Euro hits 1-yr high as mkt resumes dollar selling

[Ghost Dog]

Source: Reuters

LONDON, Sept 22 (Reuters) - The euro hit a one-year high against a broadly weak dollar on Tuesday as dealers took advantage of the U.S. currency's rise the previous session to resume selling ahead of a Federal Reserve monetary policy meeting and a Group of 20 summit later in the week.

...

The backdrop to that is strongly bearish market sentiment toward the currency. Analysts expect the Fed to signal its ultra-loose monetary policy will remain in place well into next year and the G20 to discuss rebalancing the global economy, a process which will require a weaker dollar over time.

Options-related buying and strong demand from Asian accounts pushed the euro up toward $1.48, while the dollar also hit a 14-month low against the Swiss franc.

"It's all about the $1.4800 knock-out option...and Asian names hoovering up euros," said one trader in London, echoing market talk that a large U.S. bank was a notable buyer in the run up to $1.48.

Read more: http://www.reuters.com/article/marketsNews/idUKLM17587520090922?rpc=44&pageNumber=2&virtualBrandChannel=0&sp=true

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... Which also means the jobless stock-market/banker bubble will be expected to continue, for a while ...

[Ghost Dog]

1. Without China, rebalancing won't work

WASHINGTON (Reuters) - If the United States is going to succeed in its push for more balanced global economic growth, it must convince China, Germany and other big exporters there is no going back to the pre-crisis boom times.

In calling for the Group of 20 to back its framework for global rebalancing at the Pittsburgh leaders' summit this week, the United States is asking its big trading partners to abandon a strategy which paid off handsomely for years -- namely making goods for export to seemingly insatiable U.S. consumers.

...

It is not a risk-free tactic for U.S. President Barack Obama. If he expects the big exporters to change their ways, he will have to make good on pledges to address the worsening U.S. fiscal position, which means making politically unpopular choices about spending and taxes.

"The key question here is whether the rest of the world believes the United States is really going to stop being the consumer of last resort," said Fred Bergsten, director of the Peterson Institute for International Economics in Washington.

...

Past IMF attempts to tackle decades of U.S. over-consumption and to discourage excessive savings elsewhere failed, mostly because the IMF lacked the influence to wield the stick over the world's most important economies.

/... http://uk.reuters.com/article/idUKLNE58L00M20090922?rpc=401&=undefined&sp=true

[excess_3]

2. do people in Europe benefit?

how much does milk cost in Europe?

sugar
eggs
rice
beef
etc, etc.

[Ghost Dog]

3. Well, a stronger Euro helps keep oil-price-related inputs down;

as you'll know, the common agricultural policy needs serious reform, to favour more local-scale agricultural and horticultural production and consumption and to limit the almost-monopoly buying power of the supermarket chains.

I guess what we're seeing is the start of more 'protectionist' macroeconomics within the large semi-autonomous 'blocs' - North America, Europe, East Asia, ...

... Which, in Europe's case, was what the power of this large 'internal market' was supposed to be all about, wasn't it?

The USA hopes to manufacture and export more, however, and to achieve that aim (and to devalue the value of its international debts while 'goosing' its financial bubble markets) it clearly intends to push the dollar down. Will they end up, on the whole, consuming (and polluting) less (while avoiding 'social unrest')? That appears to be the really big question.

Edit: Milk is being thrown away because there is a glut and price controls are making production relatively uneconomic for (especially smaller) farmers. Same applies to many EU agricultural products.

Some food prices to the consumer have gone down, others (especially meats) have gone up recently. The low subsidised price of your basic loaf (or baguette) of bread is sacred, of course (not sure about in UK, though). Manufactured food products have been moving from more expensive branded stuff to cheaper 'white label' products (usually manufactured by the same corporations).

On the whole, I don't see food prices being a big problem yet, at least in the South-West Europe I can see. Biggest costs for most folks are 1). housing and 2). transport (and the annual 'back to school' expenses).

[excess_3]

8. milk, $1.99 a US gallon

I'll post more prices, if I remember to look

[specialed]

4. You would have to take..

The average wage and compare those in relation to the price of the goods.

(Avg wage US - Avg wage EU) / (Avg price US - Avg Price EU)

This ratio would be the buying power differential between the two markets. You would first have to equalize the currencies. Either multiply the dollar by $1.48 (current cost of 1 Euro right now) or divide the Euro by the reciprocal with would be .52 to the the dollar.

[excess_3]

9. rice 90 USc per 1 pound bag

1 pound --.> 453,59237 grams

how do Europeans obtain food?
please enlighten me.

the grocery store I patronize,
has a floor space of about one hectare,
two or three US acres,
and has stuff stacked about six meters high

not very personal,
but rice is not very personal

the one worker on the floor,
will help people who get lost

[comtec]

12. Rice is about 50cents Euro per half kilo

roughly.
eggs are about 1€ for 10, soda (pepsi) is on sale 75c for 1.5Liters, meat is about 5e a kilogram across the board.
that's about 2.50 for a pound.
Chicken is cheaper than beef (which sucks anyway) and pork is in the middle.
a loaf of bread is between .80 and 2.00 depending on the type (german is nice but spendy)
and beer is cheap.

The buying power of a euro is about the same as the dollar was when I left 5 odd years ago.

Keep in mind, this is after paying 30-50% in taxes, 6% tax on food (which is included in the price) and 19% tax on goods (which is included in the price)

Example, the playstation 3 slim is selling here for 299 €uros. not 299+tax. just 299.

However the PS3 is also selling in the us for 299+tax, which comes to about 325 after tax (making it much cheaper)

So some things are going to be cheaper, some more. but the basics required for living are cheaper, and more within our means here, than in the US currently.

The Euro is stronger, and weaker, but only because tax is so fucking high here.
The counter balance to all this is stronger worker protections. The "minimum wade" is based on age. and at 22, you get around 10e an hour no matter what you do, that is the minimum you can make an hour (McDonalds is almost all under 20)

so it's all relative.

[excess_3]

16. thanks for posting that. .nt

[muriel_volestrangler]

5. It has an effect on the price of imports and exports

Oil will be the obvious one, and will be cheaper than before in Europe. Same for natural gas imported from Russia (unless the contracts are typically fixed in Euros - I don't know). With some of the foods you list, they'll be mainly domestic (eg milk, eggs) so not much difference will be seen. Sugar is still subject to a maze of tariffs and subsidies, so it's hard to say how this affects that.

Exports will be more expensive, so manufacturers may not like this much.

[Ghost Dog]

6. I think the main point is that the US intends to manufacture more,

both for internal consumption and in order to export more.

This implies a more 'protected' economy providing more jobs albeit on lower wages, in real terms. Will there also be a further erosion of social and environmental standards, though?

[pattmarty]

10. Question: If the US is going to mfgr more, that would be a long term..........

.........goal, no? Hasn't our manufacturing capacity been decimated over the last 40 yrs, but especially so the last 15? Just askin', I don't understand currency differences and the economic differences between countries all that well.

[Ghost Dog]

13. Well, we seem to be able to build new factories pretty quickly

these days, where the economic circumstances are right.

Training proficient workers may take a little longer, though.

Reading between the lines, I think that's going to be the mid-term policy in both US and UK.

It will be interesting to see how much political 'industrial policy' will be involved.

[pattmarty]

14. It wasn't the "physical buildings" I was talking about, you're right..........

...........that part is easy. It's about WHAT we're going to make and the financing. You can't just decide to open up a factory for "widgets" overnight and get financing, workers, engineers etc where there were none of those before. My opinion on going back to manufacturing is going to take a lot longer than what it took to lose ALL our capacity. The question I was getting at was the exchange rates between currencies and capital movement out of the US or at least out of US manufacturing. I believe the capital will stay on "Wall st", but it doesn't necessarily do the rest of us any good as far as I can see, but again I have no knowledge of "money things".

[Gedankenaustausch]

15. I can speak for germany

I just went to the supermarket yesterday and bought a liter of milk for .89 So, if you do the math, 3.78 liters per gallon, the price for the gallon of milk was 3.36. I remember this past summer being back in the states and buying a gallon just above 4 dollars. The brand is a more expensive brand of milk, it's from bavarian cows in the alps with 3.5% fatt, so it basically tastes like infinite bliss. But I usually buy the cheaper brand which costs around .55 per liter from discount stores like Aldi or Lidl, those work out to 2.07 per gallon.

1kg of suger is about .50 eggs are around 1 euro for a dozen, uncle bens rice is 3.35 for 10 packs of 250 gram instant rice (expensive! but of course this is not typical, the other brands are much cheaper), beef is pretty expensive as well, a nice t-bone will set you back at least 12 euros and it's going to be thin by american steak standards. But pork and chicken are relatively cheap, 1kg of boneless chicken breasts will usually cost from 4-6 euros. And bratwurst is so cheap they practically give it away. Loaf of sandwich style bread is .45, baguette is 1 euro, most bread products are around the euro mark.

I really believe that you get a higher quality of goods here. Instead of going to 1 store and buying everything, I and everyone I know go to 1 "supermarket" to buy the regular stuff, milk, suger, flour, canned goods, etc. Then you go to a bakery of choice to get your bread, then you go to a butcher of choice to get your meat. The availability of ridiculously fresh food is something that I have never seen. To get the best food, you have to go to the specialty shops, i.e. bakery butcher instead of the meat dept at the supermarket. Plus every thursday there is farmer's market in the middle of the city, and that's where I buy all of my fruit.

KEEP IN MIND!!!! All of those prices are in euros, and they also include sales tax. The basic sales tax is 19% here in germany, but some foods like the essentials get only 7%. It's nice going to a store and paying exactly what's on the tag!

[Ghost Dog]

17. It would be misleading were I to post prices

from here in the Canary Islands, which are atypical (and the fresh fish is excellent and relatively cheap, for example).

But I'll make a note the next time I'm in Barcelona, next month.

Prices vary by country/location.

[paulsby]

7. i have been long euro, short the dollar

for a few months and it is one of the best trades i ever made. i posted it here a few months ago and said the euro was a screaming buy vs. the dollar, so it is ok to gloat :)

[melm00se]

11. there are upsides and downsides to a weak currency

Upsides:

- US exports to other countries become more attractive to other countries
- Encourages the growth of domestic industries for both export and internal consumption

Downsides:

- Critical imports (oil comes to mind) become more expensive fueling inflation
- Borrowed funds become more expensive to cover the delta between "their" currency and "our" currency

IMHO, the "strong" dollar policy of the last few decades fueled a lot of economic growth overseas which has come back to roost. The USA will have to go through a rebuilding period using this transitory "weak" dollar situation to rebuild it's manufacturing capabilities. The big concern (again IMHO) is that many of the programs proposed will require a drastic realignment of resources and a potential increase in taxes (regardless of who pays them) can seriously erode the available domestic capital necessary to rebuild much of the USA's lost and out of date industries and workers.