6 ms·

The euro benefited Germany immensely because weaker nations basically hindered the appreciation of the common currency.

by veyron 15y ago

yummyfajitas 15y ago
Why is that good for Germany?
- ticks 15y ago
  Lower value boosts manufacturing and export. Germany's unemployment levels are astoundingly low at the moment. http://www.tradingeconomics.com/germany/unemployment-rate http://www.tradingeconomics.com/germany/unemployment-rate
  - nakkiel 15y ago
    Germany is actually in a difficult position. Most of Germany's current growth is driven by exports to industrializing countries. As we know it, those country's growth is largely tied to Europe (the biggest consumer market in the world). Therefore, if Europe was to collapse, it would affect industrializing nations and Germany would be hit both through Europe and through industrializing countries.
    - ticks 15y ago
      I agree, it's a perilous situation.
  - yummyfajitas 15y ago
    A low value currency is good for Germany because then Germans get to work hard and send valuable goods to other people? Wouldn't it be better for Germans to work less and have other people send valuable goods to them?
    - barrkel 15y ago
      It's relative currency changes that hurt or help the economy, because that's what forces the rest of the import / export economy to adjust. A currency that increased in value substantially would have reduced global demand for German goods, which would have created unemployment in its export sector, reducing German wealth production until the German economy adjusted. If you asked these unemployed German people if they preferred this new "work less" situation, I expect they wouldn't be as happy with it as you seem to suggest.
      - tsotha 15y ago
        I wonder about that. The Germans have imported labor from all over Europe plus Turkey in an effort to keep positions staffed. I don't see how it benefits Germans to create all these extra jobs and then fill them with foreigners.
        barrkel 15y ago
        I see; unemployment is indeed better than immigration, especially from Muslim countries. Anything would be better than that. (Did I misread you? What you write seems rather xenophobic besides being somewhat economically illiterate. From a strict economic point of view, there is no surplus of jobs. The price of labour should rise until the demand for labour abates; and the German workers would be better off. To the degree that that isn't happening (though Germany's population overall is decreasing, not increasing), it is because Germany has an open economy with free movement of labour. If you're attacking that, you're attacking the whole foundation of the EU, and I don't want much more to do with you.)
        seabee 15y ago
        I downvoted you for using racism accusations as a tool to shut down opinions you disagree with. This is no way to have a discussion; in fact it's downright insulting to anyone who thinks critically and likes to explore differing views. Unless you are looking to increase your population you don't design policy to encourage immigration, you design policy to improve the lives of people already living there (indigenous or not). After all the government has invested in these people prior to working via services and schools. It is not xenophobic to put your needs ahead of those outside the country or suggest it should be so. The reason the price of labour doesn't increase needs only a simple answer; that demand is met by supply from an open economy and free movement of labour. This benefits immigrants from weaker economies, of course, but also German businesses who employ them. If the EU did not have this freedom, ordinary Germans would be better off, but we would all lose out for three reasons described by DuncanIdaho.
- veyron 15y ago
  For exporter nations, a weaker currency means that they don't need to charge as much in foreign nations for the equivalent value in the local currency. Let's take porsche cars as an example. Porsche pegs a price in euros, and the price that US customers pays is the equivalent price in dollars (plus some extra fees, but those are generally negligible). A weaker euro means that 1 dollar is worth more euros, so that the dollar cost of the porsche to US customers is lower than it would have been otherwise. On the other side, US exporters are hurt because the stronger dollar means that they have to charge more euros for items. A similar issue exists between US and china
  - junkbit 15y ago
    Yes this is why Sony just announced big loses. All Japanese exports are getting more expensive in dollars http://www.google.co.uk//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1321168013712&chddm=1755251&q=CURRENCY:JPYUSD&ntsp=0 http://www.google.co.uk//finance?chdnp=1&chdd=1&chds...
    - parfe 15y ago
      Same happened with Nintendo. Largest losses in three decades. "Nintendo had a $690 million foreign exchange loss in the first six months of the fiscal year that began April 1, the company said." http://seattletimes.nwsource.com/html/businesstechnology/2016627275_nintendo28.html http://seattletimes.nwsource.com/html/businesstechnology/201...
- barrkel 15y ago
  Germany has had a positive balance of trade (a trade surplus, i.e. it exported a lot more than it imported). If Germany had had its own currency (e.g. DM), importing nations would have had to buy DM in order to exchange them for German goods. The demand for DM would have pushed up the price of DM; this would have made importing goods from Germany more expensive. But with the Euro, other countries in the Eurozone which have had a negative balance of trade (a trade deficit) balanced out Germany, preventing the Euro from appreciating too much. This helped Germany's export sector, helping keep them competitive. The other issue with the Euro is that Germany's economy was already adjusted for low interest rates; but the introduction of the Euro meant low interest rates in countries which had not historically had them. Ireland didn't have a big government deficit problem; Ireland's problem was a property bubble driven by reduced rates on mortgages. It only turned into governmental debt when the government guaranteed bank debt, having been convinced by the banking-political cabal in the middle of the 2008 crisis that the bank problem was liquidity, not solvency; but with banks holding assets formed from inflated house prices, they didn't have as much capital as they thought.

The euro benefited Germany immensely because weaker nations basically hindered the appreciation of the common currency.

by veyron 15y ago

The euro benefited Germany immensely because weaker nations basically hindered the appreciation of the common currency.

yummyfajitas 15y ago

Why is that good for Germany?

ticks 15y ago
Lower value boosts manufacturing and export. Germany's unemployment levels are astoundingly low at the moment. http://www.tradingeconomics.com/germany/unemployment-rate http://www.tradingeconomics.com/germany/unemployment-rate
- nakkiel 15y ago
  Germany is actually in a difficult position. Most of Germany's current growth is driven by exports to industrializing countries. As we know it, those country's growth is largely tied to Europe (the biggest consumer market in the world). Therefore, if Europe was to collapse, it would affect industrializing nations and Germany would be hit both through Europe and through industrializing countries.
  - ticks 15y ago
    I agree, it's a perilous situation.
- yummyfajitas 15y ago
  A low value currency is good for Germany because then Germans get to work hard and send valuable goods to other people? Wouldn't it be better for Germans to work less and have other people send valuable goods to them?
  - barrkel 15y ago
    It's relative currency changes that hurt or help the economy, because that's what forces the rest of the import / export economy to adjust. A currency that increased in value substantially would have reduced global demand for German goods, which would have created unemployment in its export sector, reducing German wealth production until the German economy adjusted. If you asked these unemployed German people if they preferred this new "work less" situation, I expect they wouldn't be as happy with it as you seem to suggest.
    - tsotha 15y ago
      I wonder about that. The Germans have imported labor from all over Europe plus Turkey in an effort to keep positions staffed. I don't see how it benefits Germans to create all these extra jobs and then fill them with foreigners.
      - barrkel 15y ago
        I see; unemployment is indeed better than immigration, especially from Muslim countries. Anything would be better than that. (Did I misread you? What you write seems rather xenophobic besides being somewhat economically illiterate. From a strict economic point of view, there is no surplus of jobs. The price of labour should rise until the demand for labour abates; and the German workers would be better off. To the degree that that isn't happening (though Germany's population overall is decreasing, not increasing), it is because Germany has an open economy with free movement of labour. If you're attacking that, you're attacking the whole foundation of the EU, and I don't want much more to do with you.)
        seabee 15y ago
        I downvoted you for using racism accusations as a tool to shut down opinions you disagree with. This is no way to have a discussion; in fact it's downright insulting to anyone who thinks critically and likes to explore differing views. Unless you are looking to increase your population you don't design policy to encourage immigration, you design policy to improve the lives of people already living there (indigenous or not). After all the government has invested in these people prior to working via services and schools. It is not xenophobic to put your needs ahead of those outside the country or suggest it should be so. The reason the price of labour doesn't increase needs only a simple answer; that demand is met by supply from an open economy and free movement of labour. This benefits immigrants from weaker economies, of course, but also German businesses who employ them. If the EU did not have this freedom, ordinary Germans would be better off, but we would all lose out for three reasons described by DuncanIdaho.
veyron 15y ago
For exporter nations, a weaker currency means that they don't need to charge as much in foreign nations for the equivalent value in the local currency. Let's take porsche cars as an example. Porsche pegs a price in euros, and the price that US customers pays is the equivalent price in dollars (plus some extra fees, but those are generally negligible). A weaker euro means that 1 dollar is worth more euros, so that the dollar cost of the porsche to US customers is lower than it would have been otherwise. On the other side, US exporters are hurt because the stronger dollar means that they have to charge more euros for items. A similar issue exists between US and china
- junkbit 15y ago
  Yes this is why Sony just announced big loses. All Japanese exports are getting more expensive in dollars http://www.google.co.uk//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1321168013712&chddm=1755251&q=CURRENCY:JPYUSD&ntsp=0 http://www.google.co.uk//finance?chdnp=1&chdd=1&chds...
  - parfe 15y ago
    Same happened with Nintendo. Largest losses in three decades. "Nintendo had a $690 million foreign exchange loss in the first six months of the fiscal year that began April 1, the company said." http://seattletimes.nwsource.com/html/businesstechnology/2016627275_nintendo28.html http://seattletimes.nwsource.com/html/businesstechnology/201...
barrkel 15y ago
Germany has had a positive balance of trade (a trade surplus, i.e. it exported a lot more than it imported). If Germany had had its own currency (e.g. DM), importing nations would have had to buy DM in order to exchange them for German goods. The demand for DM would have pushed up the price of DM; this would have made importing goods from Germany more expensive. But with the Euro, other countries in the Eurozone which have had a negative balance of trade (a trade deficit) balanced out Germany, preventing the Euro from appreciating too much. This helped Germany's export sector, helping keep them competitive. The other issue with the Euro is that Germany's economy was already adjusted for low interest rates; but the introduction of the Euro meant low interest rates in countries which had not historically had them. Ireland didn't have a big government deficit problem; Ireland's problem was a property bubble driven by reduced rates on mortgages. It only turned into governmental debt when the government guaranteed bank debt, having been convinced by the banking-political cabal in the middle of the 2008 crisis that the bank problem was liquidity, not solvency; but with banks holding assets formed from inflated house prices, they didn't have as much capital as they thought.