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High Euro, Is the Eu economy about to take a hit ?

Discussion in 'Other Off Topic Forum' started by WILLIAM H, Jan 7, 2004.

  1. WILLIAM H

    WILLIAM H Three Time F1 World Champ

    Nov 1, 2003
    34,891
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    HUBBSTER
    Ive heard people whining about the falling $ but now I think the Euros may start whining as their euro becomes so high that their products become more difficult to sell in the US. Will Ferrari, Lambo, BMW, MB, & other euro brands take losses & hope the US$ rebounds or will they just raise prices some more ?
     
  2. tbakowsky

    tbakowsky F1 World Champ
    Professional Ferrari Technician Consultant

    Sep 18, 2002
    14,404
    The Cold North
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    Tom
    Eventualy if the Euro keeps growing the way it is, the enitr North American coninent will have to switch over to the Euro dollar. It's just a matter of time before trade becomes impossiable because of the differance.
     
  3. Kds

    Kds F1 World Champ

    I am no where near being an economist, but I think the Euro is falsely inflated right now due to politics, as their economies are really not in great shape to begin with.
     
  4. gabriel

    gabriel Formula 3

    LOL! I thought the same thing from a slightly different perspective.

    You got it backward! It's the entire European continent(whatever that is at the moment) that will have to switch over to the US dollar. Multipolar world visionaries be damned....
     
  5. Cavallino Motors

    Cavallino Motors F1 World Champ
    Lifetime Rossa

    May 31, 2001
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    Martin W.
    The European economy is in the dog house. Thanks to our fearless leader though and his "intellect" the much better US economy is being overlooked and held hostage to fears of revenge from crazed people and their economic impact. Oh and did I mention the 1 Billion it costs to fight a war we should not have started as far as the rest of the world is concerned?

    If you look at Germany (I know, I always look that way) you see a bunch of lazy whinners who work 35h at best, get 30 business days vacation paid and have managed to start reducing thier quality products to "cheap ****" (BMW, Mercedes Benz, Porsche to name a few in the automotice world) while other big corportations are not just walking away from Europe but rather are RUNNING!

    The Euro makes intra trade easy but devaluates strong currencies and overinflates weak ones.

    By all standards Germany is bankrupt!
     
  6. theboogers

    theboogers Rookie

    Nov 14, 2003
    42
    maryland
    Full Name:
    steve hannon
    so what is the forecast for the future euro value?
     
  7. gabriel

    gabriel Formula 3

    >By all standards Germany is bankrupt![/QUOTE]

    Gotta agree with that. :)
     
  8. Wolfgang

    Wolfgang F1 World Champ
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    Mar 8, 2003
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    Gotta agree with that. :)[/QUOTE]

    @Martin & @Gabriel,
    Pffffffffffffff, don`t panic, we are still doing well:D
    And Martin, not all are working in this way - 35hours/week.
    I`m working around 60hours or sometimes a bit more/week....and many friends of mine also.
    Wolfarossa
    FORZA FERRARI
     
  9. Cavallino Motors

    Cavallino Motors F1 World Champ
    Lifetime Rossa

    May 31, 2001
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    Martin W.
    found this , thought it was funny
     
  10. Wolfgang

    Wolfgang F1 World Champ
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    Mar 8, 2003
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    @Martin, you hit the target;-)

    Wolfarossa
    FORZA FERRARI
     
  11. FLATOUTRACING

    FLATOUTRACING F1 Rookie

    Aug 20, 2001
    2,684
    East Coast
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    Jon K.
    We need to distinguish whether the difference in currencies is because of a European driven catalyst or a US one. It is clearly a US one.

    Two things are causing the dollar to continue to fall. The rising US budget deficit which is scarring away foreigners who in the past had been willing to fund our current account deficit AND

    Record low interest rates and statements by the Federal Reserve Bank that there are no immediate plans to raise rates.

    The deficit is of a particular problem because unlike past deficits, most of the foreigners see no return on the money being on Iraq, which makes up a growing portion of the budget deficit. In other words, foreigner are more willing to fund our current account when they think the deficit is being run up to fund further improvements in the US economy. The war in Iraq has little to do with pulling us out of a recession or improving our economic picture. From an economic standpoint I am not a moderate or liberal economist and feel that deficits are bad all the time but the rest of the world, especially socialist countries feel that government spending can be beneficial at time and many are willing to fund out deficits but not this time.

    In addition, past history has shown that running huge deficits means the government must offer higher rates of return to attract that funding but for the fist time in many years we have been in a deflationary period (or perceived deflationary period) and as a result the Fed is keeping rates low which discourages foreigners from putting their money over here when they can get better returns elsewhere…..

    ….and this of course lowers demand for the dollar.

    The low US $ has little to do with Europe and Japan. Europe is still the same basket case they have been since the mid 80’s. They have huge structural ummeployment problems that still haven’t been fixed and soon the Euro will experience a confidence crisis as the EU countries bend all the rules of the Masstricht treaty. In another year or so many of the countries n the EU will run afoul of the budget deficit numbers that permit them to be in the EU. The rules are already being modified for Germany, France and Italy all of which will soon have Debt/GDP ratios and budget deficits outside the allowable numbers.

    Japan faces the same problems it has had for over 15 years.

    If you look at the US $ vs. a worldwide basket of currencies it hasn’t done quite as badly. It was down over 25% against the Euro in the past 18 months but only 10% against the Morgan Stanley World Currency Basket.

    I used to trade currencies for a living in the mid 90’s and any body familiar with economics knows the term “currency overshooting”. In almost all cases of crisis or interest rate imbalances currencies will either get severely overbought or oversold.

    If you look at the futures markets they point toward an eventual 1.35 level in the next month or two but by the end of the year the US $ will be back at the 1.15 – 1:20 level. I believe that the Fed can’t keep interest rates this low as long as they want the market to think and I think the currency and bond markets are not in agreement with the Fed’s statements.

    In the end, barring some huge attack or something terrible happening to our economy, interest rates will have to rise and the economy will get healthier. At that point it’s back to the US being the superior econimci climate to invest in vs. Europe and Japan.

    Just my 2 cents worth.

    Regards,

    Jon P. Kofod
    www.flatoutracing.net and resident Ferrarichat Economist
     
  12. gabriel

    gabriel Formula 3

    @Martin & @Gabriel,
    Pffffffffffffff, don`t panic, we are still doing well:D

    Oh, I'm not in a panic at all. :)

    And Germany, is still bankrupt. :)
     
  13. Wolfgang

    Wolfgang F1 World Champ
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    Mar 8, 2003
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    Wolfgang
    I`m doing very well and don`t feel ill or bankrupt;-)
    To be honest, NO we all have a big problem with the US$.
    Export is going down and we are all loosing money here in Europe (with Export).
    The contracts made in US$ last year....are worthless for ex. Fiat/Ferrari/Sponsorship/F1...a.s.o.
    We are close to an economic crisis!

    Wolfarossa
    FORZA FERRARI
     
  14. FLATOUTRACING

    FLATOUTRACING F1 Rookie

    Aug 20, 2001
    2,684
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    Jon K.
    Wolfgang,

    Although I am not German I was born and raised there. The problem is not with the US dollar but with Germany's expensive welfare state and it's unions which hand tie most of the biggest firms. Perfect example is I.E. Metalgeselenshaft (sorry if my spelling is off).

    You have unions members that sit on boards of directors, you have near lifetime employment and expensive benefits. Germany has had 10% + unemployment for over 12 years and taxes on business START at 50% and go up to 80%.

    You have one of the most inflexible labor forces in the EU along with France and Germany.

    The 35 hour workweek is just one of many structural problems in Germany and the rest of Europe. The single currency is a huge problem as there is no labor mobility in Europe and setting interest rates to benefit one country hurts another.

    Young people in Germany can't get jobs despite having advanced degrees.

    And up until the EU in Brussels took over monetary policy the Bundesbank was still predisposed to fears of hyper inflation from the 20's and ran the most restictive monetary policy in the world.

    Lastly, along with Japan, German law allows (and encourages) banks to own shares in corporations so you have a huge conflict of interest in making loans to them.

    Just like Japan does, German banks prop up uncompetitive firms with low interest rate loans because the bank can't afford to have the firms fail for fear of the stock price heading south, which of course hurts the bank since it owns shares in the firm. This throws prudent credit analysis out the door.

    And furthermore Germany still refused to let old inefficient industries die and instead prefers to subsidize totally inefficient government owned firms that can't survive on their own. The coal industry in Germany is the most inefficent in the world.

    The US $ isn't the root cause of Germany's and the rest of Europe's problems, it's their socialistic craddle to grave policies that can no longer be supported given their anemic gowth.

    Regards,

    Jon
     
  15. MarkG

    MarkG Formula Junior

    Nov 3, 2003
    369
    Colorado Springs
    Full Name:
    Mark
    "By all standards Germany is bankrupt!"

    Lets hope not - look what happened the LAST time they were broke!!
     
  16. Tyson

    Tyson Formula Junior

    Jun 5, 2003
    636
    Idaho
    A year later and the Euro is stronger.
     
  17. F SPIDER

    F SPIDER F1 Rookie
    Owner

    Jan 30, 2002
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    NYC, A'dam, W'stock
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    rijk rietveld
    Some observations:

    I think that only something 5% of the Euro economy zone gets exported to the US.

    In the mean time, energy becomes relatively cheaper in Euros, since the price is in Dollars.

    When you compare unemployment, the same parameters need to be used. Isn't it true that when you run out of benefits in the US, you are no longer counted as unemployed????????? That is a way to keep the numbers low.

    When we design a building in New York City, because of the union labour contractors, we cannot get a building cheaper than $250/SF. In Amsterdam the same would cost $100/SF, with labor that does not work more than 35h per week and that take 30 days of vacation.
     

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