The die is now cast. As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis. We now have to start asking whether the EU itself will survive in its current form.
Telegraph.co.uk - but other than that, a possible scenario? You can't be me, I'm taken
As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis.
And, if $1.50 to the Euro is sufficient to guarantee an economic and political crisis in the Eurozone, why is $2.10 to the Pound not enough to send the British economy into a tailspin? We have met the enemy, and he is us — Pogo
Britain is far less dependent on manufacturing than some euro-zone states. sterling is falling aginst the euro and Swiss franc -- to 4 year lows viz euro, so the currency overshoot is not as extreme. sterling will fall a lot further, and that will rescue us. The problem for the Spain, Italy, Greece, et al, is that they cannot devalue. They are tied to the German-Austia-Dutch-Finish bloc, which has a much higher euro pain threshold. UK can and will slash interest rates. Club Med cannot do so until Germany is ready, which it is not... <snip> By the way, I'm not saying the eurozone is "inevitable". If Germany is willing to tolerate inflation, Club Med will be given a lifeline. I am saying that there will be a major crisis whatever.
Britain is far less dependent on manufacturing than some euro-zone states.
Britain is far more dependent on financial speculation and puffery than some Eurozone states. An economy built on funny money CDOs and junk mortgages is clearly in such a strong position at the moment.
ceebs:
sterling is falling aginst the euro and Swiss franc -- to 4 year lows viz euro, so the currency overshoot is not as extreme.
Overshoot? What overshoot? We're talking about a currency which is starting an inflationary spiral and is likely to default on some or all of its obligations within the next 5-10 years.
There is no overshoot here. If anything it's faith-based nonsense like this which is making the dollar dump too cautious.
sterling will fall a lot further, and that will rescue us.
Because that's such good news for an economy based on rickety financial scams which imports almost everything that matters.
UK can and will slash interest rates. Club Med cannot do so until Germany is ready, which it is not...
The UK can't slash interest rates without creating stagflation. A rate fix is another roll-out for the Greenspan put, and we know how well that worked for the US.
Honestly - where do they find these people? He sounds like he has genetic connections to the geniuses at the Treasury who are predicting $20/bl oil.
Even setting aside my skepticism of claims that some sort of grand crisis on a scale previously unseen is coming, I don't see an economic or political crisis arising because of exchange rates. But there is some argument to be made that Europe shouldn't rely on decoupling from the US to save it from the fallout here. The markets in Europe have been rocky, and Trichet is pumping quite a lot of money into the system. WHEEEEEEEEEEEEEEEEEEEEE!
This will be the next domino, IMHO, to fall in the developing global financial re-adjustment.
Knowing the exposure, meaning how much money has been "invested" - hahahahahahahaha! - in these things, by EU financial entities: banks, hedge funds, & etc., goes some way to allowing us to forecast the health of the EU financial sector over, say, the next 2 years.
At least that's the reason for my question. A doo run-run-run, a doo run-run
What the European macroeconomic picture will look like over the next few years is better for people like Jerome to discuss, because I'm not at all tuned-in to it. WHEEEEEEEEEEEEEEEEEEEEE!
Jerome? Migeru? You guys got anything? A doo run-run-run, a doo run-run
All of them will likely be cutting rates next year. I disagree with the idea that they'll fall below 3% in the states, but they'll be significantly lower. The question is: How much will Europe be tied up in this? WHEEEEEEEEEEEEEEEEEEEEE!
INTEREST rates are set to tumble next year in a big boost for homeowners, the Bank of England hinted yesterday. It said the UK economy would grow more slowly in 2008 -- with house price inflation slowing and consumers spending less. Governor Mervyn King also warned that continued fallout from this summer's Northern Rock credit crisis could play a part. He said: "This looks like a fairly sharp slowdown. What is difficult to judge is whether the slowing is bigger than we would have wanted." City economists said it was a clear sign that interest rates would fall from their present rate of 5.75 per cent.
INTEREST rates are set to tumble next year in a big boost for homeowners, the Bank of England hinted yesterday.
It said the UK economy would grow more slowly in 2008 -- with house price inflation slowing and consumers spending less.
Governor Mervyn King also warned that continued fallout from this summer's Northern Rock credit crisis could play a part.
He said: "This looks like a fairly sharp slowdown. What is difficult to judge is whether the slowing is bigger than we would have wanted."
City economists said it was a clear sign that interest rates would fall from their present rate of 5.75 per cent.
(And all that depends on what the definition of "is" is. Yes, I know, all very Bill Clinton.) WHEEEEEEEEEEEEEEEEEEEEE!
Now, whether this is an interested rumour by industry insiders who would gain from the market effects of the very rumour, or expect to be able to create such a climate of expectation as to force the hand of the BoE, I don't know. Everything is possible.
I really don't understand monetary theory so I don't know what I think the "right" interest rate policy should be over the next 6 months. But that's what I hear. I do think that lowering rates is just going to pour gasoline on the flames of the asset bubble. We have met the enemy, and he is us — Pogo
I don't know what the BoE's mandate says specifically. I know the Fed's, and you've told me the ECB's, but the basic premise is likely the same: Balance stable prices (stable growth in prices really) with maximum output/employment.
If I were King, I'd be very hesitant to do anything that might be equivalent to pouring gasoline on the fire in Britain. As it is, I think we're looking at one of the nastiest crashes around the globe there -- much worse than in America and countries with comparable bubbles. Average and median house prices in Britain are fast-approaching double those in America, and some indices have them already surpassing that point. WHEEEEEEEEEEEEEEEEEEEEE!
As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis. We now have to start asking whether the EU itself will survive in its current form.
Right. Because the crisis is in the eurozone, and not at all in the City or tha land of unusstainable and unpaid for McMansions and Cadillac Escalades. In the long run, we're all dead. John Maynard Keynes
"Will Europe impose exchange controls to head off disaster?" The die is now cast. As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis. We now have to start asking whether the EU itself will survive in its current form.
My, my, how things change.
Not too long ago the die was as the euro plummeted towards worthless invoking a full-fledged economic, social, and political disaster; which, in time, would cause the very EU itself to explode in a puff of nothingness.
Telegraph.co.uk - but other than that, a possible scenario?
No.
Look, the global economy requires a reserve currency that, more or less, holds its value for a reasonable period of time. Anyone, with any sense, has already started to move away from the US dollar due to its structural weakness. As the financial crises plays itself out the € is only going to move into a stronger position relative to the $.
True some purchasers of new equipment (stuff) may decide to buy American based on the relative pricing but that's insignificant compared to the purchase of parts and services to maintain and upgrade the equipment (stuff) already existing in plants, shops, and homes and the relationship(s) that fosters.
The eurozone consumer purchases will still be transacted in euros, thus supporting the euro.
Keeping a manufacturing base somewhere in the EU will help support microeconomic activity within the EU thus supporting the euro.
As the oil producers move away from the dollar the euro will be supported by Peak Oil to the extent the basket of currencies - if they are smart - incorporates the euro as a percentage of the basket.
Last, believe it or not, except for the trans-nats (and who cares about them?) most firms don't base fundamental business decisions on currency moves. The rise of the euro versus the dollar actually illustrates why. Any company that based their long term business decisions on the relative value of the euro/dollar as it was 2 years ago is in deep trouble today. A doo run-run-run, a doo run-run
Yes. It matters to me, and others on this list, as we live in the dollar economy. How bad it will be depends on how hard-nosed the rest of the world gets when they realize they ain't gonna their money back. As an example, the US automotive industry, to stave off bankruptcy, utterly depends on rolling over their existing debt OR they will have to raise capital through equity to pay for principal return OR they will have to be bought-out, taken-over, by something capable of returning the principal.
No. To those of you living in the eurozone and who do not make a living off the international commodity trade - which includes currencies, btw - or financial services most likely all you'll see is a stronger attempt by the PRC to move into EU markets coupled with a slow rise in the amount of American goods and services attempting to enter the market. The downside affects will be felt primarily in those EU countries that profited from the insanity of the dollar and pound areas economic policies.
Maybe. For those who do make their living in the international commodity trade or financial services life is about to get interesting. (Bankers love these times. It gives them nice warm fuzzies. Just ask Jerome. :)
For years some of us on ET have shouting the financial Models being used were bullshit. Over the last 3 months, say, the financial world has arisen from its dreams and realized, "Hey! Our Models are bullshit!" Then they thought, "If our Models are bullshit what about .....? OH NO!" And stopped lending to each other.
What we've got going on is a classic Flight to Quality where nobody knows where the Quality is: euros? yen? rubles? gold? Slovenian Goat's Head Cheese?
So the 'Maybe' depends on how the Flight to an Unknown Quality plays out.
(Apologies to geezer for going O/T & trampling all over his diary) A doo run-run-run, a doo run-run
My guess is the preliminary decision has been the € is the place to park value, at least in the short run, while things work themselves out. A doo run-run-run, a doo run-run
Cos they got energy and the EU hasn't.
As I understand it a weaker dollar should make American exports cheaper. At the same time however imports get more expensive, plus world resource prices are going to go up and keep on going up. Japan and Europe have done a lot more than the US (or China and India for that matter) to make their industries resource and energy efficient. Maybe 'a lot' is an understatement. The US has a larger resource base than Europe or Japan, but its industry - what's left of it, anyway - still needs to import a lot of raw material.
This means that the competitive advantage the US industry will get from a weak dollar is not going to be as much as it was in the past. Might not be enough to stave off bankruptcy for one or two of Detroit's dinosaurs?
Any company that based their long term business decisions on the relative value of the euro/dollar as it was 2 years ago is in deep trouble today.
Enders Rings Alarm Bells: Euro Strength Knocks Airbus Off Course - International - SPIEGEL ONLINE - News
Airbus is in trouble. ... Even worse, Airbus earlier this year launched a restructuring program called "Power 8." The idea was to massively cut costs and stop the bleeding at the European plane manufacturer. The problem? Power 8 assumes an exchange rate of $1.35 to the euro.
I wonder why they continue selling planes in US Dollar and not in another currency or pool of currencies (yen, euro, ruble, live chicken, whatever).
A few oil exporting countries (some of which are airbus customers) have indicated their intention to switch from US $ to other currencies for oil so it seems quite simple to sell them the goods in the same way. Le caoutchouc serait un matériau très précieux, n'était son élasticité qui le rend impropre à tant d'usages.- A.Allais
