Will the euro crash in 2011

[allanb]

[quote user="Quillan"]The 'Market' currently quotes in dollars for oil, just like it does for gold. When you go to buy gold do you pay in dollars, of course not you pay in the local currency. [/quote]

Absolutely not true.  You pay in the currency of the contract.  A buyer and a seller have agreed on a price, and the price consists of a specific amount in a specific currency.  If you're the buyer, that's the amount you owe.

If you've agreed to buy something for $100, whether it's oil or gold or coffee beans, $100 is what you have to pay, no matter what the local currency may be.  You have no right to pay in euros, and the seller has no right to demand euros.

Of course, if the seller wants to fix the price of his oil in euros, and the buyer agrees, that's fine; my point was simply that it doesn't seem that the Middle East producers do that very much in practice.

[Quillan]

Fair point but OPEC are not the sellers, they are a group that represent countries. However Kuwait, Iran, Bahrain, Quatar all accept the Euro and Dollar and want to move to just the Euro in the near future. Oman and Saudi Arabia still only accept the Dollar but are watching to see how it goes with the other four. There may be other counties outside of the Arabic States, for example some South American countries also trade oil in Euros. Just google around and it's all out there.

[pachapapa]

You can hedge for a currency variation on the contract but one should beware of contracts with the consideration in the currency of a "banana kingdom". Remember only too well the company paying through the nose in respect of two Mirrlees Blackstone engines for a power station in Northern Chile.

[breizh]

The Chinese are no white knights. They intervene in the bond markets to maintain the EUR and USD rates against the RMB to maintain their exports. Meanwhile the EUR banks buy EUR bonds because the ECB guarantees 100% loans back to the banks against the bonds. Everyone's a winner except the european taxpayer.

Interesting perspective from the German media (seems to dispute the previously quoted Deficiet/Debt figures)

http://www.spiegel.de/international/europe/0,1518,739351,00.html

[Sprogster]

There is a major downside exchange rate risk for Brit retirees reliant on a £ income, if the Euro breaks up, which I don't believe most expats consider.

Whilst the Euro crashing is unlikely, a much more probable scenerio is that Greece, Italy, Spain and Portugal will have to leave the Eurozone. This would lead to a German dominated Euro, which like the Deutche Mark beforehand would be a very strong currency. As a result the £ could be expected to weaken considerably over a period of time compared to the new Euro, making France a much more expensive jurisdiction for Brits to retire to. But make Spain a much cheaper retirement destination.

[Jako]

That is exactly my point, accept for the breakup.A breakup solves nothing for the countries that leave. If it were possible the Eurozone would have kicked out Greece, that would have helped everybody but Greece. (why is nobody speculating that California should go back to their own pesos?)

All Eurozone countries have a 'German' Euro.  The target for eur/gbp is 2 for the long run. But when markets loose confidence then the benefit of the doubt that the UK is currently enjoying will disappear like snow in the sun. The gilt market will crash and this long term target may be reached much faster and will probably even overshoot. The UK is currently issuing gilts way below inflation, no investor in his right mind will buy gilts at this level, only UK banks and pension funds that are forced to do so. This means that the Pound value of UK pensions will degrade in the long run, but the Euro value might crash much faster.

This will resolve the UK's debt problems, but by stealth instead of in plain sight.

[allanb]

[quote user="Jako"]A breakup solves nothing for the countries that leave. [/quote]

On the contrary, it solves the most important of their problems.

Inflation in Greece has been running at 6% or more compared with the Eurozone average of 2% or thereabouts.  In other words, it's getting relatively less productive.  It can't compete, and as long as it's in the euro system its currency can't devalue.  It can, however, keep going by borrowing cheaply, because rates on the euro are relatively low; so its debt gets out of control.  It's a recipe for disaster. 

Greece being stuck in the euro is rather similar to Britain being stuck in the ERM (remember that?)  Abandoning the link to the deutschmark was what saved Britain; Greece should abandon the euro for the same reason.  And so should several others.

[Jako]

Old figures, Greece will deflate. Wages down, prices down. You forget the debt will remain denominated in Euro's. Turning back to Drachme and devalue will increase the debt burden, not decrease.

Britain was kicked out of the ERM because it had mismanaged its economy, just like today. That is why the UK got no help from the other members, all were happy to let the UK go. They would have done the same with Greece, same problem, but that is legally impossible.

[just john]

 An Irishmans take on it! [6]

[mint]

JJ, you are NOT to make Irish jokes:  now I am seriously offended![geek]

[just john]

That's a bit irish to me[:)] anyway it wasn't a joke, he's absolutely right, let me know if you need a translation, I'm fluent when someone takes my money![:P]

[Devon]

Things are getting interesting in Portugal. I wonder, will Portugal be the first country within the euro to follow Iceland's lead and refuse to spend the next 20 or 30 years as serfs paying for the folly of their government and the West's financial sector?

[Quillan]

Just been reading Le Figaro, French manufacturing up by 0.7% in the first quarter, Euro hitting $1.40 and ECB to increase interest rates by 0.25% on the 1st April. Then there is the UK, Interest rate the same, manufacturing down 0.3%, Stirling (v Euro) £1.13, inflation up. Its a bit difficult to tell people in the UK not to worry as others are worse off when, apart from a few exceptions, everyone else is doing better. The only thing they have left is to knock the Euro but then that's normal, they have been doing it for several years now. Anyone remember when Stirling first started to go south a couple of years ago and 'the experts' on the forum said it would be 1.25 by Christmas (2009) and would be back to 1.40 (ish) by the summer. I wonder if they still have their jobs? The Euro won't crash and burn, there is too much invested in it and if it did it would take the UK and US economy with it.

[Devon]

[quote user="Quillan"]Just been reading Le Figaro, French manufacturing up by 0.7% in the first quarter, Euro hitting $1.40 and ECB to increase interest rates by 0.25% on the 1st April. Then there is the UK, Interest rate the same, manufacturing down 0.3%, Stirling (v Euro) £1.13, inflation up. Its a bit difficult to tell people in the UK not to worry as others are worse off when, apart from a few exceptions, everyone else is doing better. The only thing they have left is to knock the Euro but then that's normal, they have been doing it for several years now. Anyone remember when Stirling first started to go south a couple of years ago and 'the experts' on the forum said it would be 1.25 by Christmas (2009) and would be back to 1.40 (ish) by the summer. I wonder if they still have their jobs? The Euro won't crash and burn, there is too much invested in it and if it did it would take the UK and US economy with it.[/quote]

 

I used the wrong heading when I started this thread: I should have written: Will there be a 2 tier euro by the end of 2011, not: Will the Euro crash in 2011.

From post no 1:

I know there have been doom mongers since its birth but it is looking like 2011 will be the real test for the euro. What are the chances of  a 2 tier euro by the end of 2011 with poorer/bankrupt countries like Ireland and Greece being expelled by the stronger countries like Germany?

Like you Quillan, I expect the stronger European countries like Germany and France to prosper but I do not see them handing over their hard earnt to keep bankrupts likes Ireland, Greece and Portugal afloat forever.

I think the British have plenty left to knock without worrying about the euro but this thread isn't about sterling: its about a 2 tier euro which might come one step closer in the next couple of months.

[andyh4]

I personally do not see the 2 tier Euro.

 

There will be a single euro and in the Euro group will be debtors and lenders.

 

Despite the serfs comment above, the consequences for a debtor defaulting from within the euro region would be far worse for the debtor than the lender because he would suddenly find himself without a currency and without liquidity.  An island like Iceland standing alone could manage it a Euro-zone country?  I doubt it.

 

the nay sayers have been preaching doom for 12 years now and somehow the Euro still seems to be there.  Just luck I guess

[Quillan]

Quite right Andy, they also said Greece would never make a repayment on their debt and they have every month. If you look at the companies that issue 'credit ratings' and you look at the Euro against the Dollar, call me a sceptic if you want, but there is a link, namely the US. The US don't want to see the Euro as a leading world currency which it is becoming, their interests is obviously with the dollar. They have been chipping away at the Euro via the back door by 'attacking' Greece, Spain, Ireland and Portugal to try and destabilise and split the Euro. This will not succeed and the Euro will stay as one currency, there will be no split and no two tier Euro. As you say they have been 'doing the Euro down' for years now and it's still here. The UK made a terrible mistake when it destroyed (OK wound up) the mechanism for joining at a future date. There will be a time, when the IMF gets called in, as it will, that it may wish desperately that it didn't burn it's bridges. And to think they called me a fool because I moved my money in to Euroland, those same people, well those that are left as the others have had to go back to the UK, are whinging about exchange rates and lack of money to spend in France. What with terrible exchange rates, French consumer index's showing price rises of between 15 and 20% over the last 12 months and set to rise further as the fuel crisis bites they are finding it very hard going. Don't get me wrong, I'm not being smug, it could have gone badly wrong for me as well but it didn't and I do feel sorry for those that are 'hurting' as its not their fault.

[NickP]

Quillan wrote: And to think they called me a fool because I moved my money in to Euroland, those same people, well those that are left as the others have had to go back to the UK, are whinging about exchange rates and lack of money to spend in France. What with terrible exchange rates, French consumer index's showing price rises of between 15 and 20% over the last 12 months and set to rise further as the fuel crisis bites they are finding it very hard going. Don't get me wrong, I'm not being smug, it could have gone badly wrong for me as well but it didn't and I do feel sorry for those that are 'hurting' as its not their fault.

No one thinks your smug Q, but you  have to keep telling us or we might not believe you ? [Www]  By the way we are not all "whinging about exchange rates  and lack of money to spend", And of course those of us who can afford to spend time in France are not feeling smug either. [:D]

[Quillan]

[quote user="NickP"]

By the way we are not all "whinging about exchange rates  and lack of money to spend", And of course those of us who can afford to spend time in France are not feeling smug either. [:D]

[/quote]

Your quite right again, I was really thinking about the people I know round here. Talking to an agent the other day he told me that there are about 70,000 Brit owned homes in the region up for sale at the moment. Many are being sold because the people can't afford to live here anymore, how true this is I do not know but it is true to say that I know of a group here that have gone back ,about 13 in all, and they were dubbed the 'unlucky 13'. It's a shame really but out of that I do know two couples who basically always thought the exchange rate would stay the same for ever (when it was 1.60 odd) and based their whole budget on that. Having cut back on everything they still cannot afford to live here. Terrible shame really to see your 'dream' ripped apart and there is nothing you can do.

[NickP]

"70,000 Brit owned homes in the region up for sale at the moment. Many are being sold because the people can't afford to live here anymore, how true this is I do not know but it is true to say that I know of a group here that have gone back ,about 13 in all "

Slight difference in numbers old boy? Look here Q, if people can't afford to live in France, they are in for a nasty shock when they settle back in the UK. My source of information is not  hearsay  but from me and I split my time between the two countries. I pay rates and taxes in both and buy goods etc. Anyway back to the question, I don't think there will be a two tier Euro it would never work and it would destroy the concept of "The Common Market"

[Quillan]

[quote user="NickP"]

"70,000 Brit owned homes in the region up for sale at the moment. Many are being sold because the people can't afford to live here anymore, how true this is I do not know but it is true to say that I know of a group here that have gone back ,about 13 in all "

Slight difference in numbers old boy? Look here Q, if people can't afford to live in France, they are in for a nasty shock when they settle back in the UK. My source of information is not  hearsay  but from me and I split my time between the two countries. I pay rates and taxes in both and buy goods etc. Anyway back to the question, I don't think there will be a two tier Euro it would never work and it would destroy the concept of "The Common Market"

[/quote]

When I refered to the 13 I meant in our local town, I understand it's actually more but then I don't know the others so it's just hearsay, sorry about that I didn't make it very clear.

[Salty Sam]

[quote user="Quillan"]

Talking to an agent the other day he told me that there are about 70,000 Brit owned homes in the region up for sale at the moment. [/quote]

If that figure is accurate - which I very much doubt, looking at some of the prices being sought makes you wonder if some people really wish to sell, or have any idea regarding the true value in today's market!

[blink]

[idun]

If I move money I always get it wrong with exchange rates etc. It boils down to luck really.

However I do believe my money should be where I live though, any substantial amounts at least.

When we sold our french house my husband asked if we were leaving anything in France and apart from a little, we left nothing to speak of. We no longer live in France.

We have no choice for everyday living as all pensions for the time being will come from France if they ever pay up, so we will have to transfer on a monthly and/or tri monthly basis as that is how one of them is paid. And we like everyone else will be at the mercy of the exchange rates.

IF France is in as good a state as has been said, then surely it would have been better off under the FF???????? rather than being tied to several sinking ships????????

I have always thought that it is Germany that keeps the euro strong, c'est tout. Others may think differently, but that is my feeling on the matter.

[zarathustra]

Having moved to France three years ago, just at the moment  the pound plummeted, I've been working more or less at 1 pound = 1 euro, so anything extra is considered a bonus. It must be tough on those who remember the good old days of a strong pound. Looking at the exchange rate today, it's not too great.

[allanb]

[quote user="NickP"]I don't think there will be a two tier Euro it would never work and it would destroy the concept of "The Common Market"[/quote]

I think this is one of the fallacies that's keeping the euro alive (just).  You can have a common market without having a common currency.  Of course, the people who believe in concentrating power in Brussels or Frankfurt don't want us to think like that.

But in any case, if you believe that a group of countries can successfully have a common currency - which you obviously do - then I can't see why you couldn't have two smaller groups, each with its own common currency.  It surely doesn't matter whether you call them the "EuroA" and the "EuroB", or the "acorn" and the "peanut".

As it happens, I also don't think a two-tier euro will work, but for a different reason.  I believe that when the costs of being tied to one  currency zone are more widely understood, people will realize that having two currency zones will not be any better.

[idun]

I do not want a united states of europe. Never have never will. Nonsensical to me.

I don't think that you could have a two tier euro though. And I don't think that there should have even been a euro in the first place. Most of you never lived in France when the prices were very stable for years and years. Hectic in the early 80's and then when everything went mad in the UK we all bit the bullet and had no or tiny wage rises and the thing was that prices were very stable. As a family we knew where we were with things and a 0.25% pay rise was a rather nice bonus to be honest. Could the UK greedy population at the time have coped with that?

As soon as that pesky euro was in actual money in our hands then in spite of everything we were told prices went up. During the few years prior to that we were actually a euro country, the prices didn't really change as we all knew what we were buying and could see it in FF, EVERYONE noticed once we had the euro, you could not, not notice. And things have not looked back, they never stabilised again.

IF the UK had joined I had rather hoped that it would join at 1.5 euros to the £. Who knows what it would be if it was done now and I 'd rather it was not.