Posted on 04/18/2008 9:19:58 PM PDT by bruinbirdman
Jean-Claude Juncker, the EU's 'Mr Euro', has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.
Momentum traders have blithely ignored last week's accord by the G7 powers, which described "sharp fluctuations in major currencies" as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.
"I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting," he said.
Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising "protectionism" in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar.
World central banks last intervened eight years ago - with mixed success - buying euros in September 2000 to support the fledgling currency through its worst crisis.
David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. "They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn't happened. There are no signs that the dollar decline has turned disorderly," he said.
European industry has managed to live with the high euro so far, but the damage of major currency shifts can take years to surface. "The moment will come where the exchange rate level will start to cause serious harm to the European economy," said Mr Juncker.
Louis Gallois, head of the Airbus group EADS, said his company is already taking dramatic steps to shift plant to the dollar-zone. "The euro at its current level is asphyxiating a large part of European industry by shaving export margins," he said.
The European Central Bank revealed in its monthly report that foreign direct investment (FDI) into the euro zone has contracted by €269bn over the last two years. Foreigners are gradually winding down operations. This will have powerful long-term effects.
George Soros, the hedge fund baron who "broke" Europe's exchange system in the early 1990s, said yesterday that the euro could never anchor of the global system. "I don't think the euro can replace the dollar as the main world currency. The euro is not a truly attractive alternative," he said.
Mr Soros said the dollar would reclaim its crown eventually, but for now the financial crisis is leading to a flight from all paper currencies, causing a dash for gold, silver, and oil futures.
Otmar Issing, the ECB's former 'High Priest', said the single currency had started well but could face a "disastrous outcome" if the eurozone failed to embrace a flexible market system. "The 'single-size' monetary policy would simply not fit at all. In such a scenario, the single currency would risk straining cohesion " he warned in a new book, 'The Euro'.
This is already occurring. North and South have diverged further. While Germany and Holland have prospered under the strong euro, most of southern Europe and Ireland is in trouble. Current account deficits have reached 9.2pc of GDP in Spain and may touch 15pc in Greece. The European Commission's economists fear that the loss of competitiveness against Germany over the last decade may have passed the point of no return. At best, these countries face years of belt-tightening as their property booms deflate.
Silvio Berlusconi, Italy's newly elected premier, has called for a change in the ECB's mandate, proposing a dual mission akin to the US Federal Reserve's mandate to promote growth as well as fighting inflation. He has the support of France's Nicolas Sarkozy.
A key reason for the 30pc rise in the euro agasint the dollar over the last two years has been the move by Asia central banks and Mid-East wealth funds to parking huge sums of newly acquired wealth in European bonds as an alternative to the dollar.
BNP Paribas said Asian surplus countries and commodity exporters have accumulated $1,160bn in reserves over the last year alone. US Treasury data shows that only 19pc of this was invested in dollar assets. This is a sharp break with past practice. A large chunk of the money was invested in euro-zone securities. The question is whether China, Saudi Arabia, and others, have now reached euro saturation.
“Only one fellow in ten thousand understands the currency question, and we meet him every day.” - Kin Hubbard, quoted in ECONOMICS by Paul A. Samuelson
So true! If 6 of these a sholes read Samuelson, they would at least be smarter than Barak.
HELLOOOO!
ECON 101?
Anybody.. anybody..
Buehler...?
Maybe someone is getting hip to Soro’s monkey games?
The way I see it, without the dollar's weakness against foreign currencies, our exports would not be booming as they are. The stock market gains this month indicate that the market approves, however, the market does not approve of any further drops, or should I say more properly that their currencies are elevated because of a propped up Euro. Japan has intervened in theirs, and it's getting in line, and the Brits adjusted theirs, so now it's up to the other to follow suit, and certainly up to China to release their float completely.
All this would not have happened if not for China to begin with.
When this all clears up, the libor spread will ease, and the feared major resets will not occur in mortgages.
I see this as a currency war that has been going on for more than 7 years. We have come to the final battles and it looks like the U.S Fed is winning, but at a cost. After giving that cost a lot of thought, I figure the cost of stagflation would have been much higher and lasted years. As it is now, we will have a mild slowdown for a couple quarters and some re-valued securities with their various offshoots and that lost value will return in 12-24 months as all the fears calm and people realize that it was over done.
Soros has made a huge profit during this cycle of fear, and we can expect a good part of it to be spent against McCain.
Ha, ha, it's only to get worse.
Bernanke's hari-kari policy better have a silver cloud.
It is a curious episode. Europeans can unload their Euros and buy US property, businesses, and take vast vacations that they never dreamed about. The amount of European products coming into the US now? It is apparently decreasing because no one can seriously afford to overpay for a product. I’m one of those Americans working for DOD in Europe...where I’m paid in dollars and there is almost no real cola given by the company...so this is almost turning into charity work for me.
I doubt that the rate can stay like this...with most European analysts predicting that the new president in January...will likely trigger a reverse trend...no matter who it is. You will likely see a huge buying spree by the Europeans by the end of summer....buying into houses and property across the US.
It's a built in tariff that makes European imports very expensive. and increases the number of Europeans vacationing in America.
ping for saturday reading
We just have to sell to those who are likely to sell it straight back to us when the dollar rebounds at their expense.
Can you move to a pension and learn to live on sandwiches until Bernanke re-bounds the dollar?
Shouldn't that be, "franc?"
Oh cry me a river you Europansies!
Their real gripe is that we are paying less on our deficit but still getting the same value.
After WWI,Germany was required to pay billions of Marks to the Allies in war reparations.When the Mark fell and thousands of them were equal to a few dollars,the overprinted Mark easilly payed off the outrageous debt though the Allies recieved little more than decorative paper.
Washington DC has put America so far in debt a real dollar could never pay for it without wrecking our economy.A de-valued dollar,on the other hand,may be our only hope to pay off the global liabilities that may cripple us in the long run.
Once the debt is paid or lessened suficiently,we can issue the “new” dollar and start over.
Right now,a short recession or perhaps even a depression,may be a somewhat unpleasant plus if we wish to preserve America for our children.Our plight will be harsh,but the plight of the nations we owe money to will be worse but at least we will be done with our debts to them.
It goes without saying that if Washington DC politicians had had the interests of America in mind instead of egomaniacal self-interests this bitter pill would not be necessary.
One of the biggest problems is all the currencies, pegged to the greenback, that are undervalued. That is: ChiCom yawn, Saudi (Middle East) currency and any others that are state controlled and do not float. These guys are hording undervalued currency and can't spend it fast enough.
yitbos
Not to mention the jobs that are being created here in the US as euro companies rush to take advantage of the exchange rate to build factories here and build business.
My anecdotal evidence is that I know of FOUR different German businesses being created in the States in the next year.
I know of NO ONE that has lost a home to foreclosure.
And, no, business is not my business :-)
Would u be terrible bothered if I asked u to move my deck chair on the Titanic to the high side of the boat?
Fiat money has to have a down side for someone!....Its the nature of the beast
Soros probably made a fortune as the dollar fell and is now poised to make another when it rises.
i do believe he's been trying to make it fall for some time now
David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. "They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn't happened. There are no signs that the dollar decline has turned disorderly," he said.
The dollar slide has caused exports to boom (double digit growth 5 years and a row, and looks to be 6) and the trade deficit, besides oil/energy, to decrease.
Ok, but can we survive the Oil/energy(everyting) cost spike? Looks like its helping .000000001% of our population. Why would Washington be happy as the the future looks devastating.
Those in Washington will loose elections because of it and Fed/State/local tax dollars are plummeting. My local school system is laying off hunderds of folks. (but keeping the none producing tenure people. (figures)
If you are paid in dollars then this is not a good thing. You wealth is evaporating before your eyes. Your standard of living is falling and there is nothing you can do about it, short of moving to non dollar economy nation.
There are no authorities. The last authority died many years ago. There are officers of the state.
My cost of living is up about 3% from a year ago, with almost all of that being food and energy. That’s about the same as the last 10 years except its condensed into those 2 groups. I’ve also done things to prevent growth like buy a more fuel efficient vehicle 3 years ago and stock up at the grocery store during specials.
Exports are about 14% of GDP so no it’s not .00001%. Yes we can survive the oil/energy price spike but we wouldn’t even have that if our government allowed drilling, coal and nuclear energy here in the US. The USD was overvalued in 2001 and it’s undervalued now. I expect a rebound to start by summer in the USD as the fed stops lowering rates.
You are very fortunate, I am seeing huge increases in cost of living food, fuel and energy all going thru the roof.
““Only one fellow in ten thousand understands the currency question, and we meet him every day.””
I took the college economics courses - I got the bachelor’s in Finance - but that was the early nineties before the euro and it was unthinkable the dollar could become so weak.
I’m having a hard time understanding the cause for this decline.
I wonder what his reasoning for this is? Can the main currency of the world last very long without control over the world's security structure and Vis-versa?
- Yes, because the strong economic development of Eastern Europe and most of Asia compensate for the present American recession.
I've witnessed how strong the demand for Western European quality goods actually is at the closest possible level, working at the assembly line of Volvo Cars here in Gothenburg (one of the largest industrial plants of Europe, yeah, I've been at the front!).
Interesting article bump...
Here is an article posted today that expounds on Soros’ reasoning.
http://www.freerepublic.com/focus/f-news/2003869/posts
We do not cry a river. In fact our industry stays astonishingly cool this time since the US lost much of its original relevance for us. America still stays the most important trade partner of Europe, but its share in our exports is shrinking in a tremendous way. It would not be funny but we could handle a crisis on American markets in the meantime. If the devaluation of your valuta continues, the Euro will replace the Dollar as the major international reserve currency soon. It is also only a matter of time until more and more oil-countries draw up in Euros - no matter what the Saudis and the OPEC-dinosaurs are saying. The temptation to do it is simply too big. It begins with irrelevant countries but will end as a huge wave. If this happens it will be over with your living on deficit and Chinese goods for America. A deep cut in the US consumption will generate a real river of tears then (and not in Europe... ...such is for sure not in our European interest but it will be unavoidable).
The discussion remembers me a little bit to the rise of Airbus. In the beginning 70ties Boeing (and America) smiled about the first European tests. At least it can be said that today nobody is smiling in Seattle about European projects anymore.
;)
Best regards from good old Europe
A.B.
Don’t be so confident.When America finally gets fed up and removes from power your leftist comrades here the concept of real applied capitalism will bury you once again.
The Euro is just a more internationally fungible Soviet Rubble(in this case a union of European socialist republics)as shaky and wholly dependent on government manipulation and diplomatic propaganda—and as history proves,Government economics is a contradiction in terms.
The EU has restricted the opportunities of the masses with universal welfare and near totalitarian regulations allowing nepotism to dominate an economy beholden to none but an elitist ruling class.When the EU conned the UK into joining this free market anathema,they eliminated the last truly gifted entrepenuerial competition on the continent.
So along with the resources-rich barbarian dictatorships of the third world,Europe goes after America believing that a union of many second class economies may overpower a single first rate one.
So far so good—for you.
But remember the Rubble and the collapse of that other union of socialist republics.
Sometimes it takes awhile but we always win in the end.
After all,you created us and if our liberal Democrats stay in power I suppose we will end up like you.
But I doubt it.
Food & fuel is up, but what % of your budget is that? Housing is flat or dropping, clothing is dropping, electronics are dropping, credit (all types) interest rates are dropping, etc etc.
A German would think so. After all, Germany is the main benefactor in a strong Wuro. But do keep in mind your Southern brothers in Greece, Italy, Spain, Portugal and others are getting hurt badly. They’re already plotting against you. And you know the British are not so happy also, and are always an election away from going their own way.
Keep an eye on your own house, Komrade!
Rubble?
I probably meant Roobble;)
BuHuHaHa! After all it is not that bad if you belong to the elitist ruling class like I do. To me it is extremely funny how some Americans like you are emotionally shaken if they discuss the pros and cons of the European Union. You guys are much better German nationalists than I as a German will ever be. Fact is that we Europeans are usually very contented about common boarders, engineer standards, money, laws and rules etc. etc etc. Such makes all European societies simply more competitive, convenient and free. The thing is that the old national BS was not necessarily the best possible solution. Germans i.e. never had to give in much sovereignty since they were not sovereign until 1990 anyway. Beside of this the German tribes (Prussians, Swabians, Bavarians, Saxons etc. etc. etc.) are that different that there was never that much coherence among them. People from Austria, Switzerland or Alsace-Lorraine are ethnically much closer to a German (Swabian, Bavarian) from the south than one of this German compatriots from Berlin. Same thing on the British Isles. Nobody would say that the English, the Scots and the Irish share lots of national common ground. It does not matter into witch corner of Europe you are looking. Spain, France, Italy even the Austrians have deep differences among their ethnic groups. Therefore it was somehow logical to take a look over the fences for some new and better forms of organization.
This is all what the EU is about. Giving up some sovereignty was therefore no big problem for most nations who are already de facto compulsory communities.
Whatever.
Let’s ask all the people on earth what country they would wish to immigrate to.Let’s compare immigration applications if one wishes to see real evidence of which country is most admired by the earth’s masses—and the most despise by their dictators or ruling socialist elite
No emotion,just calm cold fact.
BTW,you have a wicked laugh;)
Working in Europe and payed in dollars?!!!!
That is harsh man, i wonder where the rest of the cut is going in your company...
Your reply to AB’s argument about Europe was ‘whatever’??????
It pretty clear to me who won that one. I’m fairly sure a European will know more about Europe than a Yank.
And he does, because your argument was.....oh...whatever.....
hehehehe.....
My “whatever” was a surrender.If the Euros are content with socialism or “legislated domestication” as it were,it’s none of my concern as long as America doesn’t end up that way.
Besides,it makes it easier to compete with them in a truly free market where individual freedom,initiative,guts and national pride can’t be beaten.
Nonetheless,we’ll still be Allies if not friends,Western Civilization demands the contract if it is to survive.
BTW,you have a wicked chuckle;)
“it makes it easier to compete with them in a truly free market where individual freedom,initiative,guts and national pride can’t be beaten.”
In a truly free market ‘national pride’ wont have anything to do with it. ‘National pride’ would only lead to subsidies and nationalisation, as an ongoing theme of nationalism. See the pattern?
If you are that unimpressed with us, why go to all the trouble to having an argument on FR about it? We have possibly learned a bit (depending on your receptiveness to outside arguments), but none of us have altered our stance right?
I cant understand why Americans who so obviously don’t like our continent still persist in posting on these threads, just save yourself the trouble and desist.
Oh,I almost forgot—who the heck are you calling a YANK!?!?
I was born in the Sacred South in the Holy City of Charelston,SC—where the Ashley and Cooper Rivers join to create the world’s oceans—not to mention the place where the Great Patriotic War Against Northern Aggression,1861-1865,began!
Call ME a YANKEE—what cheek!
Dem’s fightin’ words!
>:^/
“National Pride” for an American is just another term for patriotism.Patriotism to us means the traditional American spirit that glorifies success and stigmatizes failure.
Without it we would never have become the world’s sole superpower and would be unable to compete with even one of the EU’s poorest nations.
The policies of our leftist Democrats have,unfortunately,weakened us considerably—they despise and reject the traditional American spirit.
Fortunately,those who still have it enjoy one of it’s greatest side-effects—the optimism of faith.
The thing that created our country and constitution in the first place
Yep, sorry for the slur. As I understand it, you southern boys dont exactly see eye to eye with them Yankees up north. It was one of them deadly ‘general’ terms, a catch-you-all when describing Americans.
Dem certainly may have appeared fightin’ words, but it was an honest mistake!
If I were to say I follow the White Rose, which part of the UK do you reckon I’m from? (Clue for you: War of the Roses). From that point of view, I wouldn’t like it if someone called me a Londoner, or a Southern Fairy. A point well made HR!
I’m not looking this up,strickly off the cuff so I am probably wrong.
Did the War of The Roses have something to do with the rise or fall of the Plantagenents—who had that nasty French ancestry,London being lousy with the Frogs at the time?
If I am at least partially correct,I presume you to be of a proud anlgo-saxon descent—or at least gaelic..
I know a bit of Brit History but not as much as I should.
Well, your kind of right. Welsh, Irish and English all in my line, so I guess its Gaelic-Anglo-Saxon(!) Impressive you should know of the Plantagenets though man.
Im a White Rose man, meaning a proud Yorkshireman, not like the rest of the lilly-livered softies in the UK!
Funny how important regional identity is aint it?!!!
I suppose you Yorkies are well represented,like we Southerners,in our respective armed forces.
The noble savages protecting the useless nobles from the wicked world.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.