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Are many Eurozone countries hurt by having a strong Euro? Yes. With that said if they all agreed they could devalue the Euro rather easily. As I said it is quite easy to devalue your currency, it was the way the Italians and Greeks managed their economies before the Euro, however, Germany is against this and will not let it happen. Germany has been an economic power house since before the Euro and has always done it with a strong currency or "strong gilt" as one of my college econ professors used to say. The fact is unions, minimum wage, and a social safety net have little impact on a country's ability to export and do manufacturing.
I disagree. The German economy really started to take off after the Euro was formed and cost of inputs does impact the ability to export. Unless you deflate the value of your currency, but then your imports become more expensive. I had to order some expensive parts from Sweden once, if those same parts were mfg in the USA or China they would be very cheap and more affordable for me. A washer made in the USA is about 3X as much as one made in China, part of the reason is regulations and part is the cost of labor.
Does the UK mfg anything? The Pound is very expensive compared to the dollar. They make some very nice suits that cost $4K, but I can get one made in China for 1/3 of that and if I ever purchase a bespoke suit I'm going to China.
For the 3rd time artificially low currencies are really easy to achieve if you have total control of your monetary policy. Germany does not need to the Euro to make an artificially low currency to do what they do since they are running the same manufacturing/export engine they had with the Deutchmark, and not that they would want to anyway. Part of the issue with the Euro is that it puts southern European countries in a possition where their currency is too strong for them to pay their debts, and they need bailouts, these bailouts come with austerity conditions that further contract their economies and again make it impossible to pay their debts. That and Northern Countries becoming frustrated with bailouts are what make the Euro not feasible in the long run without Europe moving towards a more unified federal system like the US.
Southern countries do need to devalue because of the above mentioned hamster wheel they are on but cannot because they do not control their own monetary policy.
We aren't in disagreement, but outside of the current arrangement unless Germany pegs their currency and doesn't let it float they don't have a way to have an artificially low currency. They can devalue it, but that makes their people less rich. I'm not an expert in this particular area though.
I disagree. The German economy really started to take off after the Euro was formed and cost of inputs does impact the ability to export. Unless you deflate the value of your currency, but then your imports become more expensive. I had to order some expensive parts from Sweden once, if those same parts were mfg in the USA or China they would be very cheap and more affordable for me. A washer made in the USA is about 3X as much as one made in China, part of the reason is regulations and part is the cost of labor.
Does the UK mfg anything? The Pound is very expensive compared to the dollar. They make some very nice suits that cost $4K, but I can get one made in China for 1/3 of that and if I ever purchase a bespoke suit I'm going to China.
That is the point of deflating your currency. With that said deflating your currency is really easy if you have total control over your monetary policy.
Furthermore Germany had been a net exporter as far back as 1991 if not before. Finally cost is only in part dependent on regulations and cost of labor. There are numerous other issues at stake. Ironically you point out washers which are interestingly enough starting to be produced in the US again because of those other factors.
Seriously guys, even the Republican leaders don't dare make any references to the "Bush economy" which slowly sucked the life out of the nation despite having been handed a budget surplus.
Infact the Republican establishment would rather Dubya not speak in public about the economy or wars ...it just brings back a lot of bad memories for Americans. There is a reason why Dubya wasn't invited to RNC'12 or made any public campaign appearances. The man is toxic for the party.
All great booms come to an end. In a capitalistic society there will always be a business cycle.
There's a difference between a growth spurt coming to an end and a bubble giving in. History is rife with economic booms that left societies richer, even after their first growth phase came to an end. Discovery of agriculture or iron or steam power or even the horse collar, for all that - all boom cycles that actually left their societies richer. Compare and contrast to bubbles, starting with the tulip mania.
We aren't in disagreement, but outside of the current arrangement unless Germany pegs their currency and doesn't let it float they don't have a way to have an artificially low currency. They can devalue it, but that makes their people less rich. I'm not an expert in this particular area though.
Pegging and devaluing are different things entirely.
First off with at peg you set it to a certain value and keep it there. Pegs have to be defended both ways by devaluation when the currency floats to high, and the much more difficult process of selling foreign denominated assets to buy back currency if the value falls to low. That later is the major issue for pegs as was the case in 1997 with the Thai Bhat.
Devaluation is simply the process of printing money and then selling it to keep your currency low. It doesn't necessarily make people less rich since people tend to be invested in hedges against it anyway such as real estate. In fact, by leveraging property and then getting the assist from devaluation in paying down debts devaluation can actually increase purchasing power. Furthermore it is a great way to protect domestic industry and deal with unemployment. With that said in Germany's case they would be in the black either way.
Last edited by Randomstudent; 02-21-2013 at 11:25 PM..
You want Bush level recovery? Look at this graph and let me know if you see any difference between how Bush v Obama handled things:
What stands out is, government jobs under Bush rising, and declining under Obama. This adds to Obama's unemployment data, yet right-wingers complain...
We are now in the sixth year of recession and things don't appear to be getting better any time soon. Does anybody think its possible to ever return to 2004-2007 level growth like we had when Bush was President? The Bush economy was by no means a boom like Clinton's was, but it was a comfortable time and most Americans were better off than they are today. Bush was President eight years and 2008 was only one of those years. Most of his presidency he presided over a growing economy. A return to that level of growth would be an acceptable recovery.
Or is this the new normal and the best we'll ever see the economy going forward?
The bush economy is precisely why we are in the mess we are currently in. To return to his economic policies would probably doom this country.
What is your opinion of Milton Friedman? He claims that it was a failure of the federal reserve. Additionally, the gold standard and protectionist policies hurt us and explains why we were still in a depression when Europe was already emerging.
I watched / listened twice. I swear I heard Friedman say that Congress should have exercised it's constitutional mandate to create gold and silver coins (aka create money) and that would have had a better effect than Fed policy at the time. Wonder what he was smoking? Congress does all it can to help inflate the money supply.
In the meantime I find it ironic that Friedman's brilliant theory of monetarism has but one flaw - government can and does undermine it by inflating the currency.
I wish he was still alive so he could be pinned down on some of these things.
The bush economy is precisely why we are in the mess we are currently in. To return to his economic policies would probably doom this country.
The same people that ran the economy when Bush was president are running things today.
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