Article

2004-01-14 Europe

Transatlantic rift grows over falling dollar

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Posted by rkb 2004-01-14 2:33:55 PM|| || Front Page|| [11134 views since 2007-05-07] Top

#1 Why won't the EU central bank lower interest rates to stimulate growth? Is it a hold-over from the German central bank historic fear of inflation?

Posted by Shipman 2004-1-14 3:49:36 PM|| 2004-1-14 3:49:36 PM|| Front Page Top

#2 The run-up of the Euro is also threatening adoption of the Euro by additional countries, a goal dear to Das Frankenreich, especially when others see that an Audi A8L is selling for a third less in the US than its Euro price in Europe according to the Wall Street Journal. This is serious payback and it couldn't happen to a better pair than Chiraq and Schroeder.

Posted by Mr. Davis 2004-1-14 3:56:57 PM|| 2004-1-14 3:56:57 PM|| Front Page Top

#3 Trade, like other things, tends to roll downhill.

Posted by mojo 2004-1-14 3:59:27 PM|| 2004-1-14 3:59:27 PM|| Front Page Top

#4 Mr Davis... if it is payback, it's payback for Aznar and Berlusconi as well.

Despite the strong Euro Germany is Number 1 export nation in the world again and is likely to remain so in 2004. We export more than the U.S., go figure. Most exports are inside the EU, so the dollar rate doesn't influence them. Energy prices are lower, holidays outside the EU zone cheaper (hello Miami?).

When the Euro was worth 84 cents people whined, now it's worth 1,27 dollars and other people whine. In 1995 the dollar traded for DM 1,37 (70 US cents or â¬1 = $1,42). We survived that too.

Posted by True German Ally 2004-1-14 4:11:37 PM|| 2004-1-14 4:11:37 PM|| Front Page Top

#5 Fred and Steve's favorite saying come to mind here: Cause and Effect.

Posted by Charles 2004-1-14 4:12:02 PM|| 2004-1-14 4:12:02 PM|| Front Page Top

#6 I'm sure this little tidbit is entirely unrelated:

WASHINGTON (Reuters) - The U.S. trade deficit narrowed unexpectedly in November while wholesale prices outside of food and energy posted a surprise drop last month, government reports showed on Wednesday.

The trade gap shrank to $38.0 billion from $41.6 billion in October, as civilian aircraft sales pushed exports to their highest level in three years, the Commerce Department said.

It was the smallest trade gap in 13 months.

Payback, as they say, can kick you right in the crotch if you're an America-bashing eurocommie.

Posted by 4thInfVet 2004-1-14 4:20:43 PM|| 2004-1-14 4:20:43 PM|| Front Page Top

#7 TGA,

We'll all survive. The question is whether the Euro will. Perhaps the Spanish and Italians will have second thoughts about having hitched their economic wagons to Das Frankenreich.

Posted by Mr. Davis 2004-1-14 4:27:49 PM|| 2004-1-14 4:27:49 PM|| Front Page Top

#8 Mr. Davis, don't hold your breath just yet. I'd rather see Germany reverting to DM than Spain to Peseta and Italy to Lire.

It won't happen.

Posted by True German Ally 2004-1-14 4:46:05 PM|| 2004-1-14 4:46:05 PM|| Front Page Top

#9 There is a 2nd issue linked to this one, namely the intent to file suit against the deficit waivers given to Germany and France again this year. Poland, Spain and Italy are among the countries who are insisting that the EU actually enforce its economic discipline rules. If I recall correctly, a while back Spain and Italy had some hard times when France & Germany insisted they toe the economic line and they are outraged at the idea that the two larger countries can cavalierly ignore the same rules for several years in a row.

One justifiable reason for the current $ valuation is that we will be doing some deficit spending during the war on terror. But Greenspan is right: the high interest rates in the EU do serve as a trade protection barrier *if* the US can be strongarmed into propping up the dollar.

In the short run, European consumers benefit from a strong Euro, just as companies that manufacture using $-based labor and materials benefit from selling to those European consumers. In the mid-term, however, the result will be more employment in the US and a smaller tax base for the EU governments. Check out Martin Wolf's column in the FT today, if you're a subscriber: he makes the case, despite himself, that the American consumer is confidcnt and is a driving force in the US recovery, while the European consumer is not confident and is not doing the same.

I don't really want to indulge in too much schadenfreude here, if only because I do realize the potential downsides for me, in the long run, to having Europe continue to stagnate. But frankly, given the sanctimonious and condescending attitudes that have come our way from Europe in the last few years - and especially given the overt announced threat by EU officials to use trade sanctions to negatively affect jobs in some key election states here, so as to defeat Bush -- well, it's worth noting that things aren't playing out quite that way at present. And, while you feel comfortable, a quick Google of recent news makes it clear that French and German politicians, and the EU finance people, are running scared over this.

Posted by rkb 2004-1-14 4:57:20 PM|| 2004-1-14 4:57:20 PM|| Front Page Top

#10 Anyone remember the whining in the 80s?

Even the IMF had to agree that we're the engine of world growth, bet that had to bite. A few days later they claimed we're disorderly.

What I still find interesting is this, thanks to Econopundit.com. A little old, but Steven doesn't think it had changed too much:

------------------------------------------------------------------------------------------
GOVERNMENT DEBT AND PENSION LIABILITIES AS PERCENT OF GDP (1990)
===net conventional debt=======net pension liabilities
CANADA===52================121
GERMANY==22================157
ITALY====100================259
UK=======27================156
US=======35=================90
-----------------------------------------------------------------------------------------------
Source: Essays on Pension Reform, Max Alier PhD Thesis, University of California LA, 1997; quoted in R.E.A. Farmer, Macroeconomics, South-Western, 2002, p. 162.

Posted by Anonymous2U 2004-1-14 9:27:29 PM|| 2004-1-14 9:27:29 PM|| Front Page Top

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