Europe - The Official Thread

Liquid
BBC - Euro prices deflated 0.2% in December 2014 compared to December 2013

Incidentally it's a bad time for Euro users to buy US dollars. It hit a 4 year record low the other day; €1 = $1.19
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Eww, no. It's the perfect time to buy it! You want to buy something that is gaining in strength but get it before it reaches maximum strength.

I find it hilarious that Europe wants another QE to keep this from happening. Much of the reason this is happening is because the US just ended their QE3.
 
Keef
I find it hilarious that Europe wants another QE to keep this from happening. Much of the reason this is happening is because the US just ended their QE3.
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For the uninitiated, QE means printing money, presumably for the purposes of stimulating inflation, demand and growth, but at least staving off immediate collapse, neverminding the debt incurred is virtually impossible to pay off. Tomorrow never comes. Is that a lie, or not?
 
Keef
Eww, no. It's the perfect time to buy it! You want to buy something that is gaining in strength but get it before it reaches maximum strength.

I find it hilarious that Europe wants another QE to keep this from happening. Much of the reason this is happening is because the US just ended their QE3.
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Russia would welcome another QE. That would translate to higher crude oil prices, which Russia can turn around and sell its Natural Gas at an inflated cost.

Either way, we both agree that this is a perfect opportunity to buy into the dollar. My family recently bought into silver to hedge against the inevitable inflation that might result in QE4 if that happens.
 
Keef
Eww, no. It's the perfect time to buy it! You want to buy something that is gaining in strength but get it before it reaches maximum strength.
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Why is it? Despite having an interest in coin and banknote collecting, I am actually not very good with numbers/arithmetic and economics.

Assuming I am looking to get the best deal on exchange rates, the euro is now close to a rock bottom price with the USD. For €1 I only get $1.18 whereas previously I could get as much as $1.30 or $1.40.

If I exchange €100 for dollars right now I will get $118. You say that this is good because in future the dollar will be even better against the euro. If, hypothetically, it became €1 = $1.05 then my $118 is €112 and that's a €12 profit. For some reason I find this very tricky to understand. I just can't wrap my head around it.

So even though it is an expensive time to buy dollars, you are saying that this is a good time to buy then because if they become more expensive I can get more euros back at the other end? This is on the assumption that it will get significantly stronger and not level out again.

It could work out that I get my $118 at 1 euro : 1.18 dollar and find that in 6 weeks time that that is now €112 at 1 : 1.05. Or I could find that that's now only worth €78 because all of a sudden it's 1 euro : 1.5 dollar. But I guess that is the risk you take.

There are three schools of though which always confuse me when exchange rates are in play.

I am a tourist (from the Eurozone travelling to the United States)

"I want as many dollars for as few euros as possible because I want to have more money to spend. Therefore €1 = $1.50 is better than €1 = $1.18 for me."

I am a money collector

"I also want as many dollars for as few euros as possible because I want to buy banknotes therefore €1 = $1.50 is better than €1 = $1.18 for me."

I am a speculator

"I want as few dollars as possible for my euros because as the ratio narrows, from 1 : 1.18 to 1 : 1.05, I will get more euros back in return."

See, that last one throws me. I understood when I worded it just above but not there. Whenever there are reports of currency [X] doing well versus currency [Y] I'm never sure which one of those they are going for. Honestly, this post has taken me over 50 minutes to write and involved deleting a lot of calculations, hypotheticals and paragraphs of rubbish.

Anyone who can understand this drivel deserves an award.
 
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What @Keef is referring to, @Liquid, is the currency markets. If you are a strong investor in said markets, having the dollar that low against the euro is a strong economical indicator.
 
Sanji Himura
Russia would welcome another QE.

Either way, we both agree that this is a perfect opportunity to buy into the dollar. My family recently bought into silver to hedge against the inevitable inflation that might result in QE4 if that happens.
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Russia can't afford another QE because the Ruble is currently experience pretty crappy inflation.

Liquid
Why is it?
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Because currency is a commodity just like anything else in the market. The American dollar is currently gaining in value and that's a good thing for anybody who has invested in it.

Overall, the lesson here is that central banks having control over money supplies and interest rates is a terrible idea. When one of the banks does something it hurts somebody else so that bank does something to fix it and it just goes back and forth and up and down and everything is always wrong. Stop screwing with the economy and the market will sort itself out. Some will succeed and some will fail - that's how this works. If you you don't want to fail then be smart, simple as that.
 
Keef
Russia can't afford another QE because the Ruble is currently experience pretty crappy inflation.
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Maybe not for the EU, but if the US has another QE, then that impacts everyone and everything. That aside, the real issue is the artificially low interest rates that the fed is currently pushing out. That will impact the global economy harder and faster than any QE would do.
 
Keef
Because currency is a commodity just like anything else in the market.
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This I can understand in a closed economy by which I mean, as an example, one currency zone or one country. My own analogy is to use Pokemon trading cards. If everyone in Economy X has thousands of shiny Charizards then shiny Charizards aren't as rare or valuable. But then that leads on to how wealth is actually created; how do we go from millionaires to trillionaires? Where does that extra value and worth actually come from?

It is just difficult for me to understand when comparing one economy or currency to another.

As for eurozone deflation, is that a bad thing necessarily? If prices come down, surely the value is still there but the ratio is different? Just something to adjust to, mentally. A rich man's €100 is now €50 and a poor man's €10 is now €5.

If I remember too I think the United States dollar actually deflated for a long time during the latter half of the 19th century. Things and prices were very stable and uninterrupted until the first few panics of the 20th century.

As for some actual news and not my ramblings, German inflation is at a five year low to 0.2%, down from 0.6% a month earlier. While this means prices should fall, people might wait to see if they fall any further.
 
Liquid
As for some actual news and not my ramblings, German inflation is at a five year low to 0.2%, down from 0.6% a month earlier. While this means prices should fall, people might wait to see if they fall any further.
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That's supposedly the fatal problem with deflation. If people defer purchases in the expectation of further price drops, the general economy contracts. Production and consumption slows. Growth ends. Debt payments remain.
 
Liquid
This I can understand in a closed economy by which I mean, as an example, one currency zone or one country. My own analogy is to use Pokemon trading cards. If everyone in Economy X has thousands of shiny Charizards then shiny Charizards aren't as rare or valuable. But then that leads on to how wealth is actually created; how do we go from millionaires to trillionaires? Where does that extra value and worth actually come from?

It is just difficult for me to understand when comparing one economy or currency to another.
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It's a basic supply and demand problem. Take your Charizard example: If you place another party into that scenario, one which has never Charizards and lives off Weedles, they'll be like "Damn, those Charizards are nice" and buy them up. Demand will be high and the price of Charizards - once worthless - will rise to meet this new demand. Any question of supply and demand you've ever seen is a simple comparison between two things.

As for eurozone deflation, is that a bad thing necessarily? If prices come down, surely the value is still there but the ratio is different? Just something to adjust to, mentally. A rich man's €100 is now €50 and a poor man's €10 is now €5.
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Dotini
That's supposedly the fatal problem with deflation. If people defer purchases in the expectation of further price drops, the general economy contracts. Production and consumption slows. Growth ends. Debt payments remain.
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Supposedly. But the folks who claim it is a problem never seem to consider the fact that the "typical" growth we like to see in modern economies is artificial. It is driven by inflation rates and interest rates that would never see the light of day in a simple market economy.

If untouched, interest rates would be higher and inflation would be lower than it's "supposed" to be. Yes, this would slow growth. But it would also promote savings and investment - safety nets which would help stave off hardship when the economy does go awry. If left to its own devices over a long period of time, this free market economy would probably result in more but smaller businesses and corporations, more conservative management, more focus on long-term sustainability, etc.
 
Dotini
Yes to all of this.

The price of oil is falling sharply due, not least of all, to high supplies from fracking and low demand from economic recession. Too much lower and it will put marginal petroleum producers, and alternate fuel competitors, right out of business.

But right now The Great Game is afoot, and it is worthwhile to sacrifice a few economic interests in order to pressure Putin-poot and his doomed regime. We'll squeeze him until something breaks. Them, us, or you.:rolleyes:
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The fall in the price of oil is ACCELERATING.
This has prompted Goldman Sachs to predict an equity markets "pullback" (serious sell off) in February.
http://www.cnbc.com/id/102328757
 
a9MGe7K_460s.jpg
 
Analyst: OPEC maintains $40 a Barrel for Oil for 6 Months, Then Pulls Out.

An analyst on CNBC today spoke on Saudi Arabia's decision to low ball current supply at $40/barrel. Because, she said, that as long as Prince Al-Waleed remains as oil minister and King Abdullah continues to have health issues, we will continue to see the oil prices that low for the foreseeable future. The host of the program gives another reason for oil being that low, Shale drilling. He says that the 6 months of $40 a barrel will see a cut in Shale production.

You can watch the whole segment here:

http://finance.yahoo.com/video/opec-maintains-40-oil-6-153900078.html
 
The cost of producing Canadian crude oil is $75/barrel. Their collective energy producer stock value has declined 40% in recent weeks. Canada is America's #1 trading partner. Many of their energy stocks are traded on American exchanges. Their trouble is our trouble. Alternative energy industries are in trouble. High margin producers are in trouble. These folks will go bust or be acquired by the majors. It is questionable if the situation can endure six more months of falling oil prices.

Saudi Arabia has done nothing but continue producing as before. It is the US and Iraq that have surged production.
Political reasons may sustain wide-open production for months or even years to come, with economic consequences for the US, Europe or the world at large playing a secondary role.
 
Meh im going to be investing in oil, as they cut back on oil production more and more at tge same time developing countries are getting more vehicles on the road. Prices this low isn't sustainable just going by supply and demand.
 
Dotini
The cost of producing Canadian crude oil is $75/barrel. Their collective energy producer stock value has declined 40% in recent weeks. Canada is America's #1 trading partner. Many of their energy stocks are traded on American exchanges. Their trouble is our trouble. Alternative energy industries are in trouble. High margin producers are in trouble. These folks will go bust or be acquired by the majors. It is questionable if the situation can endure six more months of falling oil prices.

Saudi Arabia has done nothing but continue producing as before. It is the US and Iraq that have surged production.
Political reasons may sustain wide-open production for months or even years to come, with economic consequences for the US, Europe or the world at large playing a secondary role.
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mustafur
Meh im going to be investing in oil, as they cut back on oil production more and more at tge same time developing countries are getting more vehicles on the road. Prices this low isn't sustainable just going by supply and demand.
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Saudi Arabia really holds all of the cards here as an OPEC nation, or rather the OPEC nation that directly influences how much supply out there in the world. To be honest here, I think that OPEC as a whole was caught off guard about the sustainability of oil produced from Shale, and once you factor that in, it is little wonder why the Saudi's want to cut the source off.

It is more like any other item you buy from the shelves. You see one price as the MSRP, but you shop around and find a discount store that is selling the same item for 35% off, much to the manufacture's ire. To counter that, you have two options, one is to increase supply (especially if the said item is in high demand) to tank prices, or you cut production to raise prices. OPEC decided on the former.
 
http://www.bbc.com/news/world-europe-30864088#
Europe's "crisis of democracy" is a gap between elites and voters, EIU says.
==========
Anti-establishment sentiment has surged across the eurozone (and the larger EU) and the risk of political disruption and potential crises is high."
Its analysis is that populist parties and movements - of the left, the right and the indeterminate - are moving into the space that has opened up between the old political parties and their traditional social base.

Opposition to governance from Brussels, immigration and austerity are key themes and rallying cries for many of these parties.
=============
The EIU estimates that significant protest movements surfaced in more than 90 countries during the past five years - in the main, it says, led by young, educated, middle class individuals who resent their political leaders and who prefer Twitter and other social networks to the traditional political soap box.

"An upsurge of popular protest has swept through Europe, the Middle East, North Africa and Latin America in recent years. Other regions such as Asia and North America have been less susceptible, although have not escaped entirely," the EIU says.

"The mainsprings of the protests have been different - some have been responses to economic distress, others are revolts against dictatorship; some are expressions of a popular desire to have their voices heard by political elites, others express the aspirations of new middle classes in fast-growing emerging markets."

http://www.bbc.com/news/business-30876954#
Speaking to the BBC, the IMF's chief economist, Olivier Blanchard, said deflation was an adverse and worrying force, but it was "not the kiss of death… in itself, it's not going to derail the recovery".

However, he acknowledged that it was possible that deflation could set off the eurozone's debt crisis once again. Falling prices are particular problem for debtors, because their incomes - or for governments, their tax revenues - may fall, but the debt payments often do not.
 
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Talking about debt.

Greece will not see their debts being cancelled or lowered, according to Dijselbloem, our financial minister. And he adds to that that there is a broad support for that idea in the Eurozone.
 
Dotini
Debt is like a giant sword hanging over your neck. :crazy:

But Angela Merkel, an astute leader of Europe's most successful economy, has stated youth unemployment is the biggest problem facing Europe.
http://www.theguardian.com/world/2013/jul/02/angela-merkel-youth-unemployment-europe
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That seems to be mostly a problem in the PIIGS, it has been somewhat of a problem in the rest of the Eurozone but that is expected when you're dealing with a financial crisis.

All signs point towards better times nowadays. Even for Greece. With their sword of debt chopping away at them.
 
Dennisch
That seems to be mostly a problem in the PIIGS, it has been somewhat of a problem in the rest of the Eurozone but that is expected when you're dealing with a financial crisis.
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I know what you mean, there's barely any jobs around for under-25s here unless you know someone with a vacancy.
 
“The combined monthly purchases of public and private sector securities will amount to €60bn euros,” said Mr Draghi at a press conference following a meeting of the ECB’s governing council.

“They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation,” he added, meaning the package will amount to at least €1.1 trillion.

Mr Draghi’s package of asset purchases, including bonds issued by national governments and EU institutions such as the European Commission, is intended to boost the eurozone’s flagging economy and to ward off the spectre of deflation.

When you print more money, you drive down the value of your currency. And the euro has already been crashing for months as you can see from the chart below…



As I write this, the euro is down to $1.13. And most analysts seem to agree that it is likely heading even lower.

How low could it ultimately go?

http://www.theguardian.com/business/2015/jan/22/ecb-boosts-eurozone-mario-draghi-kickstart-growth
http://theeconomiccollapseblog.com/archives/beginning-end-euro
 
@Dotini, to be honest, I expect a 1:1 pretty quickly if things are maintaining status quo. However, I fear for our government if things take a radical shift like tax increases, more welfare spending, and other things that require the need to print USD.
 
Sanji Himura
@Dotini, to be honest, I expect a 1:1 pretty quickly if things are maintaining status quo. However, I fear for our government if things take a radical shift like tax increases, more welfare spending, and other things that require the need to print USD.
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As the world's reserve currency, the USD should be the last man standing in a ruined world. Although that will be cold comfort to many.

But I'm tired of this printing of money. There's no hope of ever paying off the existing obligations as they currently stand. I now favor the minting of a trillion dollar coin - a more beautiful lie.
 
Sanji Himura
@Dotini, to be honest, I expect a 1:1 pretty quickly if things are maintaining status quo. However, I fear for our government if things take a radical shift like tax increases, more welfare spending, and other things that require the need to print USD.
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You think the Republican House and Senate will vote to increase taxes and welfare? :lol:
 

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