| Submit your comments on this article |
| Europe |
| Brussels to impose currency controls |
| 2003-12-04 |
| Buwahahahahahaa...EFL The European Commission is examining the legal basis for 1970s-style exchange controls to stop the euro surging to destructive levels. Economics dictates when a currency gets too highly valued, the host nation’s exports become uncompetitive on global markets. Watch the hands... The euro-zone has borne the brunt of the global realignment. The Chinese yuan is pegged to the dollar, while Japan has capped the yen by buying US bonds. Interesting, also, how a Taiwan straits issue would cause a "flight to quality" [into the dollar] and hold off some of the pain the PRC is experiencing by the 20% depreciation of the dollar this year. Industry leaders in Germany and France say the euro has crossed the "pain threshold" and risks aborting the euro-zone’s fragile recovery. The latest survey data shows a renewed fall in confidence among French consumers and German retailers. So we’re bankrupting the Euro-zone and using competitive devaluation to bolster our manufacturing sector...ahead of an election year...Cause, effect... "Among the actions that can be undertaken when a member state experiences serious balance of payments difficulties, Articles 119 and 120 EC provide for the possibility to reintroduce ’quantitative protective measures’ against third countries." Shit, meet fan. You won’t have to worry about "currency strength" anymore. I mean, you’ll establish "credibility" in the markets... really fast. |
| Posted by:Brian |
| #27 We're going to see some really major changes in a number of countries around the world. I really think the 'crisis' of the over-valued euro is the first, most visible crack in the foundations of the e.u. (the flouting of deficit rules by france and germany being pretty much ignored). That may be one of the major changes coming round the bend, although you could argue the e.u. was an abomination from the start and was destined to fail. |
| Posted by: reversecurrencyspeculation 2003-12-4 9:19:41 PM |
| #26 Related, one might note that two of the chocolate-eaters, France and Germany, have broken out of the budget deficit bands established in the European monetary union without suffering so much as a handslap, let alone the mandated sanctions. Not likely to have an immediate effect, but long term corrosive to the credibility of a centralized monetary policy for Europe, and hence to the stability of the EU. |
| Posted by: Nero 2003-12-4 8:18:10 PM |
| #25 Following up my last post, pulling in a few things from dozens of other posts from today: We're going to see some really major changes in a number of countries around the world. They may take a year or two, but they WILL Happen. First, you're going to see some changes in the militaries of the Coalition nations, as they incorporate lessons learned from Iraq and other battles of the WoT. That doesn't mean they will adapt US ways: the most likely effect is that they will learn to improvise, as the US forces have done, in response to what happens on the battlefield. Even more importantly, you'll probably see some major political changes, as ideas that are discussed in Iraq raise questions back home. Finally, you'll probably see some economic, social, cultural, and political links form that may never have come to be without involvement in Iraq (the same things that happened in Germany, Japan, and elsewhere following World War II, and in a different way, following the fall of Saigon and the Boat people). These will have significant impact on the existing economic community that may not be readily apparent for a decade or more, but will eventually re-shape the world into different economic communities. The current Euro crisis may be the first signs of that polarization. |
| Posted by: Old Patriot 2003-12-4 7:24:12 PM |
| #24 Back in the days I lived in Germany and England, I followed the exchange rates and the news that related to them (I.e., caused them to go up or down) quite closely. Since I retired, I've found other interesting things to do with my spare time (like comment on Rantburg). One of the main things I learned back then, however, was that every time, without fail, governments meddled in the money markets, unexpected things happened. Watching from the periphery, I see many of the same things taking place today. One serious thing I see that isn't mentioned in any of the comments above is our involvement in Iraq, and its effect on money matters. Anyone who believes there is no direct effect is full up to the eyebrows, and usually spews what he's full of. I would keep a very close eye on the effects participation by Australia, Britain, Spain, Italy, Poland, and the other Coalition forces has on foreign exchange, purchasing habits, vacation habits, and other less obvious things. We may well see the pain caused by a high euro cripple many central European countries, while the periphery is unaffected, or less affected. That could place significant pressure on the central European countries, both financially and politically, and shift the balance of power in the EU. |
| Posted by: Old Patriot 2003-12-4 5:59:07 PM |
| #23 It's not all Lay, it's Skilling and the CA legislature which wrote a poor law in the first place. Plus some interesting trades by the State of CA. Well, that and 30++ years of NIMBY while tech and population took off. If you don't put the infrastructure in place, how are you going to support the growth? |
| Posted by: Anonymous2U 2003-12-4 12:54:27 PM |
| #22 Well before the begining of the liberation of Iraq I stopped buying all European merchandise and started buying equivalent American and Far- eastern products. I especially boycott French and Belgian merchandise. Heh, I used to put Motul semi-synthetic motor oil in my motorcycle. :) (Motul is made in Phrance) |
| Posted by: Bomb-a-rama 2003-12-4 12:53:10 PM |
| #21 Rantburg at its elegant best. |
| Posted by: Lucky 2003-12-4 12:38:45 PM |
| #20 Argentina had tied its currency to the dollar. Essentially, they were increasing the apparent wealth of Argentinians by throwing away mounds of cash. They survived for quite a while until their currency was so overpriced that they ran out of liquidity. China has also tied the yuan to the dollar, but they're safe because the yuan is below where it should be. In this case, the chinese government can intervene indefinitely because it's a de-facto tax. That is to say, the government intervention is actually a source of cash, rather than a sink. |
| Posted by: Dishman 2003-12-4 12:37:46 PM |
| #19 Raptor, you can send Leigh's bitch-ass up to Detroit, I got some bud's who'd like to pop a cap in his ass. |
| Posted by: Jarhead 2003-12-4 11:54:41 AM |
| #18 'Scuse me, gentlemen, but do any of you sleep? Phil B gets a pass since he's an Aussie, but what the heck were the rest of you doing discussing global currency markets at 3am Eastern??? ;-) P.S. Very enlightening...carry on! |
| Posted by: seafarious 2003-12-4 11:38:47 AM |
| #17 The Dodo. Maybe George Soros is inflating the Euro:-)) Seriously, could it be just plain speculation? Sometime back I heard that some Muslim countries were converting their greenbacks. Don't know if it is true. The Russians have also made some comments about dealing in Euros. |
| Posted by: Barry 2003-12-4 11:36:18 AM |
| #16 The Euro is higher because they are keeping their interest rates far higher than ours (2.5% v. 1%, ha!) so there is a flight of money to the interest rate premium. If rates fall in Europe, the money will come back here. |
| Posted by: Brian 2003-12-4 11:32:24 AM |
| #15 That's all right raptor. Its just that I'm sure he would never return my floor jack after changing the oil in his 83 Camaro. I don't think he would look good in a mullet either. |
| Posted by: whitecollar redneck 2003-12-4 11:13:14 AM |
| #14 Recall that Argentina's currency hit the floor. A few times. A lot. Didn't bounce, neither. And each time it sank, the common lads and lasses got whacked harder. Argentina's problems are, unfortunately for its long-suffering citizens, unique to Argentina. Many of these problems have to do with the large-scale theft of billions of dollars of funds borrowed from multinational banks and international lending organizations*. 'Nuff said. The US has repeatedly devalued its currency with respect to its trading partners without suffering long-term damage. The US dollar is 1/3 of what it was worth relative to the German mark in the early '70's, and 1/4 of that worth relative to the Japanese yen. Guess what - we're still standing. * This isn't Enron- or Tyco-style reporting violations - it's wholesale theft from the country's treasury. |
| Posted by: Zhang Fei 2003-12-4 10:14:57 AM |
| #13 My apollogy,WR.I'll see if I can find a rock he can crawl under.I know a couple of lonely scorpions and a centipede that could use some company. |
| Posted by: raptor 2003-12-4 10:03:51 AM |
| #12 I read something back in '99 or so that very persuasively made the case that any politician who devalues his own currency loses the next election because the devaluation lowers the domestic standard of living. The Plaza accords in 1985 devalued the US dollar by 1/3 against the yen, and George HW Bush was elected president in 1988. The main political issue has always been jobs rather than buying power. GWB is NOT pushing the currency devaluation route. He is pushing foreign central banks to stop monkeying with exchange rates. What are foreign central banks doing? They are manipulating exchange rates by buying US dollars far in excess of the amounts needed to finance trade between their respective countries and the US. By doing so, foreign central banks are not allowing the dollar to reach its natural, lower level in the face of US trade deficits. In theory, trade deficits should be self-correcting, because exchange rates will adjust to remove them. What this means is that the US dollar will fall, causing US goods to become cheaper overseas, and foreign currencies will rise, causing foreign goods to become more expensive in the US. The net result is that foreigners purchase more US goods, and Americans purchase less foreign goods, thus automatically correcting the trade deficit. Foreign central banks are preventing this adjustment from happening - thus causing the US to lose jobs relative to foreign countries. |
| Posted by: Zhang Fei 2003-12-4 10:02:02 AM |
| #11 Hey Raptor, we in holeinthewall KS, don't want that sumbitch Leigh either. Even trailer trash have standards. |
| Posted by: whitecollar redneck 2003-12-4 9:40:10 AM |
| #10 Can't remember who wrote it or where I saw it, but I read something back in '99 or so that very persuasively made the case that any politician who devalues his own currency loses the next election because the devaluation lowers the domestic standard of living. 'Course, the EU government is unelected, but still it makes you wonder . . . . |
| Posted by: Mike 2003-12-4 8:39:59 AM |
| #9 "Industry leaders in Germany and France say the euro has crossed the "pain threshold" and risks aborting the euro-zone’s fragile recovery. " You don't need to be an economist to understand that the Euro is in deep doodoo. Devaluing currency is a statement in and of itself, no matter how much airfreshener is sprayed to mask the stink. |
| Posted by: B 2003-12-4 8:11:21 AM |
| #8 "Which no doubt will cause deep depression amoungst Rantburg's cheese lovers." Is that a shot at NMM.Shame on you Phil(snicker) 2 of the biggest problems facing our economy are NAFTA and high level corporate thieves. NAFTA:as soon than NAFTA was put into effect FOMCO(Ford Motor Company)shut down it's U.S.parts plant and jumped across the border to Mexico. I read an article awhile back about a ship building company,based in Louisiana,that moved it's"headquarters" to the Bahamas this enabled them to cut their taxs by 2/3's.But their ship yards remain in LA. Ken Leigh(ENRON,I believe)and his cronies haven't even been brought to trial yet,and when they do they will get a slap on the wrist(couple of years[maybe]of jail time and a fine).But I betcha he has several 10's of millions of $ hidden away in off-shore accounts. As far as I'm concerned he should spend 10 years in prision and after he gets out,be working in a 7/11 and living in a trailer park in Wholeinthewall,Kansas. |
| Posted by: raptor 2003-12-4 7:34:46 AM |
| #7 Well before the begining of the liberation of Iraq I stopped buying all European merchandise and started buying equivalent American and Far- eastern products. I especially boycott French and Belgian merchandise. I am sure many other Israelis let alone Americans did the same thing. Can someone explain to me how come the Euro is valued so high even though we buy less stuff from them ???? |
| Posted by: The Dodo 2003-12-4 5:57:24 AM |
| #6 That means that at some point interest rates have to rise so that we can get capital back into the country. Otherwise the Treasury has to find another way to float the federal debt (e.g., higher taxes) You are confusing capital generation with capital flows. The USA has no problem in generating capital for investment. Its problem is that its capital outflows are too large due to consumable purchases. The only the way out of this is for the USD to fall and that means, for example, French cheese has to cost more. Which no doubt will cause deep depression amoungst Rantburg's cheese lovers. |
| Posted by: Phil_B 2003-12-4 3:37:35 AM |
| #5 The other problem with the said "interest rate to infinity" is that we can control that by freezing money supply growth. Milton Friedman pointed to the success of the Confederacy in checking the depreciation of their currencies in, I believe, Free to Choose and it proves that we can control, and indeed, bugger, anyone who tries to manipulate the dollar. |
| Posted by: Brian 2003-12-4 2:12:17 AM |
| #4 "Recall that Argentina's currency hit the floor." I don't necessarily think comparing the Argentinian economy to ours is quite valid. If anything, the issue might be worldwide DEFLATION because of unwise investments by said furriners in 'managed' economies (france, germany, argentina). They certainly don't appear to be on the cusp of an economic uptick. I think part of our 'punishment' for the WOT and Iraq is an economic spanking by the e.u.- we're not 'toeing the socialist line', so we'll be made to pay by the mighty economic powerhouse *ahem* of a unified Europa. Problem is, they don't/won't/can't acknowledge the fundamental flaws in their systems. America, on the other hand, looks inward, realizes, ACKNOWLEDGES MISTAKES (something a country like france is completely incapable of doing), corrects them, and goes on with business. In the short term, a weak dollar is a pretty good stick to use against a gaggle of eurotrash countries that basically told us to f*ck off last spring. In the long term, the dollar will get back in 'equilibrium' with other currencies, by virtue of our willingness to buy goods made elsewhere, in spite of the past (just look at vietnam). The current state of things is completely unnatural, especially in light of recent indicators, and that's why the E.C. is forced to look into a possible devaluation of the euro. Keep in mind, however dire the current state of the dollar, we have NOT devalued it, something to which other countries who's currency cratered always had to resort. Nobody is carrying tens of thousands of dollars to the store in a wheelbarrow to buy a loaf of bread. Arguably, the current state is entirely artificial, but somehow King George the Dullard managed to turn the tables on those wily euros. Fundamentals, fundamentals, fundamentals. |
| Posted by: reversecurrencyspeculation 2003-12-4 2:05:32 AM |
| #3 Ahem. At the same time, a lower dollar is being caused by furriners not being as willing to buy US Treasury securities, and by them withdrawing equity from US markets. That means that at some point interest rates have to rise so that we can get capital back into the country. Otherwise the Treasury has to find another way to float the federal debt (e.g., higher taxes), and industry has to find a way to get more investment (or go belly-up). This is going to cause us some real pain if it goes on long enough. Recall that Argentina's currency hit the floor. A few times. A lot. Didn't bounce, neither. And each time it sank, the common lads and lasses got whacked harder. |
| Posted by: Steve White 2003-12-4 1:22:57 AM |
| #2 I love it. Dubya lets the dollar float, 'no need for tariffs, fellas, just let that ol' yoo-row keep on risin', sky's the limit!' Even the eurotrash frenchies realize their 'economy' is a house of cards. Meanwhile, the U.S. eco engine drops a gear and stomps on the gas. They should have paid attention to the history of the dollar-yen. Instead it looks like the eurocommies read the NYT and Al Guardian too much, started believing their own propaganda. Now they're beginning to feel the pain when America stops buying their crap. Didn't these marxists see it coming? |
| Posted by: reversecurrencyspeculation 2003-12-4 12:33:58 AM |
| #1 Hat tip: Drudge. Sorry. |
| Posted by: Brian 2003-12-4 12:20:31 AM |