why is the euro dropping against the dollar with the downgrade?

[RainDog]

is it because Italy, Spain and Greece are putting so much pressure on the currency?

I've been watching the two in the last few weeks and was surprised that the euro was falling against the dollar.

[Kennah]

1. Mortal Kombat!

[dkf]

2. They are probably guessing the arrangements they are making for Greece

Will be called a default.

[roamer65]

3. Because the ECB is drawing on its special credit line with the Fed.

They are allowed to swap Euros for dollars with almost no limit. The amount of Euros on the market is going up, therefore its value is dropping.

They are also going to begin QE by buying Italian bonds Monday AM.

[AndyTiedye]

4. If Everybody Agrees to Crank Up the Printing Presses at the Same Time, Exchange Rates Remain Stable

We're all in the same boat when it comes down to it.

If anything, the US is in better shape than Europe,
we have more oil than they do, and can grow much more food.

[Yavin4]

5. Man, Buying Gold and Silver Is Looking Better Every Day

Every day.

[Art_from_Ark]

7. Gold spot market closed at 1663

I never thought I would see gold flirting with the $1700 level.

Silver, on the other hand, closed significantly lower, at 38.32. It's probably going to take a lot just to get back to its May high of nearly $50.

[roamer65]

16. Here's a fun one I heard this week, Art.

Overlay the chart for gold and the Swiss franc and they nearly match up.

[roamer65]

14. They don't remain stable, as we have seen in the last few years.

They won't all stay in lock step, so the devaultions become "competitive".

Example is last weeks 4 trillion yen unilateral intervention by the Bank of Japan.

[AndyTiedye]

17. Well That Was a Pretty Big "IF"

I wouldn't expect such an arrangement to last very long, in any case.

Example is last weeks 4 trillion yen unilateral intervention by the Bank of Japan.

The yen appreciation is really crazy. How much is Japan going to have to spend to rebuild from the earthquake?
How much to deal with the ongoing disaster at Fukushima? Their government's response to that has been at least
as dysfunctional as any our teabaggers' antics.

[dixiegrrrrl]

18. Part of the Bernanke "doctrine", number 6 to be exact.

6) Execute a de facto depreciation ( of the dollar) by buying foreign currencies on a massive scale.

"The Fed has the authority to buy foreign government debt ... his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."

http://en.wikipedia.org/wiki/Bernanke_Doctrine

which has done such a stellar job of stealing from not only USA citizens but also Europe.

[golfguru]

6. Yes, the PIGS are in worse shape already than US

Portugal, Ireland, Greece and Spain are already in worse shape than US. Now add Italy to that mix, and Euro has to be vulnerable. More solvent nations like Germany have to carry the burden of rescuing the over-debted nations.

It proves my point over and over again, no one, neither an individual nor a nation can prosper by borrowing to spend.

[RainDog]

9. if the U.S. hadn't borrowed from France, we wouldn't exist

so, I guess sometimes borrowing does some good.

of course, that borrowing put France in a heap of trouble because those with wealth did not want to contribute to solving France's financial troubles. Or, more precisely, it was France's financing and participation in multiple wars that led to its financial crisis.

Charles de Calonne - Controller general of finances appointed by Louis XVI in 1783, recommended across-the-board taxation as the only way to repair France’s financial crisis. The only problem with this is that only peasants were subject to taxation - not the aristocracy. The governing bodies could not bring themselves to levy taxes on the richest of the rich.

The abuse of power and the excesses of the ruling classes - the aristocracy, the clergy and the monarchy - were the reasons France could not correct its financial mess - even with its indebtedness. No bank would lend to them, their govt. wouldn't tax those who had the funds to create solvency, and the peasants had reached their limit. Calonne's audit found corruption in all levels of govt. offices where the rich got richer at the expense of the state - and there was no accountability for this fraud.

sound familiar?

unexpected weather issues created bad harvests. an emerging "middle class" of educated non-nobles was the only entity that had both the money and the lack of political protection as nobles to bear the burden of taxes... and THOSE are the ones who led the revolution. the peasants murdered at will, but it was the bourgeoisie that called for and created the terror, that executed the king and the nobles, that declared war on the monarchies of Europe, and that was eventually usurped by a military dictator.

so, it seems to me the lesson of history is that if the wealthy do not contribute to the public coffers, they are eventually overthrown. what comes after is a bloody mess - and, eventually, it all gets sorted out until the next crisis - after too many lose their lives because of the greed of the few in the face of the suffering of the many.

[golfguru]

10. Please read my post again, carefully

I said borrowing to spend....in other words borrowing to pay for stuff you buy which you can live without. For example when you get a home improvement loan and spend it on stuff you can live without. The stuff is consumed but the loan stays until you pay it back with interest.

If we borrowed from France to defend our country, that is entirely different situation. One can certainly also borrow to start a productive business which will produce something people will buy.

[OHdem10]

8. The Euro -Zone are in real trouble and gave our market the

heebeejeebees yesterday.

[Eddie Haskell]

13. That's what we were told by the "financial experts" on CNBC.

But I didn't hear a word about the imminent downgrade of US debt. Why? There were rumors. Why weren't we told? The fuckers were providing cover for their friends on Wall Street. They knew what was coming!

[girl gone mad]

11. Because the Euro is a doomed unified currency project, while the dollar is sovereign.

The Eurozone countries are all currency users, not currency issuers. As users, EMU countries can not effectively manage increased deficits that result from an economic downturn, so the deficits actually create more instability rather than providing a buffer.

The US can never become insolvent, whereas Greece, Italy, Spain, etc., can become insolvent and can (and will, imo) default on their debts.

“A nation that gives up its sovereign currency by joining the euro gives up the three most effective means of responding to a recession. It cannot devalue its currency to make its exports more competitive. It cannot undertake an expansive monetary policy...It cannot mount an appropriately expansive fiscal policy because of the restrictions of the EU’s growth and stability pact. The pact is a double oxymoron – preventing effective counter-cyclical fiscal policies harms growth and stability throughout the Eurozone.” – Bill Black

[roamer65]

15. Don't worry.

Eurozone countries will soon surrender political autonomy as well. People, sadly, surrender freedoms very willingly in crises.

Germany will soon have the political union of Europe that it has wanted for YEARS.

The British were very smart to opt out, IMHO.

[Warpy]

12. Yep, that's it.

Look at the other, non European currencies.