USD & EUR: Something I don't get (exchange rates and crisis)

[neptop]

Hello,

I am a tech guy, without too much knowledge about economy, but a certain amount of interest in it. This is an economical question, so please don't make it unnecessarily political. I understand that these things relate, so I wanna emphasize the unnecessarily in this statement.

Lately I kinda miss the discussion about the Euro crisis. So I wanted to see what's up with exchange rates and stuff. I am still not sure, but I saw something else that made me wonder. In 2001 when the Euro came to be as actually used money (even though it was virtually around since 1999) the exchange rate was from 1 EUR ~ 0.85 USD to ~ 0.95 USD in it's early days. I remember how back then everyone was like "Oh my god, will the EUR have a chance to replace the USD with all these economies working together now?"

That attitude of course changed since then. Before the (world's) financial crisis I remember that there was something strange. Both China and the US tried to artificially devaluate their currencies to increase exports. The Euro had a trouble, because it was too stable and most European countries depend heavily on exports (more than the US, less than China). Everyone was like "It's great, we can buy cheap stuff from the US, but oh my god, we focused too hard on a strong Euro, maybe we should reduce those measures".

Things changed again. Meanwhile everyone talks about how weak the Euro is. Everyone is like "Greece, Italy, Portugal, Spain, ... The Euro isn't going to be worth anything soon". And now what I don't get about it: The current exchange rate is 1 EUR = 1.337 USD (lol nice value, just looked at the European Central Bank's website, giving out the currency).  That's a huge increase.

Now I understand that the US economy, like most economies really suffer these days. However, nobody is like "Oh my god, the USD won't exist anymore soon or they will split, ... PANIC", like in Europe. Okay, that changed in Europe too, but the current exchange rate isn't any different from what it was over the last few years. In fact it's even lower, so people should be panicking more.

Or is it actually the other way round? Should Europe actually be heading towards a lower exchange rate?
)
Sorry, I am sure these questions seem really dumb, but like I said. I am just a tech guy and I've got to start somewhere. I guess I should read books or so about it, but I really have a long list already.

[Carlton Banks]

The picture is muddy from my perspective too, but I'll tell you what I know.

EU has nearly 30 states, only about 15 or so are using the Euro. But all those 15 set nearly all economic policy independently of the ECB. The banking system isn't a single joined up system, it's actually still compartmentalised along the borders of the individual states, so, financial regulations, fiscal policy, and to a certain extent, monetary policy are all different. Even the serial numbers on the notes can be attributed to one state: "German euros" are more widely accepted than "Greek euros" right now. The states themselves have very different economies: Germany is the vehicle manufacturing top-dog, France and Britain are big in finance, Italy does alot of luxury goods, a fair amount of technology comes out of the Baltic states, etc etc. Some of the states didn't really have a specialism that stood out, and have tried to rely on the property market, Spain and Ireland being foremost there, I think.

The problem stems from where I mentioned "to a certain extent, monetary policy". Despite all the free rein that the individual states have, the monetary policy is basically the same for all states; they can't set interest rates, or alter the money supply. It's a single currency, but just about the most loose definition of such a currency that there is. So, the "weakness" isn't so much that of the exchange rate, but of the individual finances of these vastly indebted members of the Euro, and the trouble is that the characteristics of the currency union are such that if Greece, for instance, has to write off it's debts, investment banks across the whole continent that provided that credit to Greece get hit for a collective ~€200 billion. It's a very high stakes way of having a single currency, as when things are bad, the malign effects are terrible for almost everyone, whereas when things are good, the separation of the state economies means that any benefits are largely felt by the state that is performing well, and them alone.

[wachtwoord]

"German euros" are more widely accepted than "Greek euros" right now.

Being from a (northern even) Euro country, I can guarantee you this is not true at the moment. It's all legal tender and by law you're required to accept it. Just like Federal reserve notes and US Dollars.

As with the worth: It's all monopoly money. What fake money is worth more? I guess the US has slightly faster printers than the EU at the moment ....

[niothor]

The picture is muddy from my perspective too, but I'll tell you what I know.

EU has nearly 30 states, only about 15 or so are using the Euro. But all those 15 set nearly all economic policy independently of the ECB. The banking system isn't a single joined up system, it's actually still compartmentalised along the borders of the individual states, so, financial regulations, fiscal policy, and to a certain extent, monetary policy are all different. Even the serial numbers on the notes can be attributed to one state: "German euros" are more widely accepted than "Greek euros" right now. The states themselves have very different economies: Germany is the vehicle manufacturing top-dog, France and Britain are big in finance, Italy does alot of luxury goods, a fair amount of technology comes out of the Baltic states, etc etc. Some of the states didn't really have a specialism that stood out, and have tried to rely on the property market, Spain and Ireland being foremost there, I think.

I doubt you're from Europe.
There are 28 states , why use "nearly" ,  we're not talking about cattles here , and 17 country using the euro.

I am from  EU and i can tell you i have spent lots of euros from germany in france and from france in italy and nobody ever bothered to look at them when paying.
Also your whole picture about UE when coming to manufacturing and finances is a bit of.

[Carlton Banks]

The picture is muddy from my perspective too, but I'll tell you what I know.

[Carlton Banks]

I am from  EU and i can tell you i have spent lots of euros from germany in france and from france in italy and nobody ever bothered to look at them when paying.

Greek euros are said to be the sticking point, not French euros. You're right though, I have no direct experience.
 

Also your whole picture about UE when coming to manufacturing and finances is a bit of.

Are the state economies not all structured and regulated differently? I think the general point still applies, even if my examples are wrong.

[niothor]

I am from  EU and i can tell you i have spent lots of euros from germany in france and from france in italy and nobody ever bothered to look at them when paying.

Greek euros are said to be the sticking point, not French euros. You're right though, I have no direct experience.
 

Also your whole picture about UE when coming to manufacturing and finances is a bit of.

Are the state economies not all structured and regulated differently? I think the general point still applies, even if my examples are wrong.

I don't understand why people feel the need to answer question even when they know they only have some vague information about it.

There is no difference between greek/german/italian euros other than design.

I hated how you said Germany is good in that Italy in that. Seems like the whole american perception.
Germany - cars and beers , Italian pizza and Ferrari and France for perfumes.

Just as an example , Netherland is a bigger beer exporter than Germany while the biggest consumer per capita is the Czech republic.

[wachtwoord]

I am from  EU and i can tell you i have spent lots of euros from germany in france and from france in italy and nobody ever bothered to look at them when paying.

Greek euros are said to be the sticking point, not French euros. You're right though, I have no direct experience.
 

Also your whole picture about UE when coming to manufacturing and finances is a bit of.

Are the state economies not all structured and regulated differently? I think the general point still applies, even if my examples are wrong.

I don't understand why people feel the need to answer question even when they know they only have some vague information about it.

There is no difference between greek/german/italian euros other than design.

I hated how you said Germany is good in that Italy in that. Seems like the whole american perception.
Germany - cars and beers , Italian pizza and Ferrari and France for perfumes.

Just as an example , Netherland is a bigger beer exporter than Germany while the biggest consumer per capita is the Czech republic.

It makes sense the Czech consume the most, their beer is by far the best.

[niothor]

Things changed again. Meanwhile everyone talks about how weak the Euro is. Everyone is like "Greece, Italy, Portugal, Spain, ... The Euro isn't going to be worth anything soon". And now what I don't get about it: The current exchange rate is 1 EUR = 1.337 USD (lol nice value, just looked at the European Central Bank's website, giving out the currency).  That's a huge increase.

Everybody will come with breaking-news when a plane crashes but nobody will give a damn about the 10 or 20 days when thousands of planes are flying without problems.

Same happens here. All the media cares is about the end of the world the end of the euro the end of zooporn.

Recently the guy who "invented" the term Grexit said that this is no longer a threat , for the last 5 month unemployment is Spain is shrinking , when you shop in Greece (personal experience) you get a bill (meaning at long last taxes are collected) and the deficit is going down even more than expected.

I told a lot of people that just because you got unemployed or you got a wage cut or your dog has died it doesn't mean that the whole country is in deep sh**.

This is why the Euro still stands and , although it might anger a lot of people on this forum  IT WON'T FALL THAT EASY.

[Carlton Banks]

I hated how you said Germany is good in that Italy in that. Seems like the whole american perception.
Germany - cars and beers , Italian pizza and Ferrari and France for perfumes.

Just as an example , Netherland is a bigger beer exporter than Germany while the biggest consumer per capita is the Czech republic.

- Germany has a bigger vehicle industry than any other EU country

- Britain has a bigger finance industry than any other EU country

- Italy has a bigger luxury goods industry than any other EU country

Are you saying that all EU state economies are the same? Why not tell us what your view is, you seem confident that mine are all invalid. You must know what's true if you also know what is false.

[niothor]

I hated how you said Germany is good in that Italy in that. Seems like the whole american perception.
Germany - cars and beers , Italian pizza and Ferrari and France for perfumes.

Just as an example , Netherland is a bigger beer exporter than Germany while the biggest consumer per capita is the Czech republic.

- Germany has a bigger vehicle industry than any other EU country

- Britain has a bigger finance industry than any other EU country

- Italy has a bigger luxury goods industry than any other EU country

Are you saying that all EU state economies are the same? Why not tell us what your view is, you seem confident that mine are all invalid. You must know what's true if you also know what is false.

First you said about Germany - manufacturing / now cars, second you said Britain and France - finance , btw what's Britain? ,
Care to back your assumption about luxury goods from Italy by numbers?

About knowing what's true and whats false.
I can surely tell that a dog on the street weights more than 1 kg but not what it's weight is.
Also i can say that this player sucks at football but it doesn't mean i'm better than him.

[Carlton Banks]

Well, here's what I'll say: you're really good at being negative and argumentative, but not much else. Or maybe you are, but there is no evidence of that in this thread.

[niothor]

Well, here's what I'll say: you're really good at being negative and argumentative, but not much else. Or maybe you are, but there is no evidence of that in this thread.

I already answered to the OP question , but you seem blind to not see that post.

You were just posting your thoughts with nothing backing it up , that is called waste of time.

[lepko]

It mostly depends on the interest of the big speculators. Professional traders are aware to be contrarian when the public media are overwhelmingly pessimistic on one side or the other.

EUR and USD are both to stay. Even if Gold goes to 3000$ as some rumors say, it's the normal scheme of the super elites to pump the money from the mass by creating deflation after creating inflation (so called "Boom and Burst" game). Then maybe there will be some kind of purely electronic EURO or USD as a pretext to solve the liquidity crisis but it will stay euro and usd.

[Grinder]

Recently the guy who "invented" the term Grexit said that this is no longer a threat , for the last 5 month unemployment is Spain is shrinking , when you shop in Greece (personal experience) you get a bill (meaning at long last taxes are collected) and the deficit is going down even more than expected.

Getting a bill tells you nothing, as long as you pay cash it's no problem to hide it.

[countryfree]

The mistake you're making is in the association of Greece's troubles with the value of the European currency. They're hardly related.

It's like saying that because there are thousands of homeless people in Los Angeles, this is a poor city where there's no work, nor any opportunity, and that all shops selling expensive goods should close down because there won't be any buyers with big money to spend.

[CurbsideProphet]

The Euro has appreciated vs the USD because the US, through quantitative easing, starting devaluation first.  Now everyone is trying to devalue so you have a currency war of sorts that isn't always successful.  Japan is a good example, they are implementing the "printing to infinity" policy but as you can see the Yen hasn't devalued a great deal yet.