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Euro falls below parity with the dollar

reuters.com

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Re: Euro falls below parity with the dollar

#181

Post by Aulig »

emaginniss wrote: post #89
KingOfCoders wrote: post #70

Earlier quoted context omitted.

Let the Russians bomb and invade Washington State and we'll see how the dollar does.

I think if the Russians bombed Washington State, the rest of the US would actually help defend it by attacking Russia. While the military help that the EU is giving Ukraine is great, it is far below the level that the other states would provide Washington. I know that isn't exactly your point, but you can't say that Ukraine is as intrinsic to the EU as Washington State is to the rest of the US.

Well, Ukraine is not part of the EU, so it can hardly be intrinsic to it.

Re: Euro falls below parity with the dollar

#182

Post by vkou »

rvense wrote: post #105

Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?

> Can someone explain to me how raising interest rates combats inflation?

ELI5:

Inflation is directly proportional to the money supply. The more money is circulating, the more things cost.

Money supply is inversely proportional to interest rates. If I could borrow at 0% APR, I will happily borrow a trillion dollars, even if I had no idea what to do with it.

And now the important thing: In modern economies, when people borrow money, that money is magically created out of thin air and added to the money supply.

This means that when interest rates drop, money supply goes up, and inflation goes up.

When interest rates rise, money supply goes down, and inflation goes down.

There's a lag to these effects, and there's a limit to how much interest rates can affect inflation, and there are other factors at play, but this is the bare bones of it.

Re: Euro falls below parity with the dollar

#183

Post by candiodari »

ElCheapo wrote: post #104
ejanus wrote: post #86

Earlier quoted context omitted.

How do you break that circle?

You can't. If your people do not feel the need to live humbly and serve their country they are going to flock elsewhere to the highest bidder. If a German engineer finds $30k/y after tax to be an unacceptable salary what are you going to do about it? Brainwash him into sacrificing for their glorious Fatherland and just shutting up and doing the work?

Uh, you forget that those US companies make a profit off of those engineers! How you break the cycle is simple: you find a way to pay those engineers more, so they stay at home AND you put the profit in your pocket. There are plenty of large companies in the EU that could do this.

But they don't. They're too cheap, or perhaps EU style managers can't stand the idea that some people in the same company as them make half as much as they do.

Re: Euro falls below parity with the dollar

#184

Post by MomoXenosaga »

iSnow wrote: post #135
debacle wrote: post #21

Just for fun, I took a look at GBP/USD and it looks like that is tanking as well. Meanwhile the ruble is stronger than it's been in 4 years. For people in the EU/UK, how has this currency slide impacted your day to day?

Didn't impact me at all. Inflation does but since I earn above-average, not to a painful degree. I don't have plans to go on holiday to the USA in the next year or so, don't plan to buy a Tesla, maybe a new Mac which is going to go up in EUR. I worry about the long-term effects the war will have for us. Europe is resource poor and constantly rising energy prices will hit our industry hard as we cannot easily find dom…

Europe is not resource poor. It was just easier to let Russia and China deal with the environmental costs. Literally nobody gives a shit if a pipeline in Syberia starts leaking.

Re: Euro falls below parity with the dollar

#185

Post by MichaelRazum »

rvense wrote: post #105

Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?

Sure, there are some effects that come to play.

- Lets say you have a lot of euro. Interest rate is 0 and the US interest rate is 2%. Then you might think of selling euro and buy dollar to get the 2%. Especially if you think that euro/usd will decline further.

- Now let's say your interest rate is even higher now at 10%. A lot of houses in Germany produces something like 3% yearly revenue. So now you might start selling the houses with the same argument, since you could get 10% risk free compared to 3%. Housing prices go down, if you can't raise the rent.. Same effect on business that are doing just small revenue compared to the capital. It doesn't make sense to operate them. They quit -> consume less resources.

- Other effects like people spend less since saving becomes a bit more interesting. Firm's invest less, since the investment has to beat the interest rate.

PS: All that leads to a stronger currency. So your imports become cheaper and that helps a lot to fight inflation.

Re: Euro falls below parity with the dollar

#186

Post by vkou »

FollowingTheDao wrote: post #167

I guess no one here has heard there is no more gold dollar? All that is left is the petro dollar. This is the result.

Yes, now the value of money is tied to a mixture of policy and macro-economic trends, as opposed to how many gold mines opened last year.

Re: Euro falls below parity with the dollar

#187

Post by randomopining »

The idea of Merkel and the useful greenies in Germany is simply one of the most perplexing geopolitical decisions of the 21st century.

I'll never understand. If anybody knows the train of thought, please tell.

If Germany was more energy independent, Russia would be crushed this winter.

Re: Euro falls below parity with the dollar

#188

Post by lm28469 »

brundolf wrote: post #68
nine_zeros wrote: post #54

EU is lucky they invested in rail lines and trains. The average person can at least attempt to stop using gas guzzlers and keep living their life. If the USD falls and oil prices rise, we in America are screwed. We almost had it handed to us this summer.

The problem they're having is with natural gas, which they need for winter heating

It's mostly exaggerated. Some of my friends are already complaining because they won't be able to keep their flat at 25c in winter...

I haven't used heating in 5 years in Berlin, at the coldest it was 17c in my flat, having grown in the mountain that's my comfy zone

People want to live like kings for 50 euros a month, reality is catching up

Re: Euro falls below parity with the dollar

#189

Post by anton96 »

fzfaa wrote: post #116
jacquesm wrote: post #109

Earlier quoted context omitted.

They're not wasting money. They simply don't have the massive wealth of the North to jump off from or to cushion blows. On top of that a large quantity of what they do earn is spent on interest payments to the North.

I am from the south. We are wasting money and producing too little. We don't have the massive wealth of the north because we are culturally incapable of behaving some other way.

Significant part of it is also deepened de-industrialization. The entire western world but Germany experienced it. Doesn't have much with a culture or just south culture.

Even in Germany, parts that lost industries decades ago are still borer that the rest of country. France and Belgium have similar problems and Italy north-south split is even older.

Nobody know how to reverse it or at least succeeded. This is not easy.

Re: Euro falls below parity with the dollar

#190

Post by notahacker »

b112 wrote: post #129
yuan43 wrote: post #59

The headline is "Gas crisis sends euro back below parity against dollar." Yet the article does not explain how a "gas crisis" leads to a weaker currency. What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices: https://www.reuters.com/world/europe/german-economic-outlook... And the ECB…

Yet the article does not explain how a "gas crisis" leads to a weaker currency. One thing I find weird (a touchy point?) is that the UK left. Yes, that was a few years ago, but my point is historical EU / Euro pricing is now diminished overall, in its up/down cycle. COVID threw this asunder, so we did not see true fiscal results from UK leaving. And the UK left over a few years, making the departure less dramatic. Th…

The UK wasn't in the Euro, and isn't the answer to Europe's issues with gas prices or interest rates. Sterling has fallen similarly against the dollar for the same reasons (and had a larger trend fall from a higher peak in the longer term). Brexit doesn't help anybody with the current situation, but it doesn't have much to do with it.
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