Hey guys I’m very interested in economics but I have not been studying it seriously that long. I have read a few books by Mises and other Austrians. I have a very basic understanding of economics. I just have one question. If the Euro is not backed by gold, how is it doing so much better than the US dollar? I read somewhere that the US dollar is worth like $0.35 or $0.45 compared to the Euro. How is the Euro, and the British pound for that matter, worth so much more? What makes them different?
The ECB is not inflating as fast as the Federal Reserve. It’s that simple.
As for the reasons why it’s doing that, it has to do with the decentralized structure of the ECB and the German monetary policy tradition, plus all kinds of other political factors.
If you and a very fat guy jump from a building, you’d both be falling, even if the fat guy falls faster. (Okay, in reality you’d fall at the same speed, but you get the picture. ;))
Seriously, I read the Euro got de-valued by 22% from 1999. Right now, inflation is becoming a serious concern here. They have been lowering rates a bit to keep up (or down ;)) with the dollar, and they need to accumulate dollars to buy oil and whatever. Anyway, 1USD can buy 0.65EUR. Let’s not exaggerate. 