How the Euro Works

National currencies are vitally important to the way modern economies operate. They allow us to consistently express the value of an item across borders of countries, oceans, and cultures. Wealth can be easily stored or transported as currency.

­Currencies are also deeply embedded in our cultures and our psyche. Think about how familiar you are with the price of things. If you've grown up in the United States, you think of everything in "dollars," just like you think about distances in inches and miles.

On January 1, 2002, the euro became the single currency of 12 memb­er states of the European Union. This will make it the second largest currency in the world (the U.S. dollar being the largest). It will also be the largest currency event in the history of the world. Twelve national currencies will evaporate and be replaced by the euro.

In this article, we'll look at the monumental task of changing 12 countries' entire monetary systems to a new, single system, and why this change was implemented.