On Euro and world's currencies

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Steven81's picture
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On Euro and world's currencies

Hi, as you may know in July the Euro peaked against dollar at $1.6, the picture was about the same against yen and most other strong currencies. As a matter of that fact the increased share it had as a reserve currency made people thought that Euro was the currency of the future and the progenitor of dollar's downfall. Of course as always with fiat currencies, things are very volatile and since Euro is as much of a piece of paper as dollar is, it only needed a shift in the mind of the investors and some of the banks to tumble this reputation.

In fact there is talk nowadays saying that "we're led blinded by what in fact is not a very strong currency". For example there is the following recent article in Bloomberg http://tinyurl.com/4m3jz3 , calling for Euro's demise. So far so good all the things I wrote are not strangers to fiat currencies' regime, what strikes me -however- as very odd, is the grounds on which speculators are saying that Euro should and will fall. According to the above article and many other "analysts", the Euro is losing ground because it has no central planning (ala FED?!?), while as you may see from the markets, the European bailout was a splendid thing but it came too late.

In other words -according to recent cases-, a) A currency GAINS in value when more of it is out in the market, namely inflation causes strengthening of the currency which results to opposite effects than what we know as the effects of inflation b) Central planning is ESSENTIAL for a strong currency and -maybe- a strong economy. c) It seems that the "analysts" and those who trade on stock markets, are YEARNING for the two, which are nothing more than the evil offspring of socialism and Keynesian economics. My point is that, folks we're not living in a free economy but in an increasingly planned economy. Not only that but somehow interventions are made to be a salve for the market.

Either the whole world gone mad or the Austrian school and classical economics had it COMPLETELY wrong.Please tell me which of the two is happening, because as far as I can tell the more governments are acting AGAINST the predictions of economic theory the market rejoices, while when they're not as much pro-planned/interventionist economy the markets suffer, the currency plunges (according to the said analysts Euro will lose even more of its value, rendering us Europeans even poorer) and we all becoming poorer...

ds's picture
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Re: On Euro and world's currencies
seems to me that you are simply looking at current events with too short a time horizon. Give the Austrian school predictions enough time to play out.
Steven81's picture
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Re: On Euro and world's currencies
Indeed but the time horizon on which the world "leaders" see the economy is even shorter. As such they meet and are photographed together, all the while they decide to nationalize even more. Sadly the trend is now opposite than the one of the second half of 20th century, Keynesians make a strong comeback and this time they seem to resemble socialism even more. I mean even the US is nationalizing the banks and considering that I don't have big steak on the stock martket I foremost care for the currency.

The moves made, both from US and EU, seem disastrous to the currencies and I'm very worried that those monkeys' unawareness of real time economics whould ruin my savings and turn my way of life to that of far lower standards than that of my ancestors, even if I was never a big spender. I have already lost 16% of my savings -in less than 4 months- due to the fact that my country mostly import goods (and exports services). Not to speak about the inflation that is going to be caused due to those "injections of cash", which means that we're doing two bad things right now, we're keeping bad businesses afloat (to leech even more wealth from the economy) AND we inflate the money supply, all the while the markets are approving those moves. Indeed the world has gone mad...
Xflies's picture
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Re: On Euro and world's currencies
Thx Steve, it's hard to find someone here that agrees with me... I posted a while ago that I thought that countries could be ranked in terms of their ability to withstand stress and having central planning tools like the US does is a huge advantage.  The other factors I had were the extent to which an economy was diversified, debt/gdp, overall size and the amount of foreign capital already invested in the country.
pinecarr's picture
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The Telegraph: "Europe on the brink of currency crisis meltdown"

There's a really interesting article by Ambrose Pritchard in the UK's Telegraph today at http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3260052/Europe-on-the-brink-of-currency-crisis-meltdown.html . Here's the first part of it.  I always like reading the comments too, as you get so much insight from them as well.

Europe on the brink of currency crisis meltdown

The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.

They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.

Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.

RubberRims's picture
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Re: The Telegraph: "Europe on the brink of currency crisis ...

It is fantastic that we can chart history because in many ways it holds an image of the future. However this time we are going to have to throw out the fiscal economic rule book. I would look deeper in to the political goals of a global economy. Step by step over the last 20 years countries have been merged together under a single currency, the Euro this we know. If what I know is write it is a trilateral division of labour and power between competing nations that may become a bigger problem than first thought?  

Since money is a mathematical multiplier it stands to reason there will only ever be, ever larger corporations attempting to supervise the entire globe or be it portions they can manipulate. If so each portion will be given its direct task, Plutonium, Gold, Oil ex.. We will be held to support the future prosperity of whoever controls the largest controlling assets of the corporation. It is no more than a game. The end result is just global monetary domination and a unified currency. It makes perfect sense, that when the cold war ended Russia became a player. 

Why is it that I feel war is the only option open to people, to ensure and liberate them from suppression. This situation is very much likes a child who has to learn by its mistakes. Until it knows the difference between right and wrong, it cannot learn. Our progression in to the future is exactly the same. The modern world has to struggle to push forward and learn, and we are still in the first half of the 21st century. Global population is the next turning point. Like the money supply it follows a defined set of rules. Since 1933 each recession has been followed by another, each larger in scale than the last. What will happen in the next 20 years, will we decimate a country by economic implosion, or will my children be sent to war. 

End game.

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