Discussion in 'Economics' started by Debaser82, Jan 26, 2009.
Iâm not sure, but I guess this is because the European printing press is not as fast as the US press and the European dept is not that high. Also the interest rates could be a reason.
1-Supply and demand of dollars and euros
2-European printing press is not as fast as the us (BELOW)
3-FED and ECB under the table deals.
Interest rate differentials. Just look at US treasuries versus european treasuries. Also, the fed funds rate is at 0%.
Maybe there is (still) some sentiment out there that banks on the belief that the EUR zone will weather the storm better than the US.
Let's see what happens when VW, Mercedes and BMW beg for a government bailout. Or an Eastern European depression drives the EUR zone banking system into a tailspin.
Also parity was not set up originally 1:1 but something like 1:1.15-20. If somebody knows how they decided that enlighten me please.
To ask why the Euro is worth more than the Euro is to ask why do cars cost X here and Y there? Why do I get paid more than there?
It is called the market and what people believe in the value of things.
I personally believe the reason why the Euro is higher than the USD is because of a spigot relief.
The Euro is a major currency and people are in the motion of diversifying their currencies towards baskets. Hence there is demand for the Euro, and no demand for the USD.
This will probably go on for quite a while yet to come. Once though people have had enough Euros then things will probably level out 1 to 1...
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