NationStates Jolt Archive

The euro

High tensions
Feb 5th 2009
From The Economist print edition

The danger of a euro crisis is increasing; it may prompt more political integration, not less
http://media.economist.com/images/20090207/CEU806.gif
FOR all the faults they have displayed in recent years, financial markets still provide useful signals. Right now, they are indicating danger for Europe’s single currency, the euro.

The signalling is coming not from the foreign-exchange market (the euro has climbed back from its October low against the dollar) but from the bond markets. Spreads on the ten-year government debt of Greece, Ireland, Italy, Portugal and Spain over that of Germany have widened sharply. Rating agencies are paying particularly close attention to the fiscal positions of the profligate five: Standard & Poor’s has downgraded three of them and put another on credit watch.

The recession in the early 1990s saw a near-continual series of currency crises within Europe’s exchange-rate mechanism. One motive for creating the euro was precisely to avert such evils in future. Indeed, some of those fretting about the troubles of the euro area’s weaker economies are publicly drawing comfort because they have at least been spared pressure from the foreign-exchange market.

Yet pressure has to go somewhere. And in these countries it is emerging in the form of lost competitiveness, gaping current-account and budget deficits, and the markets’ fears for national creditworthiness—with the effects being felt in falling GDP and rising unemployment.

To a large extent these five countries could be chided for reaping what they have sown. In the 1990s many made strenuous efforts, through fiscal tightening, wage restraint and product- and labour-market reforms, to qualify under the Maastricht treaty’s criteria for euro membership. But once they passed the test they relaxed, beguiled by the notion that membership of the single currency would of itself solve their problems. At the same time they enjoyed the benefits of a boom brought on in part by the euro’s lower interest rates. Yet the logic of their situation argued for exactly the opposite course. Once in the euro, and deprived of the chance to devalue again, they should have pursued more vigorous reforms at home to make their economies better able to compete with Germany’s; and they should have pulled the fiscal reins even tighter to offset the euro’s easier monetary policy.

Now that Europe (including Germany) is again in deep recession, this logic is hitting home. In Spain and Ireland property bubbles that were inflated in part by the switch to low euro interest rates have burst spectacularly. In Greece, Italy and Portugal a steady loss of wage and price competitiveness is eroding growth. In all five countries, as budget deficits grow, worries that public finances may get onto an unsustainable path are rising (see article). The bond markets are especially concerned about Greece and Ireland; but fears are growing even over such big countries as Italy (where public debt stands at over 100% of GDP) and Spain.

No exit strategy
Anglo-Saxon sceptics about Europe’s single currency gleefully predict that these strains will blow the euro apart (lol, how evil-sounding :p), just as they did the exchange-rate mechanism in the early 1990s. Yet even if some countries now have a twinge of regret over joining the euro, they know that the pain would get worse still if they left. Quite apart from the huge technical problems of reintroducing a national currency, quitting the euro would surely entail default on euro-denominated debts, and could also put a country’s membership of the European Union at risk.

Yet if leaving the euro is unthinkable, the risk of default by a country that stays in has clearly gone up. As more countries from central and eastern Europe join, that danger is likely to rise further. This suggests that it would be sensible to draw up contingency plans for how the rest of the euro area should best respond to a threatened or actual default.

The rules of the single currency expressly forbid any bail-out of one country by the centre or by other countries. The Germans, ever fearful that they may be asked to pick up the bill for the profligacy of others, are already squashing any talk of issuing joint euro-area bonds to relieve some of the pressure on national governments. Yet as the euro area’s biggest economy and biggest exporter, Germany would suffer more than most from any member’s default. So it has a huge stake in making sure it does not reach that point.

That need not imply a straightforward bail-out. But it does suggest the euro area might need an equivalent of the International Monetary Fund’s rescue packages. It would imply both a bigger role for the centre and more intrusive monitoring of euro members’ budgets. Far from fulfilling the eurosceptics’ dream of kiboshing the entire European project, a crisis could thus lead to even deeper political integration. That is a guess. But some form of euro drama looks ever more likely—and it would be better if governments started preparing for it now.

Which leads us right into.....

The euro area

A tricky balancing act
Feb 5th 2009
From The Economist print edition

The euro area economy’s vaunted strengths are starting to look like weaknesses
http://media.economist.com/images/20090207/D0609EU0.jpg
A YEAR ago, when the financial crisis was in its infancy, the euro area enjoyed a brief moment in the sun. Its peers in the rich world—including Britain, the largest European Union economy outside the euro—had enjoyed faster growth and lower unemployment but now looked vulnerable. Britain was everything a country should not be in a credit crunch: debt-ridden, reliant on foreign savings, chock-full of banks and estate agents, and short of firms that made tangible stuff. America ticked many of those boxes too. In contrast, Europe’s past vices now seemed like virtues: rigidity recast as solidity, risk-aversion as prudence. When the crisis got worse in the autumn, the euro was a shelter for its members from the storms.

It is clear that America and Britain are indeed suffering badly. But so now is all of the rest of Europe. Figures due out on February 13th are expected to show that euro-area GDP shrank at an annualised rate of around 5% in the fourth quarter of 2008, worse even than the grim numbers from America, although not quite as bad as those for Britain. Business indicators have stabilised but this suggests only that the economy is likely to shrink at a similar rate in the current quarter, not that activity has stopped falling. The IMF forecasts that euro-area GDP will decline by 2% this year and barely recover in 2010.

More irksome still is that profligate America is able to borrow on better terms. Despite a sell-off (see article), the yield on a ten-year US Treasury bond is still half a percentage point lower than that on a German bund, which comes from the euro-area’s most creditworthy country. Yields are lower partly because the Federal Reserve has driven America’s short-term interest rates close to zero. It may yet buy up government bonds to push down long-term interest rates as well. The European Central Bank (ECB) is reluctant to go down that path, partly for fear that it might be seen to be bowing to political pressure. It is chary about more monetary stimulus of the normal kind, too: as The Economist went to press, it was expected to keep its benchmark interest rate at 2%.

For some governments, the ECB’s foot-dragging is not the biggest worry. A greater concern is the extra reward that bond markets are demanding to hold their debt. Before the credit crunch, investors seemed scarcely less keen to lend to Italy than to Germany. Germany’s ten-year bunds yielded as little as 0.2 percentage points less than the equivalents for Italy, despite a smaller public-debt burden. But that spread—like those of Ireland, Greece, Spain and Portugal—has widened (see chart).

Adding to the strains, Standard & Poor’s, a credit-rating agency, has recently downgraded Spain, Portugal and Greece, and issued a warning that Ireland’s public debt may lose its triple-A stamp. The odds of a sovereign-debt default have shortened, making other risks seem less improbable as well. Might the euro crack apart? The jump from possible default to break-up is a big one. And any country that had trouble financing itself within the euro would surely find life outside even less hospitable. Yet such talk shows just how troubled the euro countries now are.

In truth many of the euro area’s supposed strengths were always more apparent than real. At the start of the financial crisis, there was much talk of the absence of “imbalances” in the euro area—unlike America, which had (and has) to borrow so much abroad. Yet the euro’s external balance concealed a huge internal divide between places like Germany, with excess savings, and countries such as Spain and Greece, with huge current-account deficits. Such countries are most exposed in a credit drought, as they rely on foreign capital. So the hope had been that weaker demand in deficit countries would be offset by faster spending from hitherto prudent German firms and consumers.

Unfortunately, the instinct to save grows stronger in a downturn. The response of German firms to weaker export demand has been to cut investment plans. Consumers are warier too. So Germany’s reliance on foreign demand has proved more of a drag even than other countries’ reliance on foreign savings. The IMF forecasts that GDP will shrink more this year in Germany than in France, Italy or Spain.

The manufacturing bent of the big euro-area economies has also left them looking cumbersome rather than strong. Goods producers are hit hardest in downturns: consumers are more likely to defer spending on big-ticket items, such as cars and home appliances, than on the frequent small purchases that keep service industries ticking over. And firms are loth to lay out for plant and machinery—a German niche—when demand is so uncertain.

For all the pain endured by companies and the big drop in euro-area output, the region’s unemployment is rising more slowly than in America or Britain. One argument is that Europe’s tendency to hoard jobs in downturns may be a boon. Forced layoffs can feed a downward spiral of weaker spending and job losses. But recovery is also more likely to be delayed if weak firms in overstaffed industries are too slow to shed workers. So far, joblessness has risen a lot mainly in Spain and Ireland, because of their large layoffs in the construction industry. But there are signs that job losses are accelerating in France and Germany as well.

What default might look like
To some, the boast last autumn that the euro is a haven from financial storms was hubristic. The sharp rise in bond spreads for Greece, Italy, Ireland, Portugal and Spain shows that capital markets are now less forgiving of high public debt or rising budget deficits. It is likely, however, that borrowing costs would be even higher if any of these countries were outside the euro area, since an extra premium would then be required to compensate investors for currency risk. Italy’s public debt is more than its annual GDP, yet it can still borrow for ten years at around 4.6% a year. It needs to raise €377 billion in capital markets this year, according to a report by Fitch, another rating agency, equivalent to some 23% of GDP, a huge number (though it has had to raise even more in the past).

One reason for rising credit spreads is the huge stock of bonds in the pipeline. Almost €2 trillion of public debt has to be raised by the euro area, Britain and Switzerland this year, equivalent to 17% of their combined GDP. Ireland alone needs about €47 billion to cover its yawning budget deficit, its bank bail-outs and to pay off maturing debts (see article). With so much supply to be absorbed by finicky markets, there is a worry that some bonds may go unsold. Yet that risk is easy to overstate, says Brian Coulton at Fitch, because there is little competition for funds from private borrowers. Even a failed bond auction need not be a disaster. Countries have liquid reserves to tide them over while they reprice bonds, says Mr Coulton.

Bond investors might still take fright if there is an unexpected rush of new borrowing—for a fresh bank bail-out, say. Were markets to lose patience, a country could for a while arm-twist local banks into buying its debt, though that would curb other loans, hurting the economy. But it cannot ask the central bank to tide it over. The ECB is forbidden from buying debt directly from governments (though it can intervene in bond markets). Eventually the only option might be to default on maturing bonds. This need not imply exit from the euro; the political, budgetary, economic and legal costs of such a course are too high for it to be sensible.

More likely, a failure to pay off a loan on time would trigger a rescue package, perhaps led by the IMF but financed by richer EU states. It would be a messy business that would harm all euro members, says Daniel Gros of the Centre for European Policy Studies, a think-tank in Brussels. He believes the prospect of default is small. But since it could have such big costs, it might be safer to be prepared for it.

Well, what are the opinions on this? Where do you see the Euro going in the near future? What do you think will come of the economically dragging nations of Italy, Spain, Greece, Portugal and Ireland?

...shit happens?

...shit happens?
Shit doesn't just happen. Other shit causes shit to happen.

Cause and Effect 101

Shit doesn't just happen. Other shit causes shit to happen.

Cause and Effect 101

Who said 'just'? I didn't say 'just'. Some folks get poor, other folks don't wanna get poor, so other people get poor. shit happens. There's certainly not going to be any euro-exploding.

Incidentally, if I'm not a citizen, but a resident, do I still get to vote in the section of the poll that will matter?

Well, what are the opinions on this? Where do you see the Euro going in the near future? What do you think will come of the economically dragging nations of Italy, Spain, Greece, Portugal and Ireland?
Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

I didn't see many farms in Rome...but maybe my tourism wasn't extensive enough...

Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

Portuguese citizen here. Oh, we're feeling it alright and there's no amount of small-scale anything that can solve it. I don't get what stereotype you're talking about though.

Who said 'just'? I didn't say 'just'. Some folks get poor, other folks don't wanna get poor, so other people get poor. shit happens. There's certainly not going to be any euro-exploding.
That is probably the most simplistic response anyone could ever give while typing more than just "meh". :p
Incidentally, if I'm not a citizen, but a resident, do I still get to vote in the section of the poll that will matter?
Surely. After all, a large portion of the European Crisis effects non-citizens in the EU, for example immigrant laborers in Spain that are now unemployed after the housing bubble burst...

Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

O definetly. Quaint little places like Athens or Milan will just toddle on regardless. I'd comment further, but the thatch on my cottage has just gone ablaze. bbl.

Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

A purely stereotypical sense that was last valid about a century ago, yes. The countries you mentioned are very similar to the UK in economic composition, although with less of an emphasis on financial services. They'll feel the recession just like us. Indeed, Ireland is probably in an even worse shape than Britain, having ridden an even larger housing bubble and enjoyed comparatively very rapid economic growth in recent years.

Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

Ridiculous. While what I'm sure you're getting at is the relaxed (often seen as lazy) mediterranean lifestyle, it doesn't really apply. For one, Ireland doesn't fit. For another, it doesn't really matter about the relaxed, laid back culture of most of those places. Government's job is to keep itself in power, and to do so it will do everything in its power to make sure these the aforementioned economies don't crash. As the article showed, that may mean that other European countires will need to come to the rescue, notably Germany:

The Germans, ever fearful that they may be asked to pick up the bill for the profligacy of others, are already squashing any talk of issuing joint euro-area bonds to relieve some of the pressure on national governments. Yet as the euro area’s biggest economy and biggest exporter, Germany would suffer more than most from any member’s default. So it has a huge stake in making sure it does not reach that point.

That need not imply a straightforward bail-out. But it does suggest the euro area might need an equivalent of the International Monetary Fund’s rescue packages. It would imply both a bigger role for the centre and more intrusive monitoring of euro members’ budgets. Far from fulfilling the eurosceptics’ dream of kiboshing the entire European project, a crisis could thus lead to even deeper political integration. That is a guess. But some form of euro drama looks ever more likely—and it would be better if governments started preparing for it now.

Also, remember that the EU economies are connected. So it doesn't really matter if it would (in your hypothetical world) not matter to the citizens of these countries, it would still matter to other EU-Citizens and effect them so.

Shit doesn't just happen. Other shit causes shit to happen.

Cause and Effect 101

Hume begs to differ.

Back OT, I don't see what's so surprising here. Those economies were wobbly before the Euro, and an global economic crisis has further effected them.

If it gets too much, they'll probably leave it, in similar circumstances to the UK leaving the ERM during the 90s recession perhaps. I doubt economic turmoil would engender further integration - protectionism, nationalism and isolationism seem to be the result, historically.

The Euro is only a good idea as long as it's good for all the member states. Governments are more beholden to their electorate than to to the EU, or any EU 'ideal'.

That is probably the most simplistic response anyone could ever give while typing more than just "meh". :p

Well, come on, how long has it been? a year? An entire year of "NEWSFLASH: Some people are poor now" "NEWSFLASH: People who used to get more from people who are noow poor are now poor" "NEWSFLASH: Basic definition of economy means people now poor from relying on now poor people are now poor and cause people relying on them to be poor" "NEWSFLASH: Buffalo buffalo poor Buffalo buffalo buffalo poor poor buffalo poor Buffalo buffalo."

Yeah, surprisingly, an economic downturn in a global economy can cause a global downturn.

*Is a rich-as-fuck Luxembourger who can't be bothered to worry*

Well, what are the opinions on this? Where do you see the Euro going in the near future? What do you think will come of the economically dragging nations of Italy, Spain, Greece, Portugal and Ireland?
Well, what do YOU think? Just try to phrase your own stand for a change. Just go and say what's your opinion instead of hiding behind that of the authors.

Or... just comment on the fucking mass of text you like to post for us to ponder upon.

If it gets too much, they'll probably leave it, in similar circumstances to the UK leaving the ERM during the 90s recession perhaps. I doubt economic turmoil would engender further integration - protectionism, nationalism and isolationism seem to be the result, historically.

The Euro is only a good idea as long as it's good for all the member states. Governments are more beholden to their electorate than to to the EU, or any EU 'ideal'.
Because when things got bad for Michigan, we defected to Canada....Nah, I don't think there'd be much desertion, out of the frying pan and, to use the phrase, into the fire, no?

Well, what do YOU think? Just try to phrase your own stand for a change. Just go and say what's your opinion instead of hiding behind that of the authors.

Or... just comment on the fucking mass of text you like to post for us to ponder upon.

...who are you again?

And, well, since this isn't about Muslims at all (I think), his opinion probably isn't all that interesting anyways. :p

Because when things got bad for Michigan, we defected to Canada....Nah, I don't think there'd be much desertion, out of the frying pan and, to use the phrase, into the fire, no?

That depends on where you think the fire is...

It has to get bad enough, but given the doom-mongering about the severity of this economic crisis, there's always a chance.

I don't think your parallel is useful, as the EU isn't the same as the USA. Nor would an EU state be defecting anywhere.

...who are you again?

And, well, since this isn't about Muslims at all (I think), his opinion probably isn't all that interesting anyways. :p
Oh, I'm sorry, I'm Mike.

And what? He's muslim intolerant? At best, that only makes you fart very loudly... We are all adults here, no smirking. Milk makes my ass funny too...

That depends on where you think the fire is...

It has to get bad enough, but given the doom-mongering about the severity of this economic crisis, there's always a chance.

I don't think your parallel is useful, as the EU isn't the same as the USA. Nor would an EU state be defecting anywhere.

Merely that recession does not imply 'this relation is no longer beneficial', nor would that imply 'we're out, peace'. Not without much wailing and gnashing of teeth, at least. And, in all honesty, if it really did get that bad, I think the EU would retreat within itself, to some degree, rather than disassembling communities...but that's just me.

Merely that recession does not imply 'this relation is no longer beneficial', nor would that imply 'we're out, peace'. Not without much wailing and gnashing of teeth, at least. And, in all honesty, if it really did get that bad, I think the EU would retreat within itself, to some degree, rather than disassembling communities...but that's just me.

Indeed, it does not imply that. I only suggested that if it got worse, it could be the impetus for a situation that would. Especially if some states are intransigent on macro-economic policy, which ends up severely affecting the economies of other states. That not only breeds economic problems, but also political divisions.

I don't know... "retreat within itself" would rely on a strong EU-identity, and that really doesn't exist in a way that's comparable to a country. People have far more identity with their country and local area than the EU. It's a very distant and abstract entity. But that's just me ;)

Indeed, it does not imply that. I only suggested that if it got worse, it could be the impetus for a situation that would. Especially if some states are intransigent on macro-economic policy, which ends up severely affecting the economies of other states. That not only breeds economic problems, but also political divisions.

I don't know... "retreat within itself" would rely on a strong EU-identity, and that really doesn't exist in a way that's comparable to a country. People have far more identity with their country and local area than the EU. It's a very distant and abstract entity. But that's just me ;)

*shrug* Like I said in white, Luxembourger. Right there in the center, got the bank and everything. There's not enough room in the country for a national identity.

*shrug* Like I said in white, Luxembourger. Right there in the center, got the bank and everything. There's not enough room in the country for a national identity.

Not a huge amount of countries like Luxembourg in the EU though!

And I'm sure they'd never give up their amazing football team - that's national pride right there.

Not a huge amount of countries like Luxembourg in the EU though!

Malta is tiny, and Norway is almost as rich. Unless you mean a country with both, in which case... :tongue:

A currency crisis? In a recession? We'll be seeing unemployment next!

Well, what do YOU think? Just try to phrase your own stand for a change.
For a change? Do we know each other?...
Just go and say what's your opinion instead of hiding behind that of the authors.
Eastern European EU countries plus Spain, Italy, Portugal and Ireland will keep economically faltering, eventually needing support from the "better" economies of Western/Central Europe, who's politicians won't want to ship money out because they are under pressure from their unhappy populations to pursue more economic nationalism, that is, keep money home, but will also be under pressure not let any EU area economies fail.....

It will be interesting to watch.
Or... just comment on the fucking mass of text you like to post for us to ponder upon.
I bolded the areas worth reading for the people who don't want to read through the whole thing.....

i glanced over the info. I could use a little bit more a summary on your part though.
seems the author suggest raising the interest rates. From the info presented I am prone to agree. However I focus more on the economic history of the US and Asia so not something id bet my reputation on.

Because when things got bad for Michigan, we defected to Canada....Nah, I don't think there'd be much desertion, out of the frying pan and, to use the phrase, into the fire, no?
It's totally different though. Michigan leaving the U.S. would be alot more impossible than a EU country either dropping the Euro and/or leaving the EU.

i glanced over the info. I could use a little bit more a summary on your part though.
Summary? Just read the thing if you're interested in it. You may learn something, that's why I posted it.

If you're not interested, don't.

Summary? Just read the thing if you're interested in it. You may learn something, that's why I posted it.

If you're not interested, don't.

I am interested, but at the moment if i am not writing a paper on it for a grade, I don't want to spend more then 3 minutes looking at it.

moral of the story 5 upper level history course in same semester = bad idea.

Well, what are the opinions on this? Where do you see the Euro going in the near future?
Euro has been quite good last days. EURUSD has almost penetrated 1.31 a few times, bounced back, then returned again. It's fairly unusual and indicates the currency is fundamentally strong.

Price reflects everything. Euro isn't falling way down. More precisely, it's falling, but so is everything. Even USD: Obama is an incompetent in economics, just a charismatic populist, and his men are not much better. Euro might even break through 1.31 and go up to 1.40, maybe touch the 1.50 line and bounce between the late 1.31 and 1.43 lines. If something bad happens, it may crash down, but no plummeting, it's not going below 1.24 easily, and there's no talk about 1.0. Again, it depends on who acts dumber, the European commies or Hussein Obama.

Euro has been quite good last days. EURUSD has almost penetrated 1.31 a few times, bounced back, then returned again. It's fairly unusual and indicates the currency is fundamentally strong.

Price reflects everything. Euro isn't falling way down. More precisely, it's falling, but so is everything. Even USD: Obama is an incompetent in economics, just a charismatic populist, and his men are not much better. Euro might even break through 1.31 and go up to 1.40, maybe touch the 1.50 line and bounce between the late 1.31 and 1.43 lines. If something bad happens, it may crash down, but no plummeting, it's not going below 1.24 easily, and there's no talk about 1.0. Again, it depends on who acts dumber, the European commies or Hussein Obama.
Where are you from and what are you basing those predictions from?

Dude, where's the joke option? :(

Dude, where's the joke option? :(
. . . Joke option? . . .

I don't play that shit! I don't fuck around with the Joke option, I keep it real! ARF! ARF! THUG LIFE!

. . . Joke option? . . .

I don't play that shit! I don't fuck around with the Joke option, I keep it real! ARF! ARF! THUG LIFE!http://laughingsquid.com/wp-content/uploads/royal-fail.jpg

http://laughingsquid.com/wp-content/uploads/royal-fail.jpg

http://i159.photobucket.com/albums/t137/1phuclam/Rome_Africa_now3.jpg

Where are you from and what are you basing those predictions from?
See the poll, that should be enough.

From some (for the last couple years fairly successful) experience working mostly on GBP and EUR majors and crosses, as well as European stocks, and thoroughly monitoring their fundamentals.


People tend to grossly overestimate the degree to which anyone, especially a layman, can predict the dynamics of any valuables. It's not easy, it's not simple, it's not just rise or fall, and it's not something the chatter in this thread will get an inch closer to answering.

See the poll, that should be enough.
It says you are a non EU-Citizen, but what is your nationality? (Just curious)
From some (for the last couple years fairly successful) experience working mostly on GBP and EUR majors and crosses, as well as European stocks, and thoroughly monitoring their fundamentals.
Well, I strongly feel you have far too much faith in the Euro, though that's unfair coming from me, because I admit I an extreme amount of faith in the dollar.

Well, I strongly feel you have far too much faith in the Euro, though that's unfair coming from me, because I admit I an extreme amount of faith in the dollar.
Faith... It's not a question of faith for me. The acute phase of this crisis has coincided with some work-related events in my life, resulting in a large drop in my stable income. Since then, I've been increasingly reliant on active trading to provide it. That tends to force emotions towards countries and companies out of the way. If I do it right, I get a few grand, if I do it wrong, I lose a few grand. So it's not about a company having a cute mascot or a country being to my liking.

Strength of valuables is relative. A currency can be strong at one level and weak at another. Euro was weak in its 1.5350-1.5950 flat, the British pound was heavily overvalued at 1.97-2.00. I was shorting them for the last few months, made quite a bit.

But Euro is quite strong at 1.28, and the pound is very strong at 1.40. Euro in particular is more likely to penetrate 1.31 and go up than fall, though I don't put my money on either at the moment. The pound has bounced away from 1.40 three times in the past 20 years. Euro doesn't have a history of solid price levels, but it's flatting out at its resistance level, so the upward pressure is high.
It will take something more serious than the already well known problems to break through these support levels. It may happen, but, honestly, I seriously doubt it will, because US isn't outside this recession and faces the same problems.

If it gets too much, they'll probably leave it, in similar circumstances to the UK leaving the ERM during the 90s recession perhaps. I doubt economic turmoil would engender further integration - protectionism, nationalism and isolationism seem to be the result, historically.


It's doubtful that many, if any at all would leave it. Switching currencies is a tricky thing to do at any speed, and there's the risk of it absolutely tanking as soon as introduced.

On a side note Greece shouldn't be in the Euro, part of their problem was they cooked the books in order to fulfil the criteria to get in, and are now learning why the criteria was there.

It's doubtful that many, if any at all would leave it. Switching currencies is a tricky thing to do at any speed, and there's the risk of it absolutely tanking as soon as introduced.
The Economist states, and I agree, that dropping the currency would only worsen the economic climate of the country hypothetically dropping the Euro.

On a side note Greece shouldn't be in the Euro, part of their problem was they cooked the books in order to fulfil the criteria to get in, and are now learning why the criteria was there.
Link? I don't doubt it but I'd like to see it.

Well, with any luck the Dollar'll be back up...all I really care about, currency wise...

Well, with any luck the Dollar'll be back up...all I really care about, currency wise...
I care about the Dollar, the Swiss Frank and the Euro, as those are the currencies I use in my life, in that order of usage.

I care about the Dollar, the Swiss Frank and the Euro, as those are the currencies I use in my life, in that order of usage.

I use the same policy myself, although, as previously stated, the list is much shorter, lol...

Link? I don't doubt it but I'd like to see it.

Greece used false figures for euro entry (http://www.independent.co.uk/news/world/europe/greece-used-false-figures-for-euro-entry-547194.html)

Greece admits deficit figures were fudged to secure euro entry (http://www.independent.co.uk/news/world/europe/greece-admits-deficit-figures-were-fudged-to-secure-euro-entry-533389.html)


Greece admitted yesterday that the budget figures it used to gain entry to the euro three years ago were fudged. The Finance Minister, George Alogoskoufis, said the true scale of Greece's budget deficit was massively understated enabling Athens to dip below the qualification bar and into the EU's single currency.

Well, with any luck the Dollar'll be back up...all I really care about, currency wise...
Back where? USD is today at its highest point in the last 5 years.

The absolute peak this decade was around 2000-2001, after that there was a notch in September '01 and a stead fall since 2002-2003. But now USD is very near to that 2001 peak again - it's already back up about as high as it has been.

Back where? USD is today at its highest point in the last 5 years.

The absolute peak this decade was around 2000-2001, after that there was a notch in September '01 and a stead fall since 2002-2003. But now USD is very near to that 2001 peak again - it's already back up about as high as it has been.

By back up, I mean as the highest value currency...Im not sure if its there or not...Im getting conflicting data from teh Interwebs(go figure, lol)

But, Im just saying that all I really care about is the US Dollar being on top, cause thats the only one I use...

By back up, I mean as the highest value currency...Im not sure if its there or not...Im getting conflicting data from teh Interwebs(go figure, lol)
But, Im just saying that all I really care about is the US Dollar being on top, cause thats the only one I use...
The highest-value of single unit of currency? It wasn't.

But why and how is that being on top? Just because the Yen's value is 90 times smaller than a USD doesn't mean it's a weak currency. Just because the pound is worth 1.40-2.10 USD doesn't mean it's strong. The only reasons are penimetrics.

This could be easily accomplished by a 1:10 denomination - remove one 0 from every banknote and coin - and here it goes, the highest-value unit of currency.

*snip*


Dont be a smart ass, you know what I mean...Exchange Rates and Market Value my friend, Exchange Rates and Market Value...

Dont be a smart ass, you know what I mean...Exchange Rates and Market Value my friend, Exchange Rates and Market Value...
It is on the top already. The highest relative value for the last 5 years, very near to the decade's peak. There's no "back up" to go. I'd rather watch for it not to fall back down, with Obama in control and Dems not known for putting a priority on economics.

Which leads us right into.....



Well, what are the opinions on this? Where do you see the Euro going in the near future? What do you think will come of the economically dragging nations of Italy, Spain, Greece, Portugal and Ireland?

As for the trend in Italy: Giulio Tremonti, the incumbent Minister for Economy, has turned in the last 8 months from ultraliberist to quasistatalist.
Hence, this is likely to happen:

1.Italy will enforce a stronger tax levy on salary workers while cutting the expense on public services (most of the public services are given by municipalities, and ALREADY both centre-left and centre-right cabinets have cut funds for municipalities). Taxes on luxury homes have already been dropped (typical Berlusconi), so they have to get the money somewhere while not damaging directly their electoral base.
2.Italy will pump more money into big industries (like FIAT).
3.Italy will try to repay faster the debts it has in dollars and pounds (as both currencies have gone down a fair bit) and gain time for the debts in euro.
4.Italy will sell its dollar reserves.



About the euro: the Euro is going to rise. It's needed to repay the debts (in dollars) of many eurozone countries, plus it's needed for buying oil. Europe needs a stronger euro right now, and this means selling dollars, pounds and yen.

Italy, Spain, Greece, Portugal and Ireland all (in a purely stereotypical sense) seem like the sort of places that harbour the lifestyle that doesn't really care too much about the global economy. If a recession hits, they might not even feel it, having easily fallen back on the local community structures of old small-scale farming and fishing.

I like your highly idyllic view of Italy. Extremely inaccurate, but hey...

I like your highly idyllic view of Italy. Extremely inaccurate, but hey...

One has to wonder if Kamsaki-Ryu (no offence, pal) imagined these countries as some idyllic place with shepherds strolling through olive groves and like :wink:

About the euro: the Euro is going to rise. It's needed to repay the debts (in dollars) of many eurozone countries, plus it's needed for buying oil. Europe needs a stronger euro right now, and this means selling dollars, pounds and yen.

Funny the Germans keep buying the dollar like its going out of style last year alone they increased their reserves 20 + %.

Not as much as India increasing their reserves 64% or China's 32% increase.
good luck to you Italians trying to sell more then the German want to buy.

Funny the Germans keep buying the dollar like its going out of style last year alone they increased their reserves 20 + %.

Not as much as India increasing their reserves 64% or China's 32% increase.
good luck to you Italians trying to sell more then the German want to buy.

The Germans, having less debt, can allow themselves to keep the dollar overvalued: they're competing with the US on exports, and a weak dollar would help too much the US against Germany. Same goes for India and China.

The Germans, having less debt, can allow themselves to keep the dollar overvalued: they're competing with the US on exports, and a weak dollar would help too much the US against Germany. Same goes for India and China.

Sort of the problem of having many governments but one currency.
your monetary policy can look schizophrenic. Also seems the French are helping the Germans too.

Sort of the problem of having many governments but one currency.
your monetary policy can look schizophrenic. Also seems the French are helping the Germans too.

1.Yes. That's why I think that national governments should transfer more powers to the EU. Else we're doomed to schizophrenia.

2.We'll see: the French economy is suffering a lot more than the German one (just today, Air France announced about 1200 workplace cuts in 2009). Chances are that France will have to sell monetary reserves to fel its state help for industries.

1.Yes. That's why I think that national governments should transfer more powers to the EU. Else we're doomed to schizophrenia.

2.We'll see: the French economy is suffering a lot more than the German one (just today, Air France announced about 1200 workplace cuts in 2009). Chances are that France will have to sell monetary reserves to fel its state help for industries.

I think their concern was if the Euro went up and the dollar went down they would lose out on market share in the wine market. not to start a who wine is better debate so lets just say Nappa Valley is comparable to French and Italian(not counting organic wine, Italian organic wine is likely the best).

I think their concern was if the Euro went up and the dollar went down they would lose out on market share in the wine market. not to start a who wine is better debate so lets just say Nappa Valley is comparable to French and Italian(not counting organic wine, Italian organic wine is likely the best).

Uh?
The bottles from Napa Valley I tasted here were quite horrible. I don't think that wine can stand a trip over the ocean.
Also, what's this "organic wine"? I'm puzzled.

Anyway, BOTH french and italian economies are quite more geared towards heavy and light industries, like textiles, machinery, automotive. The notion of Italy and France surviving mostly on export of farm products, while very idyllic and extremely nice, is very inaccurate.

Greed and Death; inter-government bond/securities/generic leverage article #3 are not allowed between Euro country's; it says so right in The Economist article... So, heh, I can tell you someone who didn't read it and jumped straight to spouting his own opinion. Since, consider, that the Euro’s Central Bank (wherever it is) doesn’t want to have competition with individual countries in supplying and strangling Euros.

Anyhow, to my opinions!

The U.S. Government has taken a long look at the woes of the financial companies; who made the mistake of leveraging assets they A: didn't understand, B: overvalued, or C: just plain lied about. Taking those mistakes into consideration the US Federal Government has decided to not just screw it all but to not even pretend it has assets to that in which it is getting the 800-ish billion dollars. Literally, it is mortgaging the thin air within the Treasury Department and hoping to God that it will somehow turn out all right (if liberals believed in God, obviously).

Now, you look around and realize - the US dollar should have collapsed, by all means, merely because the stimulus plan suck-o-meter; which has officially reached "big time." It is literally a nuclear explosion in the currency supply, throwing all sorts of killer shit into the atmosphere and around the world that no one wants. Then, instead of the Euro staging some sort of 'miracle' under-dog come back, it has toddled around some of the lowest points it has gotten, ever; indeed, minus a few awkward weeks, the Euro could be said to be trading at its lowest consistent point.

What gives? Personally, I believe we don't know something that the big dogs know. Maybe Italy is worse off debt wise then we first suspected? Maybe Portugal has a lot less reserve dollars on hand then even the IMF suspected? Who knows, all I know - optimism anywhere is pitiful, and for all things - the Euro? Humorous at best. There are just plain inconsistencies that I am stumped to find answers for, and there must be more than just concerns about some debt ratings.

Uh?
The bottles from Napa Valley I tasted here were quite horrible. I don't think that wine can stand a trip over the ocean.
Also, what's this "organic wine"? I'm puzzled.

I don't know what it is with organics. but i drink a normal Italian red wine and I have not been really impressed. But an organic has tasted wonderful. It might the lack of additional Sulfites and the continuation of slow fermentation on shipping.
As for Nappa valley wine they have won several blind taste test in France, and else where beat. The main problem with it is if your not familiar with Nappa valley or know the good brands it is very easy to end up with wine of what you would call table quality grade. this is because our government only regulates the win's alcohol content.

Anyway, BOTH french and italian economies are quite more geared towards heavy and light industries, like textiles, machinery, automotive. The notion of Italy and France surviving mostly on export of farm products, while very idyllic and extremely nice, is very inaccurate.

Yeah, but the french seem to view market share on wine as a matter of pride. And my opinion of French Economy is that for the French pride comes before work.

I don't know what it is with organics. but i drink a normal Italian red wine and I have not been really impressed. But an organic has tasted wonderful. It might the lack of additional Sulfites and the continuation of slow fermentation on shipping.[/QIPTE]
Maybe it's a thing about denominations: here we usually sort wine between ordinary wine, IGT wine (indicazione geografica tipica; slightly better regulated), DOC wine (denominazione di origine controllata; tightly regulated), DOCG (denominazione di origine controllata e garantita; more tightly regulated), VQPRD (and VSQPRD,VFQPRD) the most regulated of all. Generally, more regulated means: vines must be typical of that region, production must follow some traditional standards and pass some quality tests, additives are banned (here in Italy we don't even add sugar).

[QUOTE]As for Nappa valley wine they have won several blind taste test in France, and else where beat. The main problem with it is if your not familiar with Nappa valley or know the good brands it is very easy to end up with wine of what you would call table quality grade. this is because our government only regulates the win's alcohol content.
Yes, I cannot say that I'm familiar with extra-european wine: I can get only what the supermarket offers, and it's quite a poor selection as for extra-european.

Yeah, but the french seem to view market share on wine as a matter of pride. And my opinion of French Economy is that for the French pride comes before work.

This thing with pride is quite common in most European countries... with the slight difference that Germans pride themselves about cars and public services. ;)

Maybe it's a thing about denominations: here we usually sort wine between ordinary wine, IGT wine (indicazione geografica tipica; slightly better regulated), DOC wine (denominazione di origine controllata; tightly regulated), DOCG (denominazione di origine controllata e garantita; more tightly regulated), VQPRD (and VSQPRD,VFQPRD) the most regulated of all. Generally, more regulated means: vines must be typical of that region, production must follow some traditional standards and pass some quality tests, additives are banned (here in Italy we don't even add sugar).

Yes, I cannot say that I'm familiar with extra-european wine: I can get only what the supermarket offers, and it's quite a poor selection as for extra-european.

I don't know if your government considers sulfites an additive since they occur in all wine naturally. And many vintners use them to stop fermentation.
the classification on quality is the issue with nappa valley what often happens is a very small vineyard(in nappa valley) buys the reject grapes of all the other vineyards and makes a wine out of that.


This thing with pride is quite common in most European countries... with the slight difference that Germans pride themselves about cars and public services. ;)

You'd figure they would be more prideful of their aircraft manufacturing because it employs more people. I find the Germans to be far more practical in their use of pride.

Greece used false figures for euro entry (http://www.independent.co.uk/news/world/europe/greece-used-false-figures-for-euro-entry-547194.html)

Greece admits deficit figures were fudged to secure euro entry (http://www.independent.co.uk/news/world/europe/greece-admits-deficit-figures-were-fudged-to-secure-euro-entry-533389.html)
Wow. Greece is a lying sack of shit.
1.Italy will enforce a stronger tax levy on salary workers while cutting the expense on public services (most of the public services are given by municipalities, and ALREADY both centre-left and centre-right cabinets have cut funds for municipalities).
Won't that be difficult and as unemployment rises in Italy, giving you a smaller workforce to tax? Also, that will leave these workers with less money during a time of economic crisis, which won't be that popular...

2.Italy will pump more money into big industries (like FIAT).
Money that it doesn't have, thus going further into debt?

3.Italy will try to repay faster the debts it has in dollars and pounds (as both currencies have gone down a fair bit) and gain time for the debts in euro.
4.Italy will sell its dollar reserves.
But as Italy is trying to do that, the dollar is being purchased by many other people and nations, because they see it as the most stable investment, which is the reason why the dollar is doing well despite the economic climate in its motherland.

Now, you look around and realize - the US dollar should have collapsed, by all means, merely because the stimulus plan suck-o-meter; which has officially reached "big time." It is literally a nuclear explosion in the currency supply, throwing all sorts of killer shit into the atmosphere and around the world that no one wants. Then, instead of the Euro staging some sort of 'miracle' under-dog come back, it has toddled around some of the lowest points it has gotten, ever; indeed, minus a few awkward weeks, the Euro could be said to be trading at its lowest consistent point.
The dollar is doing well because people believe in it and the saftey of investing in the American government. People and countries all over the world are buying dollars because they trust its stability. That's why the dollar not only hasn't collapsed, but is doing considerably well.

http://www.dailyfx.com/story/market_alerts/fundamental_alert/Why_is_the_US_Dollar_1223260457441.html

Non-Farm Payrolls data disappointed and the markets are pricing in dramatic interest rate cuts, so why is the US dollar pushing higher? The answer, it seems, lies in broad-based global demand for long-term US government debt. When investors become spooked by risky market conditions (as would be reasonable given recent events), they move their capital from stocks and other higher-risk investments to long-term US Treasury bonds. While these offer very little return, they are considered nearly risk-free. The assumption is that such an investment can only go meaningfully awry if the government itself collapses.

Comparing the EURUSD exchange rate with the US Treasury 30-year "Long" Bond, we see a staggering inverse correlation of 82% as of 10/03/08. This strongly suggests that the greenback is rising because traders are cashing in their investments for US dollars and using them to buy US Treasury Bonds as a safe-haven asset.

US Long Bond vs. EURUSD Spot:
http://www.dailyfx.com/export/sites/dailyfx/story-images/2008/10/other/alerts/10-05-08_bonds.gif

Uh?
The bottles from Napa Valley I tasted here were quite horrible. I don't think that wine can stand a trip over the ocean.
Also, what's this "organic wine"? I'm puzzled.
Let's not be ridiculous, shall we? California wines compete quite well with French and Italian wines. They are not 'horrible', let's not get all wine-nationalistic. I make it a point that whenever I'm a friend's house in Italy, Spain or France, I bring them and their families a bottle of California wine, so as to taste what they don't have. I think you'd be suprised at their pleasant reactions.
Anyway, BOTH french and italian economies are quite more geared towards heavy and light industries, like textiles, machinery, automotive. The notion of Italy and France surviving mostly on export of farm products, while very idyllic and extremely nice, is very inaccurate.
Indeed. Although if Italy collapses, I'm getting my friends over there to ship me bottles upon bottles of grapa. :p

Uh?
The bottles from Napa Valley I tasted here were quite horrible. I don't think that wine can stand a trip over the ocean.

Let's not be ridiculous, shall we? California wines compete quite well with French and Italian wines. They are not 'horrible', let's not get all wine-nationalistic. I make it a point that whenever I'm a friend's house in Italy, Spain or France, I bring them and their families a bottle of California wine, so as to taste what they don't have. I think you'd be suprised at their pleasant reactions.

Indeed. Although if Italy collapses, I'm getting my friends over there to ship me bottles upon bottles of grapa. :p
So I wouldn't say American wines are "horrible".....
http://www.emeraldinsight.com/fig/0701080401006.png

http://www.mapsofworld.com/world-top-ten/maps/world-top-ten-wine-producer.jpg