This is the real reason why the Euro is too strong:

C

crgarcia

The European Central Bank -ECB-, who issues the Euro, has the only purpose to "credibly commit to lower inflation, hoping to enjoy the macroeconomic stability associated with low levels of expected inflation.

The ECB (unlike the Federal Reserve in the United States of America) does not have a second objective to sustain growth and employment."

So they wont mind rising rates to fight inflation, even if they kill the european economy by doing so. It is just not their job to promote economic growth.
 
Of course it's US dollar weakness, not Euro strength that is the primary cause. It's gone down againt ALL major currencies. America is bankrupt. Just wait until the American dollar loses it's status as the world's reserve currency. All of those dollars in foreign hands will come home to roost and it will be lights out.

The Fed is trying to inflate it's way out of it's problems so look for further dollar weakness in the coming years. Anyone who thinks the government reported CPI numbers have any validity is clueless.
 
All the "fiat currencies" are being inflated. The euro is being inflated at a slower rate than the dollar. The ECB has already given in to pressure as they stopped from raising rates in September when they were supposed to have raised their official rate to 4.25%. The only currencies worth parking your "fiat money" into are currencies that are impossible for central bankers and politicians to inflate. Gold and silver!
 
Good points, I agree, the primary objective of the European Union Monetary Policy is known as "Zero Inflation". It is designed to protect the purchasing power of European riches while preventing any redistribution of wealth through inflation. You may or may not know that inflation is the most powerful and peaceful method for redistributing wealth.

However , this is not the reason the USD plunged because it kept on going down while the FED was raising rates and the Euro rates were very low to stimulate their Economy.

The REAL reason the USD is falling is NOT the trade deficit, is NOT China trade, is NOT anybody or anything else other than OIL prices. Think about it: The Arabs collect huge sums of USD and allocate them to different currencies and assets around the world. This means selling dollars to accomplish that. Although they sell a small percentage of the dollars they receive, constant selling has pushed the dollar down.

The dollar will surge when oil prices start falling (pretty soon) back to the $60 level. Euro will plunge and the structural problems of the EU economies will become evident. Europe will go into a spiral recession and some countries will want to go back to their old currency system. Utopia will be replaced by reality and USA will come again to the rescue by raising the dollar even further. My forecast for 2010 - 2011: EUR/USD = 0.7500

Ron



Quote from crgarcia:

The European Central Bank -ECB-, who issues the Euro, has the only purpose to "credibly commit to lower inflation, hoping to enjoy the macroeconomic stability associated with low levels of expected inflation.

The ECB (unlike the Federal Reserve in the United States of America) does not have a second objective to sustain growth and employment."

So they wont mind rising rates to fight inflation, even if they kill the european economy by doing so. It is just not their job to promote economic growth.
More...
 
Quote from ronblack:

The REAL reason the USD is falling is NOT the trade deficit, is NOT China trade, is NOT anybody or anything else other than OIL prices. Think about it: The Arabs collect huge sums of USD and allocate them to different currencies and assets around the world. This means selling dollars to accomplish that. Although they sell a small percentage of the dollars they receive, constant selling has pushed the dollar down.

The dollar will surge when oil prices start falling (pretty soon) back to the $60 level. Euro will plunge and the structural problems of the EU economies will become evident. Europe will go into a spiral recession and some countries will want to go back to their old currency system.

Ron
More...

I agree with Ron .... also let's don't forget that American business found ways to profit from a weak dollar, the profits of multinationals are higher than ever and the trade deficit is not as wide as it used to due to increased exports. Given the resilience of American economy is just a matter of time for tables to turn around :D
Europeans are already hurting because of their strong Euros, actually ECB is trying hard to pressure the FED into stopping the dollar decline ....
 
Quote from ronblack:

Good points, I agree, the primary objective of the European Union Monetary Policy is known as "Zero Inflation". It is designed to protect the purchasing power of European riches while preventing any redistribution of wealth through inflation. You may or may not know that inflation is the most powerful and peaceful method for redistributing wealth.

However , this is not the reason the USD plunged because it kept on going down while the FED was raising rates and the Euro rates were very low to stimulate their Economy.

The REAL reason the USD is falling is NOT the trade deficit, is NOT China trade, is NOT anybody or anything else other than OIL prices. Think about it: The Arabs collect huge sums of USD and allocate them to different currencies and assets around the world. This means selling dollars to accomplish that. Although they sell a small percentage of the dollars they receive, constant selling has pushed the dollar down.

The dollar will surge when oil prices start falling (pretty soon) back to the $60 level. Euro will plunge and the structural problems of the EU economies will become evident. Europe will go into a spiral recession and some countries will want to go back to their old currency system. Utopia will be replaced by reality and USA will come again to the rescue by raising the dollar even further. My forecast for 2010 - 2011: EUR/USD = 0.7500

Ron
More...

While I think that is an agressive valuation, I am pleased to see SOMEONE putting forth some sort of cogent argument for a dollar bull case.

Not sure I agree with it, however. Will believe the unwinding of the european monetary union when I see it. However, by all means, in such a setting I would be buying dollars. Or my old friends, DMK's! (miss ya, buddy)
 
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