive economic process that we don’t yet have a good enough label for.

10. Wolfgang Münchau, despite his considerable plaudits, remains a remarkably underrated columnist. There is no one better to read.

Addenda: Don’t forget pension funds, and also that German households start earlier, which makes the median poorer.