Is parity between the American Dollar and the Euro the perfect match? (credit, interest)

[Refugee56]

I remember going to Europe when the American Dollar and Euro was at the same level. One Euro bought one American Dollar $.

Back then things were expensive in many European Countries but not as bad as today. It seems like most everything costs about 40% more in Europe than America,

Do you feel our leaders and the Federal Reserve should push for a 1 to 1 link between the Euro and the American Dollar?

[HappyTexan]

The US-Mexico-Canada are busy working on the Amero.

All part of the NAU, NAFTA stuff.

[Mircea]

Originally Posted by Refugee56

Do you feel our leaders and the Federal Reserve should push for a 1 to 1 link between the Euro and the American Dollar?

Um, your leaders did do something about it in March of 2003 and everyone is still whining and crying and sniveling about it.

The Federal Reserve has nothing to do with the value of the US Dollar against the Euro.

It's strictly demand. The Euro and the Ruble, and to a lesser extent, the Yuan and basket currencies are reducing demand for the US Dollar, which reduces it's value. There's nothing the US can do about it, unless you want to start invading more countries.

It will get worse in the future because trading in US Dollars is not the national interest of developing nations and offers them no advantages.

[Refugee56]

Wrong. The US can do many things to promote a strong dollar but Bush wants a weak dollar so imports cost more and exports are more attractive.

Originally Posted by Mircea

Um, your leaders did do something about it in March of 2003 and everyone is still whining and crying and sniveling about it.

The Federal Reserve has nothing to do with the value of the US Dollar against the Euro.

It's strictly demand. The Euro and the Ruble, and to a lesser extent, the Yuan and basket currencies are reducing demand for the US Dollar, which reduces it's value. There's nothing the US can do about it, unless you want to start invading more countries.

It will get worse in the future because trading in US Dollars is not the national interest of developing nations and offers them no advantages.

[Mircea]

Originally Posted by Refugee56

Wrong. The US can do many things to promote a strong dollar but Bush wants a weak dollar so imports cost more and exports are more attractive.

Wrong. The US can do nothing.

The value of a currency is strictly a demand thing. You should have had that in your 4th year Implied Economic Currency class or in the 5th year in International Economics.

I'm sure you can explain, without cutting and pasting from Pukipedia, why the Euro is more valuable than the US Dollar and the why the US Dollar is more valuable than the Romanian Lei. It ain't rocket science.

It isn't in the national security interest or economic interest of developing nations to continue using US Dollars, and soon enough they'll all be trading in Euros, Rubles and Yuan. You'll be lucky if the Dollar is worth half of what it is now. It's to their advantage. You pay more, they pay less.

[destinedtodave]

Originally Posted by Mircea

Um, your leaders did do something about it in March of 2003 and everyone is still whining and crying and sniveling about it.

The Federal Reserve has nothing to do with the value of the US Dollar against the Euro.

It's strictly demand. The Euro and the Ruble, and to a lesser extent, the Yuan and basket currencies are reducing demand for the US Dollar, which reduces it's value. There's nothing the US can do about it, unless you want to start invading more countries.

It will get worse in the future because trading in US Dollars is not the national interest of developing nations and offers them no advantages.

Some of it stems from pure supply/demand but to discount the monetary policies of central banks is foolish. The central banks raise and lower interest rates which have an effect on currencies. Take the Fed's interest rate cuts the past year or so-they did much to devalue the dollar.

[jimj]

Originally Posted by Mircea

Um, your leaders did do something about it in March of 2003 and everyone is still whining and crying and sniveling about it.

The Federal Reserve has nothing to do with the value of the US Dollar against the Euro.

It's strictly demand. The Euro and the Ruble, and to a lesser extent, the Yuan and basket currencies are reducing demand for the US Dollar, which reduces it's value. There's nothing the US can do about it, unless you want to start invading more countries.

It will get worse in the future because trading in US Dollars is not the national interest of developing nations and offers them no advantages.

Dollar is up today so far and oil is way down...

[ChunkyMonkey]

Originally Posted by Mircea

The value of a currency is strictly a demand thing.

Isn't it also a supply thing? If the Fed prints more dollars, supply increases, hence the value decreases. Of course, there are other factors in play. For instance, the dollar is strengthening against the euro recently not because it is fundamentally strong, but because people are worried about the European plunging headlong into the credit crisis. So, the U.S. can and do have policies to strengthen or weaken the currency if it sees fit.

[Mircea]

Originally Posted by ChunkyMonkey

Isn't it also a supply thing?

To a lesser extent.

Originally Posted by ChunkyMonkey

If the Fed prints more dollars, supply increases, hence the value decreases.

The Federal Reserve doesn't actually print US Dollars, that's the Treasury Department. What the Federal Reserve does is create money, which isn't the same thing as currency.

The effects are relative to the money supply. Surely you can see the difference between a country that has a money supply of $1 Million who "prints" $10 Million and a country that has a money supply of $100 Billion who "prints" $10 Million.

Yes, both countries "printed" $10 Million, but in the first instance that represents 1000% of the money supply and in the second instance it represents .01% of the money

I would hope people would see the difference between 1000% and .01%

Originally Posted by ChunkyMonkey

Of course, there are other factors in play. For instance, the dollar is strengthening against the euro recently not because it is fundamentally strong, but because people are worried about the European plunging headlong into the credit crisis. So, the U.S. can and do have policies to strengthen or weaken the currency if it sees fit.

The effects are fleeting and the influence is nominal. We're talking about 2 or 3 points, not 20 or 30 points.