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Euro falls below parity with the dollar

reuters.com

271–280 of 286 posts

Re: Euro falls below parity with the dollar

#271

Earlier quoted context omitted.

Just to clarify for the rest; the borrower (ECB) is literally printing new money every time they give out a loan.

The ECB is printing money to give out loans to itself?

"Literally" was probably an exaggeration, but they are in a way.

If you deposit $100 with bank A, and they give a loan for $80 to person B, you have $100 to spend and person B has $80, so $180 can float through the economy.

The $80 debt should cancel out person B's surplus, but it kind of doesn't if interest rates are low enough because they'll never actually pay it back.

That's my potentially poor understanding of it.

Re: Euro falls below parity with the dollar

#273
post #124

Earlier quoted context omitted.

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

It's the difference between heating your house to 72 and walking around barefoot, or 68 and wearing a sweater and wearing loafers. Those are the tradeoffs. Need for indoor heating has a lot of stretch. In Europe, there's a ton of stretch on personal mobility too, since there are viable alternatives for the car. Europe can weather this crunch a lot better than America.

>It's the difference between heating your house to 72 and walking around barefoot, or 68 and wearing a sweater and wearing loafers.

Someone who actually believes the "just put a sweater on" rhetoric that even those who tried foisting it on the public quickly gave up on.

Be sure to give your sage advice to the Germans and other Europeans who are this winter going to see gas bills rise 200-1000%. We've had, in the past month, a German minister stating that becoming dependent on Russian gas was a "grievous mistake", and that his country is begging for turbines from Canadian custody "with a heavy heart". His government stating that entire industries might "collapse". Rationing of gas announced. Local municipalities planning warm buildings that those without heat in their homes can visit during the winter. These are just a few of the many things that have happened that are part of the greatest German (and thus European) catastrophe in 80 years.

>Those are the tradeoffs. Need for indoor heating has a lot of stretch. In Europe, there's a ton of stretch on personal mobility too, since there are viable alternatives for the car.

It was obvious from your earlier stupendously cringeworthy "Ten years from now, Europeans will drive electric (if they'll drive at all)" comment that you are of that peculiar species known as Homo redditus, the type that believes in everything you read in /r/politics and /r/worldnews, but the above reinforces it.

(No, Virginia, Europe isn't some sort of magical wonderland of public transportation everywhere from Ireland to Estonia to Greece to Portugal. Be sure to tell the rural Spaniard or Frenchman or Irishman how he no longer needs an automobile or two, and to the people commuting into Frankfurt or Milan or Antwerp by car that there's no reason why they've been doing so all this time so need to stop ASAP.)

>Europe can weather this crunch a lot better than America.

This is so, so wrong in every single way that it's hard to believe so much wrongness can be contained in ten words.

Re: Euro falls below parity with the dollar

#274
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?

I've always had this cognitive dissonance as well. Especially the link between rising interest rates and lowered food prices. I always ask and get ignored. I suspect it's because that's all they can really do. They are a one trick pony.

Think about it like this. A lot of things are financed via credit/debt. For example, you buy a house, using a mortgage, which has an interest rate.

Some people might be able to finance a $500k house, at 0% interest rate for 30 years. However, with certainty there are fewer people who are able to finance a $500k house, at 10% interest rate for 30 years, as this costs much more. This means, as interest rates rise, fewer people will be able to secure and offer $500k for a house. As fewer people are offering $500k for a house, sellers will struggle more to sell a house for $500k, and eventually, there even comes a point where prices are forced to drop. As for how high interest rates need to get and how long they are in place to cause a decrease in prices, is mostly a guessing game, but eventually it will cause an effect.

Now, that said, initially people might try to raise their prices to offset the increase in financing costs, (and therefore adding to inflation like the parent post thought), but like I said, eventually there comes a point where they just won't find anyone who will buy their higher prices, because no one can afford those higher prices, and therefore prices must come down if transactions are to continue happening at all, and some transactions will surely continue to happen, as some money is better than no money, when you got a liability to pay.

And this also applies to food prices, along with most everything, in very similar but indirectly complex ways, mainly because most transactions in the economy happen via credit, then with actual money/cash. Let alone the fact that all money originates via central bank loans.

Re: Euro falls below parity with the dollar

#275

Earlier quoted context omitted.

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…

I think the only real problem in this list is convincing countries to adopt English (people tend to be self-important). Culturally, EU is quite homogenous. There may be 1-2 small countries with moderately different approach, but if you compare to the rest of the world, it is basically the same. The wealth disparity in the US does not cause what you describe, so why would it happen in EU?

The disparity is much greater among EU countries. The average Bulgarian income, for example, is well below bare survival income in Western Europe. US geographic disparities are much smaller, and less geographic than racial (which then bears out geographically through different demographic mixes). Also, for the first 150 years of existence, the US was not a federal welfare state. The federal government was even limited to taxing states at an equal per capita rate until after the 16th amendment, ratified in 1909.

Re: Euro falls below parity with the dollar

#276

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.

Trains run on electricity and electricity price is skyrocketing... And then some trains run on diesel...

That's before looking at how much of that €€€ was thrown at long-distance trains. While commuting was an afterthought.

Re: Euro falls below parity with the dollar

#277

Earlier quoted context omitted.

> mostly wheat at this point Wheat and a few million people who had to leave their country, but yeah, wheat... It obviously is a major crisis in Europe and has many ramifications, if all your neighbours mysteriously die in the same week it won't affect you personally but you surely will feel down or threatened. If it was just about wheat nobody would care, Ukrainian wheat isn't even exported to EU countries

> It obviously is a major crisis in Europe and has many ramifications, if all your neighbours mysteriously die in the same week it won't affect you personally but you surely will feel down or threatened. This premise relies on a mysterious, unknown cause though. It's more like your neighbors fighting your other neighbors.

See how NYC would do if NY State bombs New Jersey.

Re: Euro falls below parity with the dollar

#278

Earlier quoted context omitted.

What's the definition of "major war"? It's the biggest war on the continent since WW2 where two countries with 100,000s of soldiers fight each other with modern weapons.

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…

I don't think people forget the war in Yogoslavia, I have two friends who fled with their parents to Germany.

Re: Euro falls below parity with the dollar

#279

Earlier quoted context omitted.

> It obviously is a major crisis in Europe and has many ramifications, if all your neighbours mysteriously die in the same week it won't affect you personally but you surely will feel down or threatened. This premise relies on a mysterious, unknown cause though. It's more like your neighbors fighting your other neighbors.

See how NYC would do if NY State bombs New Jersey.

Not even close to resembling the current situation.

Re: Euro falls below parity with the dollar

#280
post #274

Earlier quoted context omitted.

I've always had this cognitive dissonance as well. Especially the link between rising interest rates and lowered food prices. I always ask and get ignored. I suspect it's because that's all they can really do. They are a one trick pony.

Think about it like this. A lot of things are financed via credit/debt. For example, you buy a house, using a mortgage, which has an interest rate. Some people might be able to finance a $500k house, at 0% interest rate for 30 years. However, with certainty there are fewer people who are able to finance a $500k house, at 10% interest rate for 30 years, as this costs much more. This means, as interest rates rise, fewe…

I understand your first three paragraphs just fine. That makes perfect sense. The fed can easily crash housing prices.

I can also see how they can crash any large purchases financed by credit: cars, machinery, etc.

I can see how they can stop growth, how they can crash companies that have overextended.

But I cannot follow how the prices of goods and services come down. I'm not even arguing that they don't come down, I just can't follow the logic.

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