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If Germany is export driven how is it able to stay competitive against China et al.
- Thread starter short&naked
- Start date
Quote from hftvol:
Yes YOU did, and how does this relate? I am on this site for couple days now and come across more morons and people of incredible low intellect than pretty much any other place I have ever been. Big mistake to join any non technical discussion on this site...
scoot yer' little ass back to germany...buh bye..don't let the door hit you in the ass....skeedaddle now
All I asked you was to think what the exchange rate usd/dem would be today. How is that an invalid arument vs you saying that Germany greatly benefitted from weak exchange rates? My point is that if you do the math then you find that the deutsche mark was fixed against the euro at a very fair rate. Funny that generally those, who believe Germany should pick up the bill for all the incredible waste and inefficiencies in southern Europe, argue that the dollar by now most likely traded below parity against the deutsche mark.
Quote from morganist:
If the DM was fixed to the Euro then it would not be the same as using the Euro for many reasons. I don't think that is a valid argument.
M
morganist
Quote from hftvol:
All I asked you was to think what the exchange rate usd/dem would be today. How is that an invalid arument vs you saying that Germany greatly benefitted from weak exchange rates? My point is that if you do the math then you find that the deutsche mark was fixed against the euro at a very fair rate. Funny that generally those, who believe Germany should pick up the bill for all the incredible waste and inefficiencies in southern Europe, argue that the dollar by now most likely traded below parity against the deutsche mark.
You said Quote.
"If you look at where the dollar traded against DM before euro came about and how the DM was fixed against Euro you notice that German competitiveness really did not benefit a whole lot from exchange rate differentials."
I answered the above because I assumed you meant that as a statement rather than a question.
My response is below.
I think it is a bigger picture than just the US dollar. BRIC countries have entered the market more aggressively. Also the USD value is as much determined by oil than supply and demand so using it as a benchmark is somewhat difficult against other currencies because it will reflect the oil price at times the true demand mechanism is not reflected.
In short I can't give you a definitive answer to this question because there are so many variables that influence the relationship of the USD that would undermine the expected exchange rate regardless of the natural level of demand.
Perhaps if you were to ask for the price relationship with another country it would perhaps be easier. However as there are so many new emerging markets that have more power than they did before the Euro it would be impossible to make a retrospective exchange rate comparison.
My position stands that in the currently model Germany benefit enormously from the exchange rate advantage it receives from the failing states in the Euro.
So your point is basically "there are so many moving parts in this equation its impossible to determine what an exchange rate between the mark and other currencies would be today had it not been fixed to the euro, BUT, hey, I anyway venture out to say German has an unfair exchange rate advantage".
This is pretty much the only message I am getting from your post. You are arguing about BRIC countries and many other emerging market and how USD exchange rate value is determined by oil and what have you while this discussion is on German's competitiveness and in particular our arguments focuses on what you claim a too cheap exchange rate that gives Germany an unfair advantage. I get the sense you purposely mix everything up here to make the matter as opaque as possible.
I stand by my simple point which is: a Eur/USD, EUR/XXX (pick one) at current level does not give Germany ANY exchange rate advantage. To the contrary, Germany and German central bank members' insistence on sound monetary policy rather than emulating the crazy Fed gamble strengthened the Euro, not weakened it. And still at 1.3 and even 1.4+ level German exports are as competitive as ever, in fact German car makers sell more cars in China, the US, and Asia than ever before and pretty much beating the whole competition alongside the way. Secondly, my point was that if you looked at how the mark traded against virtually any other currency before it was fixed to the euro and then compared that how the mark traded against all other currencies after it was fixed (of course adjusted for the eur/dem fix) then you notice virtually ZERO discontinuity, meaning, there was no shady fixing games played that you constantly insist happened on your website. The numbers are there, its an empirical evidence. No need to throw into the discussion any BRIC countries or emerging markets, oil, or whatever.
This is pretty much the only message I am getting from your post. You are arguing about BRIC countries and many other emerging market and how USD exchange rate value is determined by oil and what have you while this discussion is on German's competitiveness and in particular our arguments focuses on what you claim a too cheap exchange rate that gives Germany an unfair advantage. I get the sense you purposely mix everything up here to make the matter as opaque as possible.
I stand by my simple point which is: a Eur/USD, EUR/XXX (pick one) at current level does not give Germany ANY exchange rate advantage. To the contrary, Germany and German central bank members' insistence on sound monetary policy rather than emulating the crazy Fed gamble strengthened the Euro, not weakened it. And still at 1.3 and even 1.4+ level German exports are as competitive as ever, in fact German car makers sell more cars in China, the US, and Asia than ever before and pretty much beating the whole competition alongside the way. Secondly, my point was that if you looked at how the mark traded against virtually any other currency before it was fixed to the euro and then compared that how the mark traded against all other currencies after it was fixed (of course adjusted for the eur/dem fix) then you notice virtually ZERO discontinuity, meaning, there was no shady fixing games played that you constantly insist happened on your website. The numbers are there, its an empirical evidence. No need to throw into the discussion any BRIC countries or emerging markets, oil, or whatever.
Quote from morganist:
You said Quote.
"If you look at where the dollar traded against DM before euro came about and how the DM was fixed against Euro you notice that German competitiveness really did not benefit a whole lot from exchange rate differentials."
I answered the above because I assumed you meant that as a statement rather than a question.
My response is below.
I think it is a bigger picture than just the US dollar. BRIC countries have entered the market more aggressively. Also the USD value is as much determined by oil than supply and demand so using it as a benchmark is somewhat difficult against other currencies because it will reflect the oil price at times the true demand mechanism is not reflected.
In short I can't give you a definitive answer to this question because there are so many variables that influence the relationship of the USD that would undermine the expected exchange rate regardless of the natural level of demand.
Perhaps if you were to ask for the price relationship with another country it would perhaps be easier. However as there are so many new emerging markets that have more power than they did before the Euro it would be impossible to make a retrospective exchange rate comparison.
My position stands that in the currently model Germany benefit enormously from the exchange rate advantage it receives from the failing states in the Euro.
M
morganist
Quote from hftvol:
So your point is basically "there are so many moving parts in this equation its impossible to determine what an exchange rate between the mark and other currencies would be today had it not been fixed to the euro, BUT, hey, I anyway venture out to say German has an unfair exchange rate advantage".
This is pretty much the only message I am getting from your post. You are arguing about BRIC countries and many other emerging market and how USD exchange rate value is determined by oil and what have you while this discussion is on German's competitiveness and in particular our arguments focuses on what you claim a too cheap exchange rate that gives Germany an unfair advantage. I get the sense you purposely mix everything up here to make the matter as opaque as possible.
I stand by my simple point which is: a Eur/USD, EUR/XXX (pick one) at current level does not give Germany ANY exchange rate advantage. To the contrary, Germany and German central bank members' insistence on sound monetary policy rather than emulating the crazy Fed gamble strengthened the Euro, not weakened it. And still at 1.3 and even 1.4+ level German exports are as competitive as ever, in fact German car makers sell more cars in China, the US, and Asia than ever before and pretty much beating the whole competition alongside the way. Secondly, my point was that if you looked at how the mark traded against virtually any other currency before it was fixed to the euro and then compared that how the mark traded against all other currencies after it was fixed (of course adjusted for the eur/dem fix) then you notice virtually ZERO discontinuity, meaning, there was no shady fixing games played that you constantly insist happened on your website. The numbers are there, its an empirical evidence. No need to throw into the discussion any BRIC countries or emerging markets, oil, or whatever.
You specifically asked about the USD which has a different exchange rate framework to any other country because of its relationship with oil. You asked a specific question and I a gave you a specific answer. I stand by my original article and the points raised in the article. That Germany does very well from the export advantage the euro gives them. If they did not they would leave.
That advantage will soon be outweighed by the crumbling of the eurozone then imo it is likely Germany will leave.
hftvol's arguments make more sense to me. They are strengthened by the simple observation that during the years that the Euro traded at a twenty percent or more premium to the U.S. dollar Germany managed to out-export the U.S. in manufactured goods. While no one would deny that relative currency strength is a factor in the balance of trade, it would seem that this can not be the primary factor behind the strong export position of the German economy. Certainly Germany benefits from a ready market in the neighboring EU countries, just as the U.S. benefits from its trade with Mexico and Canada, but that does not explain Germany's exceptionally strong export economy either..
There is clearly more to the strength of the German export economy than exchange rates and availability of near-by trading partners. Surely it must have something to do with the very high quality of German engineering and products, whereas China's exporting success has obviously benefited from exceptionally cheap prices; not exceptional quality.
If Morganist wanted to turn his argument on its head and argue that the PIIGS have been hurt by being locked into a high value EU currency, I'd be more inclined to go along.<sup>*</sup> (Among the PIIGS, only Italy can compete in engineering with the Germans, and even possibly surpass the Germans in design.) In fact, until quite recently, compared to the U.S. Fed, the ECB, urged on by Germany, has been positively parsimonious when it comes to monetary policy -- I see that resolve weakening as the ECB takes note of the rather better results obtained by "Helicopter Ben", and I would not be surprised to see the Euro trade at par relative to the dollar in the next 18 months or so.
( I note in passing that the Italians have long suffered from an exceptional level of "hilarity" in the their politics that has not been helpful to their economy. To coin a phrase, one might say they've been "Berlusconied". Among the industrialized nations, the only one I can think of that has been comparable in political goofiness would be the U.S.A. Italy had its Berlusconi; the U.S. had its "W". )
_______________________
<sup>*</sup> Which he essentially did, That is to say I'm more inclined to accept his argument that the PIIGS have been hurt to some extent by being locked into a strong Euro, then I am inclined to believe Germany's export success has been helped by the drag of the PIIGS on the Euro. It seems you can't have it both ways.
There is clearly more to the strength of the German export economy than exchange rates and availability of near-by trading partners. Surely it must have something to do with the very high quality of German engineering and products, whereas China's exporting success has obviously benefited from exceptionally cheap prices; not exceptional quality.
If Morganist wanted to turn his argument on its head and argue that the PIIGS have been hurt by being locked into a high value EU currency, I'd be more inclined to go along.<sup>*</sup> (Among the PIIGS, only Italy can compete in engineering with the Germans, and even possibly surpass the Germans in design.) In fact, until quite recently, compared to the U.S. Fed, the ECB, urged on by Germany, has been positively parsimonious when it comes to monetary policy -- I see that resolve weakening as the ECB takes note of the rather better results obtained by "Helicopter Ben", and I would not be surprised to see the Euro trade at par relative to the dollar in the next 18 months or so.
( I note in passing that the Italians have long suffered from an exceptional level of "hilarity" in the their politics that has not been helpful to their economy. To coin a phrase, one might say they've been "Berlusconied". Among the industrialized nations, the only one I can think of that has been comparable in political goofiness would be the U.S.A. Italy had its Berlusconi; the U.S. had its "W". )
_______________________
<sup>*</sup> Which he essentially did, That is to say I'm more inclined to accept his argument that the PIIGS have been hurt to some extent by being locked into a strong Euro, then I am inclined to believe Germany's export success has been helped by the drag of the PIIGS on the Euro. It seems you can't have it both ways.
No I specifically discussed the German mark, I do not even know how we got here despite my very clear and concise comments. I don't know why I feel awful of wasting my precious time right now. I guess I really had it with engaging in non technical (programming and algorithmic trading related) threads on this particular site. Sorry that I attempted to shake your rosy view of the world and German economics in particular. Please carry on, I am out.
Quote from morganist:
You specifically asked about the USD which has a different exchange rate framework to any other country because of its relationship with oil. You asked a specific question and I a gave you a specific answer. I stand by my original article and the points raised in the article. That Germany does very well from the export advantage the euro gives them. If they did not they would leave.
That advantage will soon be outweighed by the crumbling of the eurozone then imo it is likely Germany will leave.
See, the problem I am having with Morganist's line of thinking is that he is talking about BRIC (not PIIGS) countries to begin with. I got the impression he has a hard time to actually comprehend we are talking about Germany in this thread. That's why I politely ended the argument with him.
I agree with most your points re German manufacturing strength but not with your hinting that PIIGS suffer by having been locked into a high exchange rate. The same argument I made about Germany you can on the flip side make for all PIIGS: there was no exchange rate fixing gimmicks being played here. Nor was trade distorted. PIIGS loved German products before the fix and they loved and bought German products after as well. So did other countries continue to purchase Spanish tomatoes, Italian pasta, French cheese, Greek refurbished ships. PIIGS benefitted greatly from having joined the Euro, reminding you of who net transfer payers and receivers here always were and still are. The PIIGS shot into their own foot through irrational exuberance. Every last man standing became convinced they deserve 2 cars, their own home, and what have you. Bar, club, and cocktail prices virtually exploded in cities like Barcelona, not because of any exchange rate dynamics but because people figured out they could borrow cheap money without having to think about the consequences of repayment. That is the ONLY reason why you have a housing market problem in Spain. Greece has a lot more issues such as being a chronic liar and cheater what concerns EU membership and meeting qualifications to join the currency club. But essentially those countries created their own eventual demise not the evil German neighbor. It's an incredible slap into the face of Germans to now be accused of being the source of all hardship in Europe after having possible made some of the biggest sacrifices and largest payments to promote the well being of a united Europe as visionary and borderline impossible such unity may be.
I agree with most your points re German manufacturing strength but not with your hinting that PIIGS suffer by having been locked into a high exchange rate. The same argument I made about Germany you can on the flip side make for all PIIGS: there was no exchange rate fixing gimmicks being played here. Nor was trade distorted. PIIGS loved German products before the fix and they loved and bought German products after as well. So did other countries continue to purchase Spanish tomatoes, Italian pasta, French cheese, Greek refurbished ships. PIIGS benefitted greatly from having joined the Euro, reminding you of who net transfer payers and receivers here always were and still are. The PIIGS shot into their own foot through irrational exuberance. Every last man standing became convinced they deserve 2 cars, their own home, and what have you. Bar, club, and cocktail prices virtually exploded in cities like Barcelona, not because of any exchange rate dynamics but because people figured out they could borrow cheap money without having to think about the consequences of repayment. That is the ONLY reason why you have a housing market problem in Spain. Greece has a lot more issues such as being a chronic liar and cheater what concerns EU membership and meeting qualifications to join the currency club. But essentially those countries created their own eventual demise not the evil German neighbor. It's an incredible slap into the face of Germans to now be accused of being the source of all hardship in Europe after having possible made some of the biggest sacrifices and largest payments to promote the well being of a united Europe as visionary and borderline impossible such unity may be.
Quote from piezoe:
hftvol's arguments make more sense to me. They are strengthened by the simple observation that during the years that the Euro traded at a twenty percent or more premium to the U.S. dollar Germany managed to out-export the U.S. in manufactured goods. While no one would deny that relative currency strength is a factor in the balance of trade, it would seem that this can not be the primary factor behind the strong export position of the German economy. Certainly Germany benefits from a ready market in the neighboring EU countries, just as the U.S. benefits from its trade with Mexico and Canada, but that does not explain Germany's exceptionally strong export economy either..
There is clearly more to the strength of the German export economy than exchange rates and availability of near-by trading partners. Surely it must have something to do with the very high quality of German engineering and products, whereas China's exporting success has obviously benefited from exceptionally cheap prices; not exceptional quality.
If Morganist wanted to turn his argument on its head and argue that the PIIGS have been hurt by being locked into a high value EU currency, I'd be more inclined to go along.<sup>*</sup> (Among the PIIGS, only Italy can compete in engineering with the Germans, and even possibly surpass the Germans in design.) In fact, until quite recently, compared to the U.S. Fed, the ECB, urged on by Germany, has been positively parsimonious when it comes to monetary policy -- I see that resolve weakening as the ECB takes note of the rather better results obtained by "Helicopter Ben", and I would not be surprised to see the Euro trade at par relative to the dollar in the next 18 months or so.
( I note in passing that the Italians have long suffered from an exceptional level of "hilarity" in the their politics that has not been helpful to their economy. To coin a phrase, one might say they've been "Berlusconied". Among the industrialized nations, the only one I can think of that has been comparable in political goofiness would be the U.S.A. Italy had its Berlusconi; the U.S. had its "W". )
_______________________
<sup>*</sup> Which he essentially did, That is to say I'm more inclined to accept his argument that the PIIGS have been hurt to some extent by being locked into a strong Euro, then I am inclined to believe Germany's export success has been helped by the drag of the PIIGS on the Euro. It seems you can't have it both ways.
Germany is the China of Europe. The EMU replaced floating exchange rates, which act as a natural trade barrier between weak and strong economies. As for EU tariffs against BRIC countries, I don't know. Haven't looked.