Among the chilly aisles at Murray’s Cheese Shop in Manhattan, the entire continent of Europe is represented. Something like 60 percent of the cheese in Murray’s comes from the continent, according to Aaron Foster, a cheese buyer at the store.
For all the talk about how the European debt crisis is effecting the global economy, it can be hard to connect it with daily life here in the U.S. Here’s one link: Aaron Foster’s bonus depends on how cheaply he can buy cheese from Europe. And the price of that cheese is driven largely by the strength (or weakness) of the euro.
Through his cheese deals, Foster essentially trades in global currency markets. When he buys cheese from Europe, he doesn’t pay for it in dollars. He has to pay in euros.
“It’s funny to think about buying money,” he tells me. “We have an accountant who will call up the bank and say, ‘I need this many euros,’ and the bank will call around and see what they can do.”
Foster takes me to the cheese cave beneath the store. (Yes there is a cheese cave under Bleecker Street in Greenwich Village, New York.) On the shelf he points to wheels of French Ossau-Iraty. To get those he has to pay the cheesemaker in euros. Then he has to pay someone to drive the cheese from southern France to the port, also in euros.
We stand at the counter and play a game. I name a troubled country, he names a cheese.
Cheese from Portugal?
“Monoru. Chalume. Feta.”
“We have Parmesan regiano–a lot of it.” He shows me a huge stack of Parmesan wheels in the back room, 2,500 pounds of it, give or take.
In normal times, the exchange rate from dollars to euros is pretty steady. But these days, because of the sovereign debt crisis over there, the exchange rate is jumping all over the place.
And here’s how the European debt crisis affects Foster: the cheaper he can buy the cheese, the bigger a bonus he gets. When things get worse in Europe the euro drops in value, and the cheese gets cheaper. And when this happens Foster’s bonus gets bigger.
Things got really weird for him the other week, when it looked like Greece was going to have a nationwide referendum on whether to accept the latest bailout terms.
“The Greek prime minister said, ‘Ah, I’m gonna put it up to a vote.’ And the euro started to tank immediately. Then I was like YES THIS IS GREAT!” Foster recalls. “Then I realized these people half a world away could be determining my margins and my bonus–the Greek man on the street. At first I thought it shouldn’t make that difference, but a five or ten cent difference in the exchange rate makes a huge difference thousands and thousands of dollars’ difference in cost.”
A good bonus this year would help Foster pay off his student loans. But actually he’s hoping Europe can sort things out. Not only does he have a friend in Greece, he has a more long-term financial incentive. If the euro mess gets worse, it could drag the U.S. and the rest of the world into another recession. And that would not be good for cheese sales.