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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

#231

Post by TechBro8615 »

nine_zeros wrote: post #208
TechBro8615 wrote: post #203

Earlier quoted context omitted.

But you said “if USD falls and oil prices rise.” It sounds like you’re double counting “USD.” Otherwise there is a missing variable here.

Sometimes USD falls and oil prices fall together. The measure of USD is only accurate when measured against oil price, and it helps to precisely say it so as to avoid questions such as "If USD falls against what?"

But I still don’t know what you mean by “USD falls.” It falls relative to what? All the other currencies? Are you relying on some index of “real price” of oil that’s denominated in something other than USD?

Or are you just saying “if oil gets more expensive”? If so, I don’t really see the relevance of mentioning USD exclusively. Either you’re separating the currency from the commodity or you’re not.

Re: Euro falls below parity with the dollar

#233

Post by nine_zeros »

TechBro8615 wrote: post #231
nine_zeros wrote: post #208

Earlier quoted context omitted.

Sometimes USD falls and oil prices fall together. The measure of USD is only accurate when measured against oil price, and it helps to precisely say it so as to avoid questions such as "If USD falls against what?"

But I still don’t know what you mean by “USD falls.” It falls relative to what? All the other currencies? Are you relying on some index of “real price” of oil that’s denominated in something other than USD? Or are you just saying “if oil gets more expensive”? If so, I don’t really see the relevance of mentioning USD exclusively. Either you’re separating the currency from the commodity or you’re not.

The term "USD falls and oil price rises" go together to say that USD falls against oil price. The term "USD falls" alone or "Oil price rises" alone would require a backdrop of measuring against something.

Re: Euro falls below parity with the dollar

#234

Post by makomk »

karatinversion wrote: post #123
mamonster wrote: post #119

Earlier quoted context omitted.

In financial markets its pretty simple: When you raise interest rates, you increase the denominator in the DCF calculation, so most assets are repriced downward.

But asset prices aren’t included in inflation indices…

Yeah, the decrease in asset prices is just an unavoidable side effect (and similiarly, the increase in asset prices under the previous low-interest, low-inflation environment was a side effect of attempts to boost inflation and the real economy, not some large scale plot to transfer money to the super wealthy as is often claimed).

Re: Euro falls below parity with the dollar

#235

Post by im3w1l »

thiago_fm wrote: post #45

This is great for German exports. Expect to see more Mercedes Benz in the streets of America. It generates some inflation as imports are pegged to the dollar(somebody mentioned that it is hedged, it is just by some extent), but overall is actually good for the economic block. The EU needs to export to survive. The EU has been fighting a possible deflation for most of the 2010s, this is actually not so negative as peo…

Currency devaluation is basically demanding that workers do more for less. That's great for companies, if those workers accept it and don't jump ship. However some of the brightest Germans I know are in the process of emigrating. They are tired of lockdowns and inflation and everything.

Re: Euro falls below parity with the dollar

#236

Post by asldjajlfkj »

WastingMyTime89 wrote: post #214
mojuba wrote: post #140

Earlier quoted context omitted.

On the other hand though, the Eurozone population pretty much equals that of the US, and surely there are a bit underdeveloped US states compared to the overdeveloped ones, right? So why is the EU bad idea and the US is not?

That’s because the euro zone is a scam. Rich countries in the north especially Germany put in place policies akin to dumping and were shielded from the effects it should have had on their money by the economic gap with the poorer countries in the south. Southern countries found themselves handicapped by an overvalued currency. Meanwhile politicians in the north refused any form of transfers and keep popularising the…

It’s not!

Currency fluctuations don’t allow for global trade. That’s why after WW2, the Bretton-Woods system was established with fixed exchange rates. After that came to its end, Europe created a new system. Rates were not pegged to gold but to other European currencies (only 2% deviation allowed, 6% for Italy and Britain).

That created a problem for countries that couldn’t keep up with the German economy: Stabilizing the exchange rate was getting very expensive for those countries. Germany started with zero gold reserves after WW2 and now has second place because of this system.

The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system. A lot of money for an economically integrated Europe. Italy gave up some sovereignty over the money supply and pledged not to spend too much.

Even without the euro, Italy had an “overvalued currency” that held it back because it kept devaluing its currency with no economic growth and, yes, no financial discipline (although, of course, Italians don’t lack discipline). The introduction of the euro relieved Italy of much of the burden.

While I agree that there was a lot of populist rhetoric in the northern countries, pretending that the euro is bad for Italy and good for Germany is also populistic. The reverse is true.

If you mean fixed exchange rates (going back to the 70s) are bad for Italy then one can discuss that. (But there’s a lot of economic literature against that – just imagine California and Kentucky had different and free-floating currencies and how trade would be impaired)

Re: Euro falls below parity with the dollar

#237

Post by vondur »

Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.

Re: Euro falls below parity with the dollar

#238

Post by makomk »

s1artibartfast wrote: post #229
mytailorisrich wrote: post #147

Earlier quoted context omitted.

People tend to forget Yugoslavia, which was really in the heart of Europe and killed about 150k people. There is a lot of hyperbole about Ukraine, not least because of Russia but so far it is not intrinsically disruptive outside of Ukraine's (and Russia's) borders beyond the disruption to Ukraine's exports (e.g. wheat). The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence…

>The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war. If Europe wanted, they could simply go back to business as usual and ignore the war entirely. It's surprising that people forget that the EU initiated the financial war with Russia

The EU's financial sanctions on Russia were pretty obviously structured to make it as difficult and painful for Russia as possible to stop selling gas to Europe. In particular, the seizure of their foreign reserves - which they were not expecting to happen, and which they were likely counting on to be able to use gas supply as leverage like they have before - means that the only way to get hard currency to spend on things is by continuing to sell gas. Also, what people don't realise is that Russia was clearly preparing to use control of Europe's gas supplies as a weapon even back in 2021, reducing supplies and depleting their storage in a way that couldn't be explained at the time.

Re: Euro falls below parity with the dollar

#239

Post by onlyrealcuzzo »

Sohcahtoa82 wrote: post #228
nickff wrote: post #216

Earlier quoted context omitted.

You seem to be implying or assuming that increased real estate prices lead to increased rent, but that's a non-sequitor; in fact, rents have become decoupled from real estate prices in many areas over the past 20 years.

I find this incredibly hard to believe, especially when it's not hard to find people that buy houses for the sole purpose of renting them out[0]. In order to ensure you at least break even in the short term, you'd need to charge a rent at least equal to the mortgage + property tax.

This is simplified.

Negative cash-flow real estate (anywhere with absurd Price-to-Rent ratios) has DESTROYED the S&P 500 (on leverage) for the last 20 years because of abnormally high appreciation (leveraged) due to interest rates perpetually decreasing.

Most R/E is leveraged.

Historically, you did not need positive cash-flow in R/E to make a fortune, and a lot of the fortunes amassed came from negative cash-flow R/E that consistently become more and more negative cash-flowing...

It doesn't really make any sense unless you believe interest rates will perpetually get lower. Anyone who took that trade over the last 20 years did very well.

Re: Euro falls below parity with the dollar

#240

Post by nopehnnope »

vondur wrote: post #237

Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.

Some problems with that:

* The US had a single national language (despite regional linguistic minorities). In the EU, the closest would be English, which is the universal second language but very few people’s first language.

* Relatedly, the US in 1789 was very culturally homogenous by modern standards. Europe is not.

* The wealth disparity between countries inside the EU is absolutely massive. Federation would lead to unfathomably massive wealth transfers from the North and West to East and South. This would lead to resentment and rekindled nationalism that would create extreme political strife and tear the whole continent apart.

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