And I figured I'd do some shopping in Quebec.

Never mind.

And?

Well, I was wondering, what would happen if the USD decided to go Euro. Would the world be a better place?

quote:

Originally posted by --Kate:
Well, I was wondering, what would happen if the USD decided to go Euro. Would the world be a better place?

How can one currency go to another currency? What do you mean? How can a currency decide?

In what ways do you think it will be better?

I don't know if the world would be a better place. I was asking the economist.

How did the countries in the European Union change their currencies? A bunch of them did it. It was a gamble, and it seems to have paid off.

I am sure I already linked to the history of the European Monetary Union and also posted it at ET. If you want to read it again, I can find it again on Rutherfordian.

How do you think "it" paid off and in what ways?

You want a dialogue or not?

If not, I don't really care.

Post it again. Teach the morons.

Sorry, but I think a little more convergent thinking on your part may help. I (we if I may be so bold) were using Socratic method of dialogue. I would like to know what you think. I know that we have traveled this road before, but hope is eternal.

quote:

Teach the morons.

I would never be so pretentious.

Paid in dollars, expats struggle to make a living
By Doreen Carvajal
Friday, December 14, 2007

PARIS: Erica Nevins's faith in the dollar was shaken the moment she pressed a crumpled $1 bill into the hand of a little girl begging for money on the streets of Marrakesh, Morocco.

"I don't want this. This is nothing," Nevins recalled as the scornful reaction of the child, who demanded more.

Since then Nevins, an American fashion executive, has replayed that moment over and over in her head as she confronted the harsh reality of living on a dollar income in Paris and then moving to pricey London. "The absurdity of this is that it's so true," she said. "A dollar really means nothing. It's scary."

With plunging exchange rates, American expatriates whose pensions or incomes are paid in dollars are scrimping. No more dinners out when a bottle of Perrier for €3.50 translates to $5 and no more Christmas shopping binges when a shiny iPod for €159 is the equal of $230.

And ultimately some are moving to greener pastures that match the color of their money.

"Those that can hold out are holding their breath and we're hoping for a return of the dollar, but those that can't are going," said Susie Bondi, an American who has lived in Paris for 12 years, but is moving to Vienna in January with her husband, Fred, to stretch their pension dollars in a city with a lower cost of living.

The past six months have been anxious for expatriates, with the dollar sinking against the euro, the pound and currencies from the Czech koruna to the Costa Rican colón. Those declines are accelerating the flight of expatriates in Europe, according to tax attorneys who listen to the woes of clients who are giving up because they see no relief in sight.

The zeitgeist is best summed up by the rapper Jay-Z who last month released a music video of himself cruising the streets of New York in a shiny Bentley with a flash wad of €500 notes.

Even U.S. government employees are feeling the pinch in countries with strong currencies like the Czech Republic, where the koruna has gained 17 percent this year against the dollar.

Radio Free Europe, the U.S.-backed international broadcaster headquartered in Prague, is suddenly facing a housing crisis for many of its 500 employees. And the news organization's new chief executive, Jeffrey Gedmin, ranks the weak dollar with attacks on journalists around the world who have been kidnapped in Baghdad and jailed in Azerbaijan as one of the critical issue that it is facing.

"For me it's become an ethical issue," said Gedmin, who was in Washington this month lobbying U.S. legislators for relief and trying to raise funds privately to aid hard-hit employees. "I have a genuine ethical issue to take care of people who are trying hard to take care of their own countries."

Employees who have long been paid in dollars pumped the money into the local economy and to landlords who in the past gratefully accepted dollars when the currency was strong.

Now most of the organization's employees living in Prague are being pressured to convert rental contracts from dollars to korunas and have received notices about imminent rent increases. One landlord raised an employee's monthly charge from $1,000 to $1,500 and took away his basement storage space to rent it out.

The impact of the sagging dollar has been particularly acute for expatriates who live on fixed pensions paid in dollars or self-employed workers whose clients are largely based in the United States.

Josh Soski moved from San Francisco to Barcelona in September to start a freelance video production company that supplies clients like Current TV in the United States with short video features on European stories.

These days, he said, he finds himself sitting on his bed, with his head in his hands, obsessively checking currency rates on his laptop. "They pay us $2,500 for a piece, and you cash it in and it's €1,400 or less. That's shocking," said Soskin, who finds himself debating whether to splurge on a €3.50 bottle of water at the airport or indulge in a can of his favorite Mexican black beans at €4.

To survive and hedge currencies, Soskin is now scouting for European clients who will pay him in euros. Other self-employed workers - from medical translators to online entrepreneurs - are simply cutting off their American clients because it is no longer worth working for them.

Vincent Gagliostro is a graphic designer and freelance video filmmaker who left the New York advertising industry two years ago to settle in the Marais neighborhood in Paris with its promise of cheaper living that reduced his monthly housing costs from a $6,000 mortgage to an 18th-century apartment rental for €1,700. When he first moved to Paris, he said, he worked for a base of clients from the United States, but he is trying to diversify to earn euros.

"The dollar still heavily weighs on the quality of my life. As long as I continue to rely on at least 50 percent of my income with American clients, it's going to do that," Gagliostro said while dining on a simple €10 brasserie lunch of pasta and chicken. "My goal would be to lose the American clients altogether."

Gagliostro's partner, Richard Nahem, a Brooklyn native, has also sought to supplement their income by offering customized tours of the Marais, but his new business, Eye Prefer Paris Tours, is dominated by Americans and Canadians who pay him in a mix of euros and dollars. To economize, he has cut back on his own indulgences, such as clothing purchases. But he cannot resist his favorite high-end patisserie, Gérard Mulot, where a chocolate éclair costs €2.80.

"When it comes to pastries," Nahem explained, "there's no price resistance for me."

Many companies with American executives posted abroad are starting to seek advice on how to deal with currency depreciation, according to Achim Mossman, managing director for international executive services for KPMG, a tax advisory firm. In the future, he expects more American companies to pay their employees abroad with local currency, and he is also advising companies to follow calculated formulas to measure the cost of living standards to make salary adjustments.

Some employees have successfully pressed their companies to shift from dollars to local currencies. Nevins, who was paid in dollars while living in Paris, changed her income to pounds when she moved to London earlier this year.

"I wouldn't be working for this company if I was paid in dollars," she said. But Nevins still cannot resist making constant mental calculations to measure the price of everyday purchases in London. "Everything from a cup of coffee to going to the movies is so much higher," she said. "An adult movie ticket can range up to $26 and in terms of the holiday season, my boyfriend and I are doing all our shopping online in the United States. We're not thinking of shopping here."

That kind of currency fever invades daily thinking, according to some expatriates, who cope by not thinking about exchanges. Others say the downward spiral has become a basic part of life.

One expatriate from Madrid recently received an e-mail from a relative in Costa Rica who wrote about the tragic circumstances surrounding the fatal heart attack of a cousin and the cremation of her remains. And then the correspondent closed with a simple last line: "And also, as normal, the dollar fell today against the colon."

I saw or heard no one worrying about or complaining when the USD was relatively overvalued ...

Kate,

I am sure there is lots of info. on the history of the euro, however the primary reason it was done, was so the EU could have a united trading front. Of course it was initially fraught with all kinds of problems.

All of sudden in relatively cheap Portugal, a loaf of bread tripled in value, while in some of the richer countries, the cost of living actually fell a little bit.

As I am most familiar with the UK, and they have (still) not converted to the euro, I don't know a great deal about the day to day challenges the conversion caused.

However, my husband has worked with many Europeans (who all worked for American companies and were paid in USD), initially when the euro was introduced I believe the value was about .75 euro = 1 usd, so of course they were quite happy to be paid in dollars.

Now the exchange rate is 1.46 euro = 1 usd, I will say this has happened in just 5 years time (if memory serves me), that is a pretty significant fall of a currency in a relatively short period.

My husband (who works in the oil industry, but he is not a bad man, honestly) knows of several European and American companies which now pay ALL their employees in euros, so it is happening already in the oil industry, and possibly other industries too (I imagine).

I have noticed that the euro is also beginning to gain strength against the GBP, which I believe is happening because the UK is looking to move to the euro. I guarantee, once this happens, the euro will become the primary currency of the world.

So our dollar, will just be another currency pegged to the euro, and it will fluctuate.

I am not a professional, but this is what I think will happen.

Ron,
I know you have studied alot about economics, and you have much of the "book" knowledge, but I always find your views very American-centric, and they tend to never look at the very real (and fairly inevitable) fact that the USD will no longer be the primary currency of the world.
Which does seem odd to me?

Here is my notes about the European Monetary Union at here.

Yes the USD has dropped from its high over the past 6 years by almost 40% on a trade weighted basis. Now the question is how much did it fall in the '85 to '87 period?

quote:

So our dollar, will just be another currency pegged to the euro, and it will fluctuate.

Pegging to another currency means it will not fluctuate, at least with respect to that currency.

quote:

Ron,
I know you have studied alot about economics, and you have much of the "book" knowledge, but I always find your views very American-centric, and they tend to never look at the very real (and fairly inevitable) fact that the USD will no longer be the primary currency of the world.
Which does seem odd to me?

It still amazes me that you can say hurtful stuff when it appears you have not even given it much thought. I could explain about my studies, my interest shown through various threads here and including my various sources of information, but it seems that you have already made up your mind.

I just don't believe that the EU wants to be the primary reserve currency of the world. Just imagine them dealing with American-Euros?

quote:

Originally posted by Ronald Rutherford:
Here is my notes about the European Monetary Union at here.

Yes the USD has dropped from its high over the past 6 years by almost 40% on a trade weighted basis. Now the question is how much did it fall in the '85 to '87 period?

quote:

So our dollar, will just be another currency pegged to the euro, and it will fluctuate.

Pegging to another currency means it will not fluctuate, at least with respect to that currency.

quote:

Ron,
I know you have studied alot about economics, and you have much of the "book" knowledge, but I always find your views very American-centric, and they tend to never look at the very real (and fairly inevitable) fact that the USD will no longer be the primary currency of the world.
Which does seem odd to me?

It still amazes me that you can say hurtful stuff when it appears you have not even given it much thought. I could explain about my studies, my interest shown through various threads here and including my various sources of information, but it seems that you have already made up your mind.

I just don't believe that the EU wants to be the primary reserve currency of the world. Just imagine them dealing with American-Euros?

Okay Ron, however the euro wasn't a cash currency until 2002, so how can you measure the USD's value to a currency that wasn't even circulating until that time?

I think you are wrong about the euro and the intent of it being the primary currency. This isn't just something I have decided, my husband works in the international oil industry (in London), and he is witnessing firsthand, the shift towards the euro. And trust me once the oil industry goes...

Of course it is not being reported in the media here, as most of what is REALLY happening with our economy is barely touched upon here in the US.

What do you mean about the American euro, it will still be the American dollar (just like we have the Canadian dollar, the Japanese yen, and the Chinese yaun), it just won't be the primary currency of the world.

I didn't mean to hurt your feelings, however I do think that you have a very narrow economic view of the world, maybe you can't help it, if all of your information is from US sources.

quote:

I didn't mean to hurt your feelings, however I do think that you have a very narrow economic view of the world, maybe you can't help it, if all of your information is from US sources.

But again you claim stuff that is not true. You have no proof but continue to dwell on it. The navel gazers on this site is a bunch of gerbils that can not look to any action outside the USA. You have not shown much ability also.

How many times have you discussed international economics with me? The thread on Venezuela has some information on that and also we covered the Red Dragon. And GCC countries with various macroeconomic policies and of course Africa with some emphasis on the problems in Zimbabwe. My final paper was on the IMF with respect to Uganda that I posted links to. So what country do you want to discuss? We also have looked at NAFTA and Chile during Pinochet rule and the various macroeconomic policies instigated. It seems you just have feelings...

Do you know what EuroDollars are?

quote:

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. It replaced the former European Currency Unit (ECU) at a ratio of 1:1. Euro

Thus the currency had chances to float since 99 it was used between member states and was traded.

How does the dollars value compare to the yen?

Yen:


Or do you mean the Renminbi?

Currency intervention still remote

quote:

Originally posted by meljomur:
Kate,

I am sure there is lots of info. on the history of the euro, however the primary reason it was done, was so the EU could have a united trading front. Of course it was initially fraught with all kinds of problems.

All of sudden in relatively cheap Portugal, a loaf of bread tripled in value, while in some of the richer countries, the cost of living actually fell a little bit.

As I am most familiar with the UK, and they have (still) not converted to the euro, I don't know a great deal about the day to day challenges the conversion caused.

However, my husband has worked with many Europeans (who all worked for American companies and were paid in USD), initially when the euro was introduced I believe the value was about .75 euro = 1 usd, so of course they were quite happy to be paid in dollars.

Now the exchange rate is 1.46 euro = 1 usd, I will say this has happened in just 5 years time (if memory serves me), that is a pretty significant fall of a currency in a relatively short period.

My husband (who works in the oil industry, but he is not a bad man, honestly) knows of several European and American companies which now pay ALL their employees in euros, so it is happening already in the oil industry, and possibly other industries too (I imagine).

I have noticed that the euro is also beginning to gain strength against the GBP, which I believe is happening because the UK is looking to move to the euro. I guarantee, once this happens, the euro will become the primary currency of the world.

So our dollar, will just be another currency pegged to the euro, and it will fluctuate.

I am not a professional, but this is what I think will happen.

Thanks, mejlomur.

Your thoughts hit on some things I've been wondering about. What about the USD shifting to the euro? Have you got some ideas about that? Would the US transition look like Portugal's transition?

quote:

Originally posted by Ronald Rutherford:

quote:

I didn't mean to hurt your feelings, however I do think that you have a very narrow economic view of the world, maybe you can't help it, if all of your information is from US sources.

But again you claim stuff that is not true. You have no proof but continue to dwell on it. The navel gazers on this site is a bunch of gerbils that can not look to any action outside the USA. You have not shown much ability also.

How many times have you discussed international economics with me? The thread on Venezuela has some information on that and also we covered the Red Dragon. And GCC countries with various macroeconomic policies and of course Africa with some emphasis on the problems in Zimbabwe. My final paper was on the IMF with respect to Uganda that I posted links to. So what country do you want to discuss? We also have looked at NAFTA and Chile during Pinochet rule and the various macroeconomic policies instigated. It seems you just have feelings...

Do you know what EuroDollars are?

quote:

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. It replaced the former European Currency Unit (ECU) at a ratio of 1:1. Euro

Thus the currency had chances to float since 99 it was used between member states and was traded.

Ron,
I am not an economist and don't pretend to know all the techinical stuff, I am just telling you what I have experienced and seen firsthand in Europe and with the euro, how it effects the people, the local economies.

AND THE OIL INDUSTRY, with many companies already using the euro.

You can keep your head in the sand all you want, doesn't effect me one bit, but it never ceases to amaze me how naive some "professionals" are in this country.

quote:

Originally posted by --Kate:

quote:

Originally posted by meljomur:
Kate,

I am sure there is lots of info. on the history of the euro, however the primary reason it was done, was so the EU could have a united trading front. Of course it was initially fraught with all kinds of problems.

All of sudden in relatively cheap Portugal, a loaf of bread tripled in value, while in some of the richer countries, the cost of living actually fell a little bit.

As I am most familiar with the UK, and they have (still) not converted to the euro, I don't know a great deal about the day to day challenges the conversion caused.

However, my husband has worked with many Europeans (who all worked for American companies and were paid in USD), initially when the euro was introduced I believe the value was about .75 euro = 1 usd, so of course they were quite happy to be paid in dollars.

Now the exchange rate is 1.46 euro = 1 usd, I will say this has happened in just 5 years time (if memory serves me), that is a pretty significant fall of a currency in a relatively short period.

My husband (who works in the oil industry, but he is not a bad man, honestly) knows of several European and American companies which now pay ALL their employees in euros, so it is happening already in the oil industry, and possibly other industries too (I imagine).

I have noticed that the euro is also beginning to gain strength against the GBP, which I believe is happening because the UK is looking to move to the euro. I guarantee, once this happens, the euro will become the primary currency of the world.

So our dollar, will just be another currency pegged to the euro, and it will fluctuate.

I am not a professional, but this is what I think will happen.

Thanks, mejlomur.

Your thoughts hit on some things I've been wondering about. What about the USD shifting to the euro? Have you got some ideas about that? Would the US transition look like Portugal's transition?

Kate,

I am not sure that the USD could shift to the euro, because the EU work as a collective trading block, with all sorts of laws and regulations (which they seem to constantly fight amongst themselves about).

Maybe once we have regime change in this country, things might change, but my own opinion is that gradually the euro will just become the primary currency, and the USD will just be another currency pegged to it.

But of course according to Ron, I have it all wrong.

Oh well, he can have his opinions, I can have mine.

The greenback hasn't sunk yet.

In conclusion, the dollar is only in danger from central banks if the large reserve holders in Asia and the Middle East decide to go off the dollar standard.

I guess the USD is safe for now...

pegged exchange rate

quote:

A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. As the reference value rises and falls, so does the currency pegged to it. In addition, fixed exchange rates deprive governments of the use of an independent domestic monetary policy to achieve internal stability. However, in certain situations, fixed exchange rates may be preferable for their greater stability. For example, the Asian financial crisis was improved by the fixed exchange rate of the Chinese renminbi, and the IMF and the World Bank now acknowledge that Malaysia's adoption of a peg to the US dollar in the aftermath of the same crisis was highly successful. Following the devastation of World War II, the Bretton Woods system allowed Western Europe to have fixed exchange rates until 1970 with the US dollar. [1]

Yet others argue that the fixed exchange rates (implemented well before the crisis) had become so immovable that it had masked valuable information needed for a market to function properly. That is, the currencies did not represent their true market value. This masking of information created volatility which encouraged speculators to "attack" the pegged currencies and as a response these countries attempt to defend their currency rather than allow it to devalue. These economists also believe that had these countries instituted floating exchange rates, as opposed to fixed exchange rates, they may very well have avoided the volatility that caused the Asian financial crisis. Countries like Malaysia adopted increased capital controls believing that the volatility of capital was the result of technology and globalization, rather than fallacious macroeconomic policies which resulted not in better stability and growth in the aftermath of the crisis but sustained pain and stagnation.

Countries adopting a fixed exchange rate must exercise careful and strict adherence to policy imperatives, and keep a degree of confidence of the capital markets in the management of such a regime, or otherwise the peg can fail. Such was the case of Argentina, where unchecked state spending and international economic shocks disbalanced the system and ended up forcing an extremely damaging devaluation (see Argentine Currency Board, Argentine economic crisis, and the Mexican peso crisis). On the opposite extreme, China's fixed exchange rate with the US dollar until 2005 led to China's rapid accumulation of foreign reserves, placing an appreciating pressure on the Chinese yuan.

Floating exchange rate

quote:

A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency. The opposite of a floating exchange rate is a fixed exchange rate.

Many economists think that, in most circumstances, floating exchange rates are preferable to fixed exchange rates. They allow the dampening of shocks and foreign business cycles. However, in certain situations, fixed exchange rates may be preferable for their greater stability and certainty. This may not necessarily be true, considering the results of countries that attempt to keep the prices of their currency "strong" or "high" relative to others, such as the UK or the Southeast Asia countries before the Asian currency crisis.

Thanks Ron, but I do understand the difference between a pegged and floating currency.

Anyway, from a purely selfish POV, it benefits us (my family) quite a bit at the moment to have a weak dollar.

It is actually quite nice, when you are paid in GBP, and live in discount USA.

One of the reasons I was thinking USD might go Euro is because lots of the new gas tanks are set up with a Euro comma instead of a USD period.