Euro vs. US$ - Finance:101

[Frustratedlady]

Could someone with good financial knowledge explain what is going to happen to the U.S. when all these countries switch to Euros? I know the news will be bad, but I would like to know how it is going to affect our country, the signs to watch for and what we can do to hedge against the pitfalls as much as possible with our personal finances.

I would also appreciate it if you could give us your thoughts in layman's terms, as I'm sure many of us are not as savvy as we should be regarding the complicated world of finance.

[trof]

1. Dollar goes down, Euro goes up.

Imported goods (Walmart/China/oil) much more expensive for us.
Of course we'll be able to sell our goods overseas more cheaply.
Wait...do we still make anything we can export?
Just my take.

[mahatmakanejeeves]

3. "Wait...do we still make anything we can export?"

Caterpillar

Dislcaimer: shareholder.

[trof]

5. Boy, we better get busy

and sell a LOT of dirt movers.
;-)

[mahatmakanejeeves]

6. airplanes too

and other stuff. The US still makes things.

[rman]

13. Not the US but corporations make stuff, and many of those

have moved overseas. Most of these are no longer actually US corporations. They pay very little if any taxes, and have their bank accounts and official mail adress abroad.

I doubt that what little the US can still export can offset the increased cost of import.

[Frustratedlady]

14. Thanks!

You said: They pay very little if any taxes, and have their bank accounts and official mail adress abroad.

That brings up another question. If I remember correctly, someone pointed out that corporations were using an address in another country (can't remember where), but were located here. This way, they could avoid paying US taxes. Was that a dream, or did I actually read that? :)

So many loopholes in our tax laws that need to be closed.

[rman]

19. maybe this helps

http://www.wfmu.org/playlists/DX
Dave Emory - On The Record

realaudio

"Interview with Lucy Komisar about Off Shore." November 8, 2005

"An interview with Lucy Komisar about offshore banking." June 3, 2004

(do a page search for "shore")

[Frustratedlady]

21. Incredible!

Thank you for pointing out that resource. If I wasn't angry and frustrated enough before, I am now after listening to Komisar. I will certainly peruse more of those recordings, but must do it piecemeal, as my nervous system can't take too much at one time. :D

I'm gettin' too old for these revelations.

[rman]

22. You're welcome

Take it easy

[mahatmakanejeeves]

23. overseas

Tyco and Stanley Tools are headquartered in Bermuda. Stanley Tools has or had plants in Connecticut. Tyco has nearly 250,000 employees. Yeah, it's big.

[trof]

18. Airbus is giving Boeing a run for their money.

Many non-U.S. airlines are going that way.

[ktlyon]

15. cigarettes

Marlboro was #1

[unblock]

2. each time country switches, it sells dollars

this drives the value of a dollar down by increasing the supply of dollars and increases the value of the euro by decreasing the supply of euros as the unload their reserve of dollars and replace it with a reserve of euros.

however, these are mostly one-time effects, and can be mitigated through various means at the disposal of the fed and the treasury.

the true economic effect of a switch to euros in and of itself has been vastly overhyped.


it is, however, a SYMBOLIC marker of the fact that the dollar is on the decline and the euro is on the rise. countries want their reserves to be in the dominant currency. if the euro continues it ascendency, it won't make much difference if everyone kept their reserves in dollars. a lower dollar would still make imports more expensive, the united states poorer, and so on, although it also would make our exports more attractive. conversely, if everyone switched to euros but the dollar soared in value, the switch would not bother us at all.

bottom line: the relative value of the dollar is the important thing, not the reserve currency chosen by most nations.

[Oversea Visitor]

7. The relative value of the dollars is base on demand

for the dollar
The switch to other currencies as reserve is inevitable
This will inject a large pool of dollar on the market driving down its relative value

There was never a real true value of the US dollar.
The fact that the US enjoy the status as the dominant currency is base on a very complex mix of trust and stability. This two factors has been greatly erroded. Hence the need for change.
The curse of a sominant currency being drop has never been experience before. Hence most are doing it very very cautiously. I do not see potential any panic as it will be gradual. Key player are China, Japan and South Korea in the Asian market. Any of this guys make a huge shift in policy can trigger panic. It is not a pretty sigh.... we went through the 97 financial crisis. Not pleasant.

Awaiting Monday to see what move China making. All watching.

[Frustratedlady]

11. Waiting for Monday

"Awaiting Monday to see what move China making. All watching.:

Me, too!

[Oversea Visitor]

20. They got a huge problems

All their accumulated wealth so far is in US dollars
Recent move to
Metal based bond ..... ( bond tie to value of gold or silver but in US dollars at specific time of purchase)

Turn it into assets .... they on spending spree

The spending spree is good but they got huge reserve of US dollars and hard to buy US company
Looking elsewhere now I think so it would inject money back into the system and the country they investing in.

Any huge devaluetion now mean their reserve get devalue.

Likely Monday wont see much action but one can never tell with China, they got a mind of their own.

[Frustratedlady]

9. Thank you for your explanation.

Just waiting for another Depression, which I've always been told would probably never happen. Only with George.

[Oversea Visitor]

4. Asian plans is for a basket of currencies

Euro is in the basket but does not want to go old route of all in one currency

Just a slow process of dumping US and building up a basket of
4 or 5 currencies as reserve.

Hard to keep US as one of them cause no faith in US fiscal policy

However this would not have great effect on your internal dollars
What you need to watch out for is inflation
Your dollar can buy less gas now. That is inflation
It all depend on what your goverment policy is.
Imported stuff will cost more if dollars weaken
But local make product will cost the same unless they increase the price
As long as US is not overdependent on imported neccessity like foodstuff clothes etc you be fine.
A dollar is still a dollar internally

Dont know too much about US internal economy to help you more :(

[Frustratedlady]

8. Thank you for explaining your view.

[Sooner75]

10. Switching from USD to EUR

As I understand it, the world oil market trades in US Dollars. Now, imagine that they decide to switch to Euros. If that happens, there would be TWO market forces operating for us: the value of oil and the value of our currency versus the trading currency.

If the value of the dollar falls against the euro, the price of oil goes up a bit for us EVEN IF the trading price of oil is steady. If the price of oil is going UP and the value of the dollar is going DOWN, you have a double whammy.

OK, back to the real world. As long as the world oil market trades in dollars, people with assets denominated in dollars only have to worry about the price of oil and NOT the exchange rate. Having the world's dominant currency has been very advantageous for us. It was once the British pound. It's currently the US dollar. In the future, it may be the Euro or the Chinese yuan.

[Frustratedlady]

12. Thank you for your kind explanation.

The financial world is like a spider web to me. So many branches that lead to more branches, yet dependent on each other to remain whole. Delicate, for sure.

[Sooner75]

25. Sidebar

I heard somewhere that Saddam Hussein was interested in accepting only Euros for Iraqi oil and wanted to go that way. Obviously, if he had been able to do that, it might have started a rather unfortunate trend of us, and, since he wasn't exactly fond of us, it'd be a way to stick to us.

I don't know if that is true or not, but I can well imagine that if Bush, Cheney & Co. had seen it as a possibility that they probably would have added it to the reasons that they wanted to attack Iraq.

[ktlyon]

16. search the Economic forum

there have been many discussions on this subject

[Frustratedlady]

17. Will do!

[Narraback]

24. Kick

nt