The Euro and its value

[Chicken Runner61]

do we? Euro cant print money as it has no method to do so, and can only borrow as much as the bail out funds permit. as it is some Germans are challenging the legality of existing bail out arrangments. USA cant borrow more money because the debt limit says they cant, the whole reason there is a problem. They could print but its not going to go down too wel in the market and maybe considered as worthy of a rating downgrade if they did devalue their currency so blantantly.

Euro borrowing /printing is much the same thing. They tell us private banks lent/bailed out Greece but I doubt it.

Usa have no option but to agree to increase the debt limit the argument is how much pain to inflict on the people to pay for it.
With an election coming up Obama and the dems don't want too much pain and the republicans want as much pain now!

The Germans are (rightly) pissed off and the situations not getting any better.

 

[Chicken Runner61]

Just to add, I can't see the interest rate increasing again either in the Eurozone so doubt that'll cause any kind of upward movement in the value of the Euro...and QE has stopped I believe so less necessary to increase intersest rates anyway.

This is true - its our interest rates that can't go up.

If we keep bailling out other countries interest rates must go up in Europe again. Germany is relatively happy with a lower Euro as they export so much.

 

[beorhthelm]

Personally I think all this 'USA may default' is a load of rubbish... it is THEIR debt limit and they could definetly roll over their debt. The day the USA thinks realistically about defaulting is a day I don't believe I will ever see.

i know what your saying, the limit is arbitary and self imposed. but fact is, it exists and is a legal restriction. if the US Treasuary issues new bonds to raise more than the $14.3t limit someone will have them in court within the blink of an eye and those new bonds would lilky be declared void and so worthless.

 

[Chicken Runner61]

BTW Whatever the US do on Tues its quite possible they will still lose their AAA rating.

Thats going to hurt someone if they do.

 

[SeagullEd]

Euro borrowing /printing is much the same thing. They tell us private banks lent/bailed out Greece but I doubt it.

Usa have no option but to agree to increase the debt limit the argument is how much pain to inflict on the people to pay for it.
With an election coming up Obama and the dems don't want too much pain and the republicans want as much pain now!

The Germans are (rightly) pissed off and the situations not getting any better.

Private banks were involved but it wasn't purely lending but writing-off of previous debt.

I would question the 'Germans are rightly pissed off', but that's another debate. Don't forget, however, they were the biggest winners from the Euro.

 

[SeagullEd]

This is true - its our interest rates that can't go up.

If we keep bailling out other countries interest rates must go up in Europe again. Germany is relatively happy with a lower Euro as they export so much.

Actually think you've misunderstood me! I don't think that the interest rate will go up in the Eurozone...

 

[beorhthelm]

Euro borrowing /printing is much the same thing.

its pretty much opposite things. one you borrow, one you pay back (with money you got out of thin air).

 

[Chicken Runner61]

Private banks were involved but it wasn't purely lending but writing-off of previous debt.

I would question the 'Germans are rightly pissed off', but that's another debate. Don't forget, however, they were the biggest winners from the Euro.

No I agree with you - the German people are pissed off but the German Government is happy with low Euro because it helps exports.

 

[Chicken Runner61]

My guess is that Euro interest rates will stay level till Oct till commodity prices push inflation up. Ours can't /wont go up till next year.

unless Libya is sorted Which I doubt will be in view of recent events.

 

[BensGrandad]

Just a normal person and not into the money markets etc but will the announcement by the US gov mean we will get more pounds for the dollar so as to improve tourism if nothing else. When I first went to Florida the rate was 2.42 US Dollars to the pound. Could the day come when you will get more that 2 dollars to the pound again. Brother is going to the US in 10 days for a month will he benefit?

 

[J2 BHA]

Sorry to jump on the bandwagon here but something has been bugging me for a while and I have no idea what the answer is(!) so hoping one of you can help me out:

The eurozone appears in a poor state with numerous countries in dire straits and lots of talk of the Euro collapsing etc etc, in contrast to this I have seen a few articles mention how our austerity measures/approach to 'getting back on track' have been well accepted (not sure by whom and it certainly doesn't FEEL like it's very good!) BUT the Euro vs £ is still around 1.09. Anyway, my question is why isn't it, say, 1.20? Or am I mis-informed and we're doing as bad or worse than the Eurozone in general??

Anyone know?

 

[BensGrandad]

It is what we get for the pound that affects most people directly. That is why I asked about whether the dollar is likely to ever get to more than 2 to the pound.

 

[beorhthelm]

The eurozone appears in a poor state with numerous countries in dire straits and lots of talk of the Euro collapsing etc etc, in contrast to this I have seen a few articles mention how our austerity measures/approach to 'getting back on track' have been well accepted (not sure by whom and it certainly doesn't FEEL like it's very good!) BUT the Euro vs £ is still around 1.09. Anyway, my question is why isn't it, say, 1.20? Or am I mis-informed and we're doing as bad or worse than the Eurozone in general??

people read a little too much into exchange rates, though an indicator or relative prosperity, they are not used by the markets a such. the Euro/GBP is really Germany+France/GBP and they arent inthe basket case catagory. whats really important right now is the bond yield prices, detemined by how likely a country is to default and priced to reflect that risk. currently we have record low yields reflecting that the markets think we are good for the money and will be paying it back. Greece, Ireland, Portugal are facing yeilds of 10, 15, 20% or more, meaning noone wants to touch their debt. when they come to issue new debt (to pay off the old) they are likely to have to borrow at the market rate, unless someone (ie ECB, other countries) subs them at a reduced rate (the bailout).

so in short because of the "austerity" we aren't going cap in hand to others to pay our way and pay lower interest with our policies dictating spending - even if you dont like them, they are determined here not at the IMF/ECB or others. eventually we will see the economy turn the corner and will reap the benefits of lower debt repayment, taxes going to health/education/welfare/our choice (or cuts...), instead of repay higher interest loans.

 

[J2 BHA]

people read a little too much into exchange rates, though an indicator or relative prosperity, they are not used by the markets a such. the Euro/GBP is really Germany+France/GBP and they arent inthe basket case catagory. whats really important right now is the bond yield prices, detemined by how likely a country is to default and priced to reflect that risk. currently we have record low yields reflecting that the markets think we are good for the money and will be paying it back. Greece, Ireland, Portugal are facing yeilds of 10, 15, 20% or more, meaning noone wants to touch their debt. when they come to issue new debt (to pay off the old) they are likely to have to borrow at the market rate, unless someone (ie ECB, other countries) subs them at a reduced rate (the bailout).

so in short because of the "austerity" we aren't going cap in hand to others to pay our way and pay lower interest with our policies dictating spending - even if you dont like them, they are determined here not at the IMF/ECB or others. eventually we will see the economy turn the corner and will reap the benefits of lower debt repayment, taxes going to health/education/welfare/our choice (or cuts...), instead of repay higher interest loans.

Thanks for that Beorhthelm.

 

[SeagullEd]

Wo Wo Wo!! Beorhthelm, that last part you shouldn't try to pass off as economic fact. There is a LOT of disagreement about the 'benefits' of such debt reduction.

To others, remember the exchange rate is set by the trade of currency... currency is generally traded to either buy imports (to buy goods from Japan we sell sterling thereby putting downward pressure on the pound and buy yen) or for investments in countries (which, in some ways, is like an export). SO, exchange rates don't reflect the economic 'health' as such - they only do this in so far as investment flows of money might stop if an economy doesn't look healthy so the countries currency depreciated. Exchange rates - in many theories- roughly equilibrate the prices of goods across nations but they only do this for traded goods.

 

[larus]

Wo Wo Wo!! Beorhthelm, that last part you shouldn't try to pass off as economic fact. There is a LOT of disagreement about the 'benefits' of such debt reduction.

Actually, there's very little debate as to debt reduction. The purpose of government debt is to stimulate the economy during recessions, and pay for long-term capital investment in infrastructure etc. This should be balanced over the economic cycle.

However, in the developed world, we have for many years, taken the view that it is great to run up debt now and pay in the future (and by this I mean that it's always in the future, continually being added to). Add to this the liabilities which governments (of all persuasions) haven committed to. For example; public sector pensions, health, welfare etc and it's no wonder we're in a mess.

This situation was compounded by GB running a deficit even during the boom years over the noughties. This restricted our ability to run large deficits, as you end up risking paying high interest payments on the debt.

 

[Triggaaar]

Greece, Ireland, Portugal are facing yeilds of 10, 15, 20% or more, meaning noone wants to touch their debt.

What an idiot. Thankfully he's better on the pitch than off it.

 

[beorhthelm]

Wo Wo Wo!! Beorhthelm, that last part you shouldn't try to pass off as economic fact. There is a LOT of disagreement about the 'benefits' of such debt reduction.

you think so? only in political circles*, economists and markets seem to be fair squarely behind the opinion lower national debt is good. illustrated in basic numbers, paying 6.25% (Spanish 10 yr) is more expensive than 2.74% (UK 10yr) on the billions governments borrow, and that difference has to be funded from taxes sooner or later. the point is you dont want to be in a situation like Greece, Ireland and Portugal being *told* they must cut this much now. we can at least have some debate about where and what is cut, and vote them out if we dont like it in 4 years time.

* you will note that the Ed Balls economic mantra "cuts are too fast, too far" doesnt disagree with the direction of policy, only the trajectory time frame. so beneath the surface, i dont think there is any dissent to the view that the deficit (and eventually the debt) needs to be cut.

Noone may join a long list of footballers who arent great at financial mangment

 

[SeagullEd]

you think so? only in political circles*, economists and markets seem to be fair squarely behind the opinion lower national debt is good. illustrated in basic numbers, paying 6.25% (Spanish 10 yr) is more expensive than 2.74% (UK 10yr) on the billions governments borrow, and that difference has to be funded from taxes sooner or later. the point is you dont want to be in a situation like Greece, Ireland and Portugal being *told* they must cut this much now. we can at least have some debate about where and what is cut, and vote them out if we dont like it in 4 years time.

* you will note that the Ed Balls economic mantra "cuts are too fast, too far" doesnt disagree with the direction of policy, only the trajectory time frame. so beneath the surface, i dont think there is any dissent to the view that the deficit (and eventually the debt) needs to be cut.

Noone may join a long list of footballers who arent great at financial mangment

I meant disagreement in terms of the current situation and policies.

You'd be wrong, there is disagreement amount economists. I know that my tutor in Economics, who is a member of prominent economic think-tanks and his own thoughts have been discussed in the house of commons, is a harsh sceptic of the currenct debt-reduction plans.

The situation is FAR more complex than that, those figures are very very misleading.

 

[Notters]

What an idiot. Thankfully he's better on the pitch than off it.