It appears to be a race to the bottom here. I happen to think that the Euro will implode before the dollar, which will probably lead to a dollar rally. I would like to hear everyone’s opinion.
Spain, Italy, Portual, Greece, etc, it appears that the Euro is in a worse shape than the dollar, amazingly.
I’ve heard the argument that
Euope at least has a Germany, a productive economy that can shoulder all the PIIGS, at least for a while. The US is but 50 Spains, Italys Portugals and Greeces cobbled together.
The US owes more than any other country.
The Europeans are introducing austerity, which the US thinks is madness.
Three reasons why, although both are in sad shape, the dollar will fall before the Euro.
This is an interesting thing to follow. Much the same as the inflation or deflation debate.
According to this chart: http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt
United States is 36th in public debt, Europe in average is much worse.
I, personally, think that TPTB are trying to demolish the Euro in order to save the dollar. The dollar has much more weight in every financial market around the world, including debt and energy. The euro doesn’t have the same necessity of flow that the dollar does.
The EU banks are waaaaaaay more capitalized (some of them like 50 or 60 times) than US banks and have much more to lose. The wars are the only reason that the whole system (the EU and hte $) are even still workable. The U.S. idiots brag about the ‘service sector’ as we have roughly 10 percent productive capacity and 6-8 percent of that 10 percent total money flow is military spending by government and a few corporations. If we cut that, we have food and trinkets. So between war expenditure, oil markets and debt markets the dollar has value because it is needed for transactions everywhere. Who know what M3 really looks like if the FED can give foreign corporations and banks money under the table . Those Eurodollars will flood back here and then we’ll have a dollar that, internationally, should be worth about 95% less than it is today.
The EU is a contrivtion and if it is broken up most of Europe will look like the U.S. (see above) and thew middle east will be in chaos, because we’ll have collapsed Saudi Arabia’s savings. China will be in a restructuring allowing their people to buy more (which sounds good for the people, but a self sustaining economy like that will make a brutal military/industrial complex in the future) Germany and France will be fine assuming that they can move back to the Franc and the Reich.
And I’m not sure how much raw materials we’d have available to even keep up that roughly 5% percent of our economy that is legitimate and self-sustaining. Ahem, I’m sorry, I must have meant isolationist.
Ron Paul has the best quote ever, “It’s a dishonest system and it doesn’t deserve to work.”
I meant external debt.
Also, that page you linked to has the USA at 11, according to the IMF.
The euro without doubt. The devaluation last year gave it a very nasty blow from which is not recovering and the promised interest rates increases are not materializing. To top it all up an Italian (and Goldman-Sachs alumnus) will become ECB president in November after Trichet retires.
Also the mugh fangled austerity measures are failing to affect budgets while at the same time stirring up a hornets nest. Apart from Ireland all PIIGS (plus France) have very strong union movements which can exert a ton of pressure on politicians. People are accustomed (addicted?) to hand outs and are not letting them go without a fight.
After a decade of talks about the “One Thousand Years Reich euro” the option of allowing countries to “be let go” is clearly on the table. While French, EU and ECB officials want to keep the EMU no matter the cost for all the member States, cooler heads are starting to wonder if, instead of devaluing the common currency even more and saddling up countries with already high debts with more interest payments, the best course of action isn’t perhaps to give the Greeks a currency they can devalue themselves.
Also while all eyes are on Greece, the next big crisis may well be in the true “sick man of Europe”: Italy. The banking system is struggling to hide its weaknesses, spending is completely out of control and interest rates are seen by many investors as well below what they should be. The blow the Milan stock exchange took this week is a warning shot. As I said before compared to Italy Greece will truly be a cakewalk.
Both according to this:
and according to this:
The United States is not at such bad place comparing to Europe. Nevertheless Americans fear the debt a lot more than Europeans.
Quote
Do you think when the Euro collapses, there will be a huge dollar rally?
There could be a dollar rally. I think that is what everyone is counting on. I think that there are only a few reasons to invest in the U.S. and they are not huge positives…they are like anecdotal at best.
Italy, is worse than Greece, yes, and so is Spain. We’re in for five years or more of this save for a cataclysm. After that…probably reconstruction.
Are there people in the news that are concerned that the private banks of the world are criminals and that they are changing the world forever by privatizing, in their hands, all of the governments of the world’s assets with money that they create? Is there a set of lawyers on this? Fuck.
Do people get the seriousness of it all?
In what way is “which will crash first, Euro or Dollar” “much the same as the inflation or deflation debate”?
Do you think when the Euro collapses, there will be a huge dollar rally?
Now there’s a great question. Assuming the Euro dies first, meaning it becomes worth 10% of what it used to be compared to gold and to other currencies, will people dump their Euros and run to dollars first chance they get?
There are two possibilities here.
They might ignore the fact that the dollar has all the problems the euro does, only worse, and make a lemming like run to the dollar. This happened in 2008, when instead of running away from the dollar, people ran to it, mistakenly thinking it was a safe haven for some reason.
So historically, if we look for evidence that people are stupid enough to do such a thing, yes it might well happen.
The other possibility is that they say, correctly, if the Euro fell, why not the dollar, and ever so much more so?
I don’t know which will happen. Am interested in anyone’s input, too.
Jacob:
This is an interesting thing to follow. Much the same as the inflation or deflation debate.
In what way is “which will crash first, Euro or Dollar” “much the same as the inflation or deflation debate”?
Cause when one crashes the other will suffer either inflation or deflation?
How does the supply of Euros have any influence on the supply of dollars? Or vice versa?
Because the value of the Euro is partly determined by the quantity and value of the ECB’s dollar holdings and vice versa for the FED. I do not know the exact ratios.
That doesn’t make any sense. The Fed could print $500 Trillion tommorow and it doesn’t have to effect the supply of Euros one bit. The only thing that can cause inflation/deflation is a manipulation of the money supply…and the only thing that has the ability to increase the supply of Euros is the ECB.
If there is an external way to devalue the asset holdings that are acting as collateral for the paper money, then doing so will be met with the purchase of new bonds by the ECB. So you are right that inflation in the long term sense is only caused by increase in the stock of money, but overlooking that external factors can mess with domestic prices and cause policy reactions.
EDIT: and further, new currency is collateralized by the purchase of bonds, from anywhere in the world. The FED has used Mexican bonds to collateralize the issuance of new US Dollars in the same way that the ECB issues new Euros by buying US bonds. Fluctuations in these markets, through mark-to-mark, play on bank assets and that determines their value. Obviously, the U.S. bond market/U.S dollar (the asset that backs the bond) is the main player in just about any market.
What assets? Held by whom? How are they “devalued”? The purchase of new bonds from whom?
So basically what you’re saying is that inflation occurs by an increase in the stock of money, or by external factors that cause the money printers to increase the stock of money. I can’t say I disagree.
“new currency is collateralized by the purchase of bonds”…what does that mean?
I assume by “mark-to-mark” you mean “mark to market” (accounting)
I still don’t see how any of this proves that if one currency crashes, the supply of the other currency will decrease.
i did mean mark to market
The money that the central banks 'print" has to be backed by something… This backing is collateral. They “print” money and purchase assets with it. So the purchase is a bank asset, or collateral, for the new notes which are its congruent liability.
i think you are implying that deflation can not occur because the central banks are creating new units of currency, no? Deflation will occur because the money that moves around the economy is eaten when debt is paid (so long as there is no new credit or money being created). So if the FED is really going to discontinue the QE program we should see asset deflation and price deflation on things like houses, gold, silver, oil, but this will result in a rise in interest rates. A rise in interest rates will make the Federal debt unserviceable. If the FED continues the QE program they will continue to buy toxic assets and bad bank debt and use it as collateral to issue new currency.
Either way the Euro’s price will ddecline because it will become even more that the U.S. dollar has no productive (real) value, it is only backed by debts that will never be paid, other than by borrowing more money to pay them.
What? Since when?