Euro as a Currency

[Redman]

The New York Times recently ran this graphic along side an article.
It shows the interlocking borrowings within the Euro.
Like interlocking directorships of Japanese and Korean fame, this opens 2nd and 3rd party countries to the risk of insolvency.
The IMF has two main tools in this situation -Interest rate manipulation- a sovereign currency and interest rate regime required(aka not part of the Euro)

The second tool is inflating money supply-the more politically expedient choice.
Increasing supply erodes the intrinsic value of any commodity.Therefore will we see the demise of the Euro as we know it??

Buy Gold

Later

[Ali]

not like i understand any of this but...that ting rel choonky boy :eek:

[skl]

Gold in inflated right now. DONT buy gold.

and yeah that image too small to make sense.

[Acid]

And the Euro is nose diving. Within the last couple of months it has lost $0.25 to the green back and is seen as a highly unstable currency with the economic situations among the PIGS (Portugal, Ireland/Italy, Greece, Spain).

Hold onto gold, collect your dividends, and when you see the price starting to fall then sell off for big profits. Those with big gold investments can live off their dividends right now.

[oecarb]

It is very easy to forget that when the euro was launched ten years ago, it was based on the German Deutschmark which was as strong as the US dollar and the euro was supposed to be worth $1 US. So $1.18 US is not too bad.

The other thing is that all this hoohah about the weakness of the euro is based on the economy of four weak EU countries that should never have been allowed to join the euro. Germany still remains a very strong exporteerand has only just been overtaken by China (in 2009). With a lower euro, it will soon outstrip China again and the euro will rise again IMHO. Meanwhile the US deficit is much larger than the EU's and the EU economy is as big as the US.

Also the US has been trying to get China to let the yuan rise against the dollar as the (artificially, according to the US) low yuan means that Chinese goods are sucked into the American economy affecting US exports. If the euro stays low, there is no way China will agree to this - which could put the US economy in trouble, apparently.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ax1OKhucfbVs&pos=2

[Acid]

In Europe, Germany and France are the 2 power houses. They have solid industry, manufacturing and economics backbone.

I think the German taxpayers are becoming fed up with bailing out the PIGS. However it would be to the detriment of the Euro Currency if the PIGS are expelled as it will show up the economic weakness.

So the Germans and French have to balance this bail out loan because if any one of the partners go to the IMF that could be disaster.

The advantage the US has over the Euro Zone is that all states are controlled by the Federals. In Europe there is a Euro Central bank but each of the individual countries have their own practices. There is a lack of standardization.

The green back is solid with its creditors.

The Deutsche Mark was a strong currency and combining the strategy of having it lower than the US, it fostered excellent trade allowing Germany to export BMW, Mercedes, Audis and Volkswagen as a staple. The weakness of the Euro is a bite to the Germans - a similar reason the British are hesitant to put their hand in the Euro Currency Zone.

[Sly1]

Okay folks here is the answer to your Euro currency problems.
http://forums.liveleak.com/showthread.php?t=67645

[oecarb]

However it would be to the detriment of the Euro Currency if the PIGS are expelled as it will show up the economic weakness.

Acid, there are 27 countries in the European Union but only 16 use the euro. You are right about the political control. However, the PIGS pulling out of the euro would give them more control over their own currencies and they can rejoin at a later date when their economies pick up.

[mammadon]

breds, increasing the money supply causes inflation. wouldn't this make Euro countries less competitive?

[mammadon]

In Europe, Germany and France are the 2 power houses. They have solid industry, manufacturing and economics backbone.

I think the German taxpayers are becoming fed up with bailing out the PIGS. However it would be to the detriment of the Euro Currency if the PIGS are expelled as it will show up the economic weakness.

So the Germans and French have to balance this bail out loan because if any one of the partners go to the IMF that could be disaster.

The advantage the US has over the Euro Zone is that all states are controlled by the Federals. In Europe there is a Euro Central bank but each of the individual countries have their own practices. There is a lack of standardization.

The green back is solid with its creditors.

The Deutsche Mark was a strong currency and combining the strategy of having it lower than the US, it fostered excellent trade allowing Germany to export BMW, Mercedes, Audis and Volkswagen as a staple. The weakness of the Euro is a bite to the Germans - a similar reason the British are hesitant to put their hand in the Euro Currency Zone.

The PIGS countries all met the criteria for entry into EMU when they joined. It is the world recession that all mashed them up.

[oecarb]

breds, increasing the money supply causes inflation. wouldn't this make Euro countries less competitive?

Did the US not increase their money supply also?


In Greek Debt Crisis, Some See Parallels to U.S.
By DAVID LEONHARDT
Published: May 11, 2010

It’s easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.

Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem..............

......But the main issue isn’t the near-term deficit — the one created by the recession, the wars in Iraq and Afghanistan, the Bush tax cuts and the Obama stimulus. The main issue is the long-term deficit.

http://www.nytimes.com/2010/05/12/business/economy/12leonhardt.html


The PIGS countries all met the criteria for entry into EMU when they joined. It is the world recession that all mashed them up.

Many countries lied about their economic situation in order to be allowed to join the Eurozone. Also, conditions do change. What is true today might not be true tomorrow.

[mammadon]

I ent sure if the amount of money in the US economy has risen or not. I don't think the federal government had a QE policy, like the UK government did.

Besides, I am UK born and i don't want us to join the Euro. I don't see much economic case for it.

[oecarb]

I ent sure if the amount of money in the US economy has risen or not. I don't think the federal government had a QE policy, like the UK government did.

Besides, I am UK born and i don't want us to join the Euro. I don't see much economic case for it.

Mammadon, you might be interested in this:


Fed to Pump $1.2 Trillion Into Markets
Greatly Expanded Purchases Are Designed to Lower Interest Rates, Stimulate Borrowing
By Neil Irwin
Washington Post Staff Writer
Thursday, March 19, 2009

The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion...........

...........The new purchases come with risks. They will balloon the value of the assets the Fed holds by about 50 percent, to more than $3 trillion. That could make it tricky for the central bank to draw that money out of the system once the economy starts to recover. The Fed would probably find it difficult to sell such massive volumes of assets, and if it doesn't handle the task adeptly, the nation could face high inflation because too much money would be in circulation.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031802283.html

$3 trillion is $3,000,000,000,000. This is enough to give every man woman and child in the UK $50,000 US each or $10,000 for each US citizen/resident. And this article was written over a year ago.