38 ms·

Euro falls below parity with the dollar

176 points by mantiq 4y ago

viraptor 4y ago
The title of this makes me annoyed. What parity? They're both abstract made up units that happened to be even on a random scale for a while. This is financial numerology :-( (yes, I know there's more content and "this week's currency summary" sounds less fun and I should chill out)
- Uke 4y ago
- nopehnnope 4y ago
  Parity can just mean equal. And the Euro’s creators clearly targeted a value similar to the dollar.
  - wirrbel 4y ago
    Fairly certain that Germany pushed for the value with an easy conversion (2 Deutsche Mark = 1 EUR) and not for dollar-similarity. Exchange rate was 1 EUR for 1,95583 DM
    - croes 4y ago
      And then some sellers converted 1DM = 1€
      - zuzzurro 4y ago
        And then some sellers converted 1000 Lire = 1€. I still remember looking at shop windows and seeing everything doubling in price. Instant inflation and instant poverty....
    - jaclaz 4y ago
      >Fairly certain that Germany pushed for the value with an easy conversion (2 Deutsche Mark = 1 EUR) and not for dollar-similarity. >Exchange rate was 1 EUR for 1,95583 DM I don't think so, the same happened for the old Lira in Italy, 1,936.27=1 €, that everyone rounded to 2,000=1 €, or for the Portuguese Escudo, around 200=1 €, it should be just a coincidence: https://en.wikipedia.org/wiki/History_of_the_euro#Currency_transition https://en.wikipedia.org/wiki/History_of_the_euro#Currency_t... The conversion was based on exchange rates on 31 December 1998 for the initial Euro members.
  - viraptor 4y ago
    Well, this led me to learn something from my stupid comment. Originally the EUA (https://en.wikipedia.org/wiki/European_Unit_of_Account https://en.wikipedia.org/wiki/European_Unit_of_Account - euro's grandparent) started at 1:1 with USD. (and quickly diverged) TIL EUA was exchanged 1:1 for ECU, then 1:1 for EUR, so that's a nice continuation.
    - cesarb 4y ago
      > Originally the EUA (https://en.wikipedia.org/wiki/European_Unit_of_Account https://en.wikipedia.org/wiki/European_Unit_of_Account - euro's grandparent) started at 1:1 with USD. > EUA was exchanged 1:1 for ECU, then 1:1 for EUR, so that's a nice continuation. Interesting, I didn't know that. We did something similar here in Brazil to get rid of the hyperinflation: the Real (which started at 1:1 with the USD) was preceded by the URV, an accounting measure which was used to denominate all prices; during that time, the prices continued to inflate in the former currency, but were mostly fixed in URV, so when the currency changed from Cruzeiro Real to Real (at 1:1 with the URV), the prices stopped inflating so much. Of course, that was not the only thing the Plano Real did to get rid of the hyperinflation, but it got rid of an important "inertial" component of the inflation, in which prices inflated daily because they had always inflated daily.
      - madcaptenor 4y ago
        For those who want to hear more about this, Planet Money ran an episode called How Four Drinking Buddies Saved Brazil: https://www.npr.org/sections/money/2010/10/01/130267274/the-friday-podcast-how-four-drinking-buddies-saved-brazil https://www.npr.org/sections/money/2010/10/01/130267274/the-...
- smcl 4y ago
  I suppose "Euro falls to historic low against dollar" might have sufficed as a headline, but highlighting the relative values and the 1:1 threshold that was crossed (no matter how abstract it technically is) could help more readers connect with the story a bit more
  - detaro 4y ago
    Doesn't "historic low" mean "lowest it ever was in history"? That's not the case (yet).
    - formerly_proven 4y ago
      Interestingly the Google exchange rate chart has historical rates for EUR/USD going back to 1982. Wonder where those numbers are coming from...
      - deleted 4y ago
        [deleted]
      - pridkett 4y ago
        The Euro had two predecessors (kinda) - the European Unit of Account and the European Currency Unit. They weren’t day to day currencies, but they were used for things like cross-border bonds. The EUA was originally defined to be one dollar worth of gold back in the gold standard days. Each transition saw a 1:1 conversion with fluctuation - usually to benefit the EUA/ECU/Euro - along the way.
      - littlestymaar 4y ago
        ECU[1] I'd guess [1]: https://en.wikipedia.org/wiki/European_Currency_Unit https://en.wikipedia.org/wiki/European_Currency_Unit
        madcaptenor 4y ago
        And it turns out that the reason a Euro is roughly a dollar is because it's the successor to the ECU, which was the successor to something called the European Unit of Account, which was originally defined to be a dollar's worth of gold. (I figured this out when I went down a Wikipedia rabbit hole last month: https://gottwurfelt.com/2022/07/16/why-is-a-euro-close-to-a-dollar/ https://gottwurfelt.com/2022/07/16/why-is-a-euro-close-to-a-...
- martopix 4y ago
  It's just a psychological threshold, but because I don't follow currency markets that closely, it makes it very evident to me that the euro has fallen below a threshold, against the dollar, that it never had gone down to.
  - awrence 4y ago
    EUR vs Dollar went as low as 0.82 ish in its early days (00) and was below 1 through roughly 02 so not a first no.
  - pavlov 4y ago
    Early in its life EUR was below 1 USD for a few years, Jan 2000 - Oct 2002.
  - KingOfCoders 4y ago
    Never, except when it had.
    - martopix 4y ago
      Ok. I was 12.
- missedthecue 4y ago
  If newspapers weren't allowed to report on abstract concepts I don't think we'd ever get any financial news. What is a dollar or a stock or bond or legal contract anyway?
- shakow 4y ago
  > What parity? Parity in this context just mean a ratio of 1-to-1, doesn't it? I guess it could be synonymously replaced with ‶numeric equality″.
- caf 4y ago
  Might as well get annoyed at people for celebrating anniversaries. It turns out that noting arbitrary patterns in numbers is just a common way to observe changes in continuously-measured values.
  - mmmpop 4y ago
    We're out here. Don't you dare tell me "happy birthday".
- Workaccount2 4y ago
  Given that they are both traded, they're really "abstract made up units" at least no more than than anything else you buy is. There is an enormous market consensus that determines the value of dollars and euros. The key takeaway given that is that the market is either losing confidence in the eurozone, gaining confidence in the US, or most likely; both.
  - viraptor 4y ago
    Correct, every other traded value has the same meaningless in reality, but psychologically cute thresholds. Same as articles about some stock price crossing a (round number). > The key takeaway... Yes, and that's the useful information.
- randomdata 4y ago
  > They're both abstract made up units that happened to be even on a random scale They are salable assets with a price that people are willing to pay to acquire them. It is no more abstract than a hypothetical report on how a house in New York City is now worth less than a house in Wichita. Numerology implies some kind of mystical force. This is simply observation of measured human behaviour.
  - dmurray 4y ago
    Not really, because we have a sense of how big a house should be. With outliers, it's a building large enough to house a single household. Houses in a given area will be within one order of magnitude in their prices. It's more like saying "a building in New York is now worth less than a business headquartered in Wichita".
    - randomdata 4y ago
      > It's more like saying "a building in New York is now worth less than a business headquartered in Wichita". Sure. There's no difference. A salable asset is a salable asset is a salable asset. They are all freely traded amongst each other. You can trade that business in Wichita to acquire the building in New York (along with some extras to reach parity in the transaction), just as you can trade your USD to acquire EUR (with some extras to reach parity in the transaction). If two assets have value parity, the trade can take place without any extras. Comparisons of similar assets (currencies in different countries, houses in different cities) tends to be more interesting for reporting, though. If you are vacationing in a different country you're probably not going to trade your house for the foreign currency. You're typically going to trade your own locale's currency. Likewise, if you're moving to another city, you're probably going to trade your house in your origin city for one in the destination city, not your collection of comic books. You could trade your house for foreign currency needed while on vacation and your comic book collection for a house when you move to New York City, but it is not nearly as common as trading similar assets when moving about the world. The media needs to attract a wide audience, so common behaviour is significant. Unfortunately, the beloved Comic Book Collector's Homebuying Guide Weekly didn't find the readership necessary to remain in business.
- _hcuq 4y ago
  Like your salary?
debacle 4y ago
Just for fun, I took a look at GBP/USD and it looks like that is tanking as well. Meanwhile the ruble is stronger than it's been in 4 years. For people in the EU/UK, how has this currency slide impacted your day to day?
- nothis 4y ago
  >For people in the EU/UK, how has this currency slide impacted your day to day? Not at all? I mean, I guess you could argue which caused which but the real problem here in central Europe are gas and energy prices. Those legitimately doubled and affect personal budgets.
  - sph 4y ago
    Would you be prepared to say that the 18% inflation [1] isn't completely due to GBP getting weaker than USD? Not being facetious, actually asking the question. Because I'm sure all the US-based services will soon be updating their prices to match our rapidly weakening currency. 1: https://www.theguardian.com/business/live/2022/aug/22/cineworld-us-bankruptcy-felixstowe-strike-gas-prices-recession-stock-markets-business-live https://www.theguardian.com/business/live/2022/aug/22/cinewo...
- asldjajlfkj 4y ago
  Day to day? Not at all. Everything is denoted in EUR anyway and imports are hedged. Oil and gas are expensive, but the strong dollar isn’t the main factor.
- devoutsalsa 4y ago
  The ruble isn't strong. You can't sell meaningfully sell it on the open market. When you buy it, the price goes up. When you can't sell it, the price stays up. https://www.cbsnews.com/news/russia-ukraine-ruble-currency-russian-economy-sanctioms-2022/ https://www.cbsnews.com/news/russia-ukraine-ruble-currency-r...
  - waffleiron 4y ago
    > When you buy it, the price goes up. When you can't sell it, the price stays up. How could you buy it, if it can't be sold? Also that article is from June, a lot has changed since then.
imustbeevil 4y ago
Another interesting thing is that many countries are experiencing lower inflation than the US, but their currency is getting weaker, so the USD's purchasing power is increasing two-fold. I've been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago (from the dollar perspective), whereas the dollar's purchasing power in the US is basically down 25%.
- JumpCrisscross 4y ago
  > been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago You’re running a real-goods arbitrage analysis. It’s dicey to compare national inflation statistics for this purpose. They’re measuring separate baskets of goods on different methodologies. This means you must reconstruct the baskets. As such, you might as well measure the things you’re buying. For traded goods, e.g. grain and fuel, there is unlikely a massive pre-tax spread because professionals are looking at the same data. For non-tradable goods, e.g. hotels and restaurant meals, you might see a yawning gap.
gls2ro 4y ago
I assume this should be good for EU economy on the long run? Like exports from EU to US are now more profitable. Or am I missing something? Can someone with more understanding/background explain how this might effect production and exports?
- f6v 4y ago
  > I assume this should be good for EU economy on the long run? If they could produce and export a lot of stuff. But that requires energy. At the current energy prices- forget it.
- deleted 4y ago
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- deleted 4y ago
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- epgui 4y ago
  Yes, it is indeed good in that it makes European exports more competitive, but on the flip side, imports are more expensive, which can mean inflation and/or increased sensitivity to supply chain disturbances. I’m sure it causes some other problems as well. (not my area of expertise)
  - thehappypm 4y ago
    I imagine it would be better for an economy that does huge amounts of exporting compared to importing (like China). Europe does a ton of importing so that side of it sucks.
    - lkrubner 4y ago
      A currency depreciation naturally leads to a reduction in imports, since the imports become more expensive.
      - thehappypm 4y ago
mg 4y ago
Every article about the EUR/USD ratio talks about gas prices. But the current rise of the Dollar started 15 years ago. Over these 15 years, it has become more and more apparent, that software is eating the world. And the US keeps extending their lead in this area. I would not be surprised if that contributes to a long term trend in the EUR/USD ratio. (I'm sitting in a cafe in Germany, writing this text on laptop made by a US company, running an operating system maintained in the USA, into a browser made in the USA and posting it to a website of a US company.)
- ladyanita22 4y ago
  I'd bet it has much more to go with the US shale oil industry. In Europe you can't do fracking
  - cloutchaser 4y ago
    Its both really. In Europe you can’t do innovation, or it’s an order of magnitude more expensive.
    - FranzFerdiNaN 4y ago
      You mean you cant do innovation without dumping the cost on society. Someone is paying for the price difference.
      - simonh 4y ago
        Nobody is willing to pay the price difference, that's why scaling up big tech in Europe natively doesn't happen. If someone were paying it, then we would have big tech natively in Europe, and we haven't.
        ElCheapo 4y ago
        Could you give an example of a technology that needs to be scaled up in Europe?
unpopularopp 4y ago
> German economy, among the most exposed to disruptions in Russian gas supply, is "likely" to suffer a recession over the winter if the energy crisis continues to deepen At this point I feel the EU is pretty much done and the war just showed how weak the EU leadership is along how individual member nations acting sometimes totally against each other (see France doubling down on nuclear while Germany does the opposite). Like I don't see any positive outcome for the Union no matter what happens in the war, unless you see the US having an even greater influence over Europe as a positive thing. Personally I'm extremely pessimistic.
- JumpCrisscross 4y ago
  > I don't see any positive outcome for the Union no matter what happens in the war If you put zero value on European unity, and the security and economic benefits that brings, of course you aren’t going to value the EU. If Texans didn’t care when New York was attacked, it would be reasonable to ask why the U.S. is a thing. For what it’s worth, France building nukes while Germany snubs them is analogous to e.g. Kentucky burning coal while California puts down solar.
- thiago_fm 4y ago
- KingOfCoders 4y ago
  Let the Russians bomb and invade Washington State and we'll see how the dollar does.
  - emaginniss 4y ago
    I think if the Russians bombed Washington State, the rest of the US would actually help defend it by attacking Russia. While the military help that the EU is giving Ukraine is great, it is far below the level that the other states would provide Washington. I know that isn't exactly your point, but you can't say that Ukraine is as intrinsic to the EU as Washington State is to the rest of the US.
thiago_fm 4y ago
This is great for German exports. Expect to see more Mercedes Benz in the streets of America. It generates some inflation as imports are pegged to the dollar(somebody mentioned that it is hedged, it is just by some extent), but overall is actually good for the economic block. The EU needs to export to survive. The EU has been fighting a possible deflation for most of the 2010s, this is actually not so negative as people might think. If ECB would raise interest to the same rate as the FED, Euro would become too strong. Inflation is already decreasing in Germany even with that 0% interest rate. The main inflation concern is the gas prices for this winter and this isn't fixable with monetary policy. If we have no gas, no amount of money will be able to buy it.
- deleted 4y ago
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- 01100011 4y ago
  This thesis only holds if MB can afford to keep running its factories. Modern economies cease to function without energy, or when the price of that energy is sufficiently high.
- simonh 4y ago
  >This is great for German exports. Expect to see more Mercedes Benz in the streets of America. A lot of MB sold in the UK are made in Mexico.
  - OJFord 4y ago
    Import/export is really about money flow though, it's not (directly) that important where the goods are made or end up.
- mutatio 4y ago
  Could you link a source regarding inflation decreasing in Germany? Only days ago German central bank chief Joachim Nagel said it will soon breach 10%.
- Ancalagon 4y ago
nine_zeros 4y ago
EU is lucky they invested in rail lines and trains. The average person can at least attempt to stop using gas guzzlers and keep living their life. If the USD falls and oil prices rise, we in America are screwed. We almost had it handed to us this summer.
- BenjiWiebe 4y ago
  Would it really be that bad? Now I work very close to home, but when I didn't, I'd meet people commuting the other way. If it was no longer profitable to commute, we could either move to be closer to our job or switch jobs to be closer to home.
  - nine_zeros 4y ago
    > Would it really be that bad? Are you asking about America? This summer, my wife's friend ($70k/yr) was considering a tradeoff between eating healthy vs supporting her mom's rent. Going closer to work is not a choice for many as rents closer to work are prohibitively high. Further, a lot of driving is errands and healthcare. I can't even get something to eat without driving 5 mins.
    - v-erne 4y ago
      Wow that's really bad - I have like four big supermarkets in 5 min walking distance from my flat and at least 4 convinience stores and even two real old school street markets. And I live on the far outsikrts of my town. And this is the norm here. How Americans could screw themselves so much and let this happen ?
  - causi 4y ago
    Would it really be that bad? Sure, for the fools who saw a couple years of two-dollar gas and decided they needed an F-350 to drive to their office job. It's hard to work up any sympathy for them, especially when most of them lived through the gas prices of the Bush years.
- brundolf 4y ago
yuan43 4y ago
The headline is "Gas crisis sends euro back below parity against dollar." Yet the article does not explain how a "gas crisis" leads to a weaker currency. What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices: https://www.reuters.com/world/europe/german-economic-outlook-gloomy-finance-ministry-says-2022-08-18/ https://www.reuters.com/world/europe/german-economic-outlook... And the ECB has done basically nothing about it. Deeply negative real rates and little indication that the ECB has the stomach for any substantive action. On the US side, there have been sizable interest rate hikes, which will continue at least until the midterm elections get underway. Real rates are still deeply negative. That difference in rates attracts a lot of capital that might otherwise be parked on the EU side. The US doesn't need to be a pillar of financial responsibility to attract the world's capital. It just has to be the cleanest dirty shirt in the hamper.
- blibble 4y ago
  the euro was supposed to make its constituent economies converge, but the exact opposite happened the only real solutions are: full fiscal union (the EU decides Germany/France/...'s budget, with redistribution) or collapse of the euro
- jmnicolas 4y ago
  If the ECB raises interest rates most European nations wouldn't be able to pay their debts. It's an untenable situation, something will have to give.
  - candiodari 4y ago
    But it's nowhere near the braking point, in fact it isn't nearly as bad as the PBOC or, arguably, the BOJ and the FED (per person EU debt is still less than the US), so they definitely still have the option to kick the can down the road. Ergo, you can safely bet both your kidneys that nothing's going to happen. It's crazy how hard it is to make 1 European country agree on finances these days, all the EU member nations agreeing to seriously tighten is about as likely as the President of the US declaring he is an alien.
KingOfCoders 4y ago
Last time a major war was in Europe, currencies tanked much more. I'm glad the EUR is as stable as it is while Europe is bombed by Russia.
- jmnicolas 4y ago
  While it has the potential to become one, this is not a major war by any means, it's contained in south-eastern Ukraine.
  - KingOfCoders 4y ago
    Sure, no world war. But Russia has lost 45.000 people (roughly the same as US combat deaths in Vietnam) and 2000 tanks. Most European powers are involved with weapon deliveries and target of economic warfare as well as targetting Russia. Several European states are targetted with cyberwarfare attacks.
  - HatchedLake721 4y ago
    What's the definition of "major war"? It's the biggest war on the continent since WW2 where two countries with 100,000s of soldiers fight each other with modern weapons.
    - mytailorisrich 4y ago
      People tend to forget Yugoslavia, which was really in the heart of Europe and killed about 150k people. There is a lot of hyperbole about Ukraine, not least because of Russia but so far it is not intrinsically disruptive outside of Ukraine's (and Russia's) borders beyond the disruption to Ukraine's exports (e.g. wheat). The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war.
      - s1artibartfast 4y ago
        >The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war. If Europe wanted, they could simply go back to business as usual and ignore the war entirely. It's surprising that people forget that the EU initiated the financial war with Russia
rvense 4y ago
Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?
- robjan 4y ago
  Borrowing becomes more expensive so it reduces the amount of cash sloshing around.
  - clownpepe 4y ago
    Just to clarify for the rest; the borrower (ECB) is literally printing new money every time they give out a loan.
    - karatinversion 4y ago
      The ECB is printing money to give out loans to itself?
      - StanislavPetrov 4y ago
        Every central bank does. If you think the ECB is bad, take a look at Japan. Unfortunately the entire "global financial system" is based on this. But don't call it a ponzi scheme or Serious Economists will tell you why it is totally sustainable.
        afiori 4y ago
        It cannot be a Ponzi scheme; if it can print unbounded amount of money there can be no risk f money running out.
      - everforward 4y ago
        "Literally" was probably an exaggeration, but they are in a way. If you deposit $100 with bank A, and they give a loan for $80 to person B, you have $100 to spend and person B has $80, so $180 can float through the economy. The $80 debt should cancel out person B's surplus, but it kind of doesn't if interest rates are low enough because they'll never actually pay it back. That's my potentially poor understanding of it.
FollowingTheDao 4y ago
Nothing to see here! Back to work! Put away the pitchforks! Keep voting! Move along now...
FollowingTheDao 4y ago
I guess no one here has heard there is no more gold dollar? All that is left is the petro dollar. This is the result.
- vkou 4y ago
  Yes, now the value of money is tied to a mixture of policy and macro-economic trends, as opposed to how many gold mines opened last year.
klqquant 4y ago
Germany and Russia playing a Kindergarten war with Nordstream. Putin throttles Nordstream-1 and says he'd supply via Nordstream-2. Germany refuses to open Nordstream-2. For Germany, apparently gas flowing through Nordstream-1 is ideologically pure, but gas flowing through Nordstream-2 is evil. The West will continue to celebrate its hawkish Ukraine policies as a success. Looks like Taiwan will be the next success.
joshe 4y ago
“Let's be honest here: Europe's a museum, Japan's a nursing home and China's a jail. We don't need to worry about those currencies being some kind of major threat to us.” - Larry Summers
- westpfelia 4y ago
  Is this the same Larry Summers who openly knew about the practices that led to the 2008 crash and did nothing? Simply because it made him money?
- fomine3 4y ago
  Jail with top tier productivity
randomopining 4y ago
The idea of Merkel and the useful greenies in Germany is simply one of the most perplexing geopolitical decisions of the 21st century. I'll never understand. If anybody knows the train of thought, please tell. If Germany was more energy independent, Russia would be crushed this winter.
drpgq 4y ago
Wow EUR/CAD is below 1.30 as well. Glad I switched (against my will) to working remotely for a California company from a German one.
- skinnymuch 4y ago
  Why wouldn’t you want to work for an American company if given the choice? Isn’t the pay a lot more for American companies? Or am I off here?
vondur 4y ago
Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.
- nopehnnope 4y ago
  Some problems with that: * The US had a single national language (despite regional linguistic minorities). In the EU, the closest would be English, which is the universal second language but very few people’s first language. * Relatedly, the US in 1789 was very culturally homogenous by modern standards. Europe is not. * The wealth disparity between countries inside the EU is absolutely massive. Federation would lead to unfathomably massive wealth transfers from the North and West to East and South. This would lead to resentment and rekindled nationalism that would create extreme political strife and tear the whole continent apart.
  - lostmsu 4y ago
    I think the only real problem in this list is convincing countries to adopt English (people tend to be self-important). Culturally, EU is quite homogenous. There may be 1-2 small countries with moderately different approach, but if you compare to the rest of the world, it is basically the same. The wealth disparity in the US does not cause what you describe, so why would it happen in EU?
    - nopehnnope 4y ago
      The disparity is much greater among EU countries. The average Bulgarian income, for example, is well below bare survival income in Western Europe. US geographic disparities are much smaller, and less geographic than racial (which then bears out geographically through different demographic mixes). Also, for the first 150 years of existence, the US was not a federal welfare state. The federal government was even limited to taxing states at an equal per capita rate until after the 16th amendment, ratified in 1909.
- 4y ago

176 points by mantiq 4y ago

The title of this makes me annoyed. What parity? They're both abstract made up units that happened to be even on a random scale for a while. This is financial numerology :-( (yes, I know there's more content and "this week's currency summary" sounds less fun and I should chill out)

Uke 4y ago
nopehnnope 4y ago
Parity can just mean equal. And the Euro’s creators clearly targeted a value similar to the dollar.
- wirrbel 4y ago
  Fairly certain that Germany pushed for the value with an easy conversion (2 Deutsche Mark = 1 EUR) and not for dollar-similarity. Exchange rate was 1 EUR for 1,95583 DM
  - croes 4y ago
    And then some sellers converted 1DM = 1€
    - zuzzurro 4y ago
      And then some sellers converted 1000 Lire = 1€. I still remember looking at shop windows and seeing everything doubling in price. Instant inflation and instant poverty....
  - jaclaz 4y ago
    >Fairly certain that Germany pushed for the value with an easy conversion (2 Deutsche Mark = 1 EUR) and not for dollar-similarity. >Exchange rate was 1 EUR for 1,95583 DM I don't think so, the same happened for the old Lira in Italy, 1,936.27=1 €, that everyone rounded to 2,000=1 €, or for the Portuguese Escudo, around 200=1 €, it should be just a coincidence: https://en.wikipedia.org/wiki/History_of_the_euro#Currency_transition https://en.wikipedia.org/wiki/History_of_the_euro#Currency_t... The conversion was based on exchange rates on 31 December 1998 for the initial Euro members.
- viraptor 4y ago
  Well, this led me to learn something from my stupid comment. Originally the EUA (https://en.wikipedia.org/wiki/European_Unit_of_Account https://en.wikipedia.org/wiki/European_Unit_of_Account - euro's grandparent) started at 1:1 with USD. (and quickly diverged) TIL EUA was exchanged 1:1 for ECU, then 1:1 for EUR, so that's a nice continuation.
  - cesarb 4y ago
    > Originally the EUA (https://en.wikipedia.org/wiki/European_Unit_of_Account https://en.wikipedia.org/wiki/European_Unit_of_Account - euro's grandparent) started at 1:1 with USD. > EUA was exchanged 1:1 for ECU, then 1:1 for EUR, so that's a nice continuation. Interesting, I didn't know that. We did something similar here in Brazil to get rid of the hyperinflation: the Real (which started at 1:1 with the USD) was preceded by the URV, an accounting measure which was used to denominate all prices; during that time, the prices continued to inflate in the former currency, but were mostly fixed in URV, so when the currency changed from Cruzeiro Real to Real (at 1:1 with the URV), the prices stopped inflating so much. Of course, that was not the only thing the Plano Real did to get rid of the hyperinflation, but it got rid of an important "inertial" component of the inflation, in which prices inflated daily because they had always inflated daily.
    - madcaptenor 4y ago
      For those who want to hear more about this, Planet Money ran an episode called How Four Drinking Buddies Saved Brazil: https://www.npr.org/sections/money/2010/10/01/130267274/the-friday-podcast-how-four-drinking-buddies-saved-brazil https://www.npr.org/sections/money/2010/10/01/130267274/the-...
smcl 4y ago
I suppose "Euro falls to historic low against dollar" might have sufficed as a headline, but highlighting the relative values and the 1:1 threshold that was crossed (no matter how abstract it technically is) could help more readers connect with the story a bit more
- detaro 4y ago
  Doesn't "historic low" mean "lowest it ever was in history"? That's not the case (yet).
  - formerly_proven 4y ago
    Interestingly the Google exchange rate chart has historical rates for EUR/USD going back to 1982. Wonder where those numbers are coming from...
    - deleted 4y ago
      [deleted]
    - pridkett 4y ago
      The Euro had two predecessors (kinda) - the European Unit of Account and the European Currency Unit. They weren’t day to day currencies, but they were used for things like cross-border bonds. The EUA was originally defined to be one dollar worth of gold back in the gold standard days. Each transition saw a 1:1 conversion with fluctuation - usually to benefit the EUA/ECU/Euro - along the way.
    - littlestymaar 4y ago
      ECU[1] I'd guess [1]: https://en.wikipedia.org/wiki/European_Currency_Unit https://en.wikipedia.org/wiki/European_Currency_Unit
      - madcaptenor 4y ago
        And it turns out that the reason a Euro is roughly a dollar is because it's the successor to the ECU, which was the successor to something called the European Unit of Account, which was originally defined to be a dollar's worth of gold. (I figured this out when I went down a Wikipedia rabbit hole last month: https://gottwurfelt.com/2022/07/16/why-is-a-euro-close-to-a-dollar/ https://gottwurfelt.com/2022/07/16/why-is-a-euro-close-to-a-...
martopix 4y ago
It's just a psychological threshold, but because I don't follow currency markets that closely, it makes it very evident to me that the euro has fallen below a threshold, against the dollar, that it never had gone down to.
- awrence 4y ago
  EUR vs Dollar went as low as 0.82 ish in its early days (00) and was below 1 through roughly 02 so not a first no.
- pavlov 4y ago
  Early in its life EUR was below 1 USD for a few years, Jan 2000 - Oct 2002.
- KingOfCoders 4y ago
  Never, except when it had.
  - martopix 4y ago
    Ok. I was 12.
missedthecue 4y ago
If newspapers weren't allowed to report on abstract concepts I don't think we'd ever get any financial news. What is a dollar or a stock or bond or legal contract anyway?
shakow 4y ago
> What parity? Parity in this context just mean a ratio of 1-to-1, doesn't it? I guess it could be synonymously replaced with ‶numeric equality″.
caf 4y ago
Might as well get annoyed at people for celebrating anniversaries. It turns out that noting arbitrary patterns in numbers is just a common way to observe changes in continuously-measured values.
- mmmpop 4y ago
  We're out here. Don't you dare tell me "happy birthday".
Workaccount2 4y ago
Given that they are both traded, they're really "abstract made up units" at least no more than than anything else you buy is. There is an enormous market consensus that determines the value of dollars and euros. The key takeaway given that is that the market is either losing confidence in the eurozone, gaining confidence in the US, or most likely; both.
- viraptor 4y ago
  Correct, every other traded value has the same meaningless in reality, but psychologically cute thresholds. Same as articles about some stock price crossing a (round number). > The key takeaway... Yes, and that's the useful information.
randomdata 4y ago
> They're both abstract made up units that happened to be even on a random scale They are salable assets with a price that people are willing to pay to acquire them. It is no more abstract than a hypothetical report on how a house in New York City is now worth less than a house in Wichita. Numerology implies some kind of mystical force. This is simply observation of measured human behaviour.
- dmurray 4y ago
  Not really, because we have a sense of how big a house should be. With outliers, it's a building large enough to house a single household. Houses in a given area will be within one order of magnitude in their prices. It's more like saying "a building in New York is now worth less than a business headquartered in Wichita".
  - randomdata 4y ago
    > It's more like saying "a building in New York is now worth less than a business headquartered in Wichita". Sure. There's no difference. A salable asset is a salable asset is a salable asset. They are all freely traded amongst each other. You can trade that business in Wichita to acquire the building in New York (along with some extras to reach parity in the transaction), just as you can trade your USD to acquire EUR (with some extras to reach parity in the transaction). If two assets have value parity, the trade can take place without any extras. Comparisons of similar assets (currencies in different countries, houses in different cities) tends to be more interesting for reporting, though. If you are vacationing in a different country you're probably not going to trade your house for the foreign currency. You're typically going to trade your own locale's currency. Likewise, if you're moving to another city, you're probably going to trade your house in your origin city for one in the destination city, not your collection of comic books. You could trade your house for foreign currency needed while on vacation and your comic book collection for a house when you move to New York City, but it is not nearly as common as trading similar assets when moving about the world. The media needs to attract a wide audience, so common behaviour is significant. Unfortunately, the beloved Comic Book Collector's Homebuying Guide Weekly didn't find the readership necessary to remain in business.
_hcuq 4y ago
Like your salary?

debacle 4y ago

Just for fun, I took a look at GBP/USD and it looks like that is tanking as well. Meanwhile the ruble is stronger than it's been in 4 years. For people in the EU/UK, how has this currency slide impacted your day to day?

nothis 4y ago
>For people in the EU/UK, how has this currency slide impacted your day to day? Not at all? I mean, I guess you could argue which caused which but the real problem here in central Europe are gas and energy prices. Those legitimately doubled and affect personal budgets.
- sph 4y ago
  Would you be prepared to say that the 18% inflation [1] isn't completely due to GBP getting weaker than USD? Not being facetious, actually asking the question. Because I'm sure all the US-based services will soon be updating their prices to match our rapidly weakening currency. 1: https://www.theguardian.com/business/live/2022/aug/22/cineworld-us-bankruptcy-felixstowe-strike-gas-prices-recession-stock-markets-business-live https://www.theguardian.com/business/live/2022/aug/22/cinewo...
asldjajlfkj 4y ago
Day to day? Not at all. Everything is denoted in EUR anyway and imports are hedged. Oil and gas are expensive, but the strong dollar isn’t the main factor.
devoutsalsa 4y ago
The ruble isn't strong. You can't sell meaningfully sell it on the open market. When you buy it, the price goes up. When you can't sell it, the price stays up. https://www.cbsnews.com/news/russia-ukraine-ruble-currency-russian-economy-sanctioms-2022/ https://www.cbsnews.com/news/russia-ukraine-ruble-currency-r...
- waffleiron 4y ago
  > When you buy it, the price goes up. When you can't sell it, the price stays up. How could you buy it, if it can't be sold? Also that article is from June, a lot has changed since then.

imustbeevil 4y ago

Another interesting thing is that many countries are experiencing lower inflation than the US, but their currency is getting weaker, so the USD's purchasing power is increasing two-fold. I've been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago (from the dollar perspective), whereas the dollar's purchasing power in the US is basically down 25%.

JumpCrisscross 4y ago
> been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago You’re running a real-goods arbitrage analysis. It’s dicey to compare national inflation statistics for this purpose. They’re measuring separate baskets of goods on different methodologies. This means you must reconstruct the baskets. As such, you might as well measure the things you’re buying. For traded goods, e.g. grain and fuel, there is unlikely a massive pre-tax spread because professionals are looking at the same data. For non-tradable goods, e.g. hotels and restaurant meals, you might see a yawning gap.

gls2ro 4y ago

I assume this should be good for EU economy on the long run? Like exports from EU to US are now more profitable. Or am I missing something? Can someone with more understanding/background explain how this might effect production and exports?

f6v 4y ago
> I assume this should be good for EU economy on the long run? If they could produce and export a lot of stuff. But that requires energy. At the current energy prices- forget it.
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epgui 4y ago
Yes, it is indeed good in that it makes European exports more competitive, but on the flip side, imports are more expensive, which can mean inflation and/or increased sensitivity to supply chain disturbances. I’m sure it causes some other problems as well. (not my area of expertise)
- thehappypm 4y ago
  I imagine it would be better for an economy that does huge amounts of exporting compared to importing (like China). Europe does a ton of importing so that side of it sucks.
  - lkrubner 4y ago
    A currency depreciation naturally leads to a reduction in imports, since the imports become more expensive.
    - thehappypm 4y ago

mg 4y ago

Every article about the EUR/USD ratio talks about gas prices. But the current rise of the Dollar started 15 years ago. Over these 15 years, it has become more and more apparent, that software is eating the world. And the US keeps extending their lead in this area. I would not be surprised if that contributes to a long term trend in the EUR/USD ratio. (I'm sitting in a cafe in Germany, writing this text on laptop made by a US company, running an operating system maintained in the USA, into a browser made in the USA and posting it to a website of a US company.)

ladyanita22 4y ago
I'd bet it has much more to go with the US shale oil industry. In Europe you can't do fracking
- cloutchaser 4y ago
  Its both really. In Europe you can’t do innovation, or it’s an order of magnitude more expensive.
  - FranzFerdiNaN 4y ago
    You mean you cant do innovation without dumping the cost on society. Someone is paying for the price difference.
    - simonh 4y ago
      Nobody is willing to pay the price difference, that's why scaling up big tech in Europe natively doesn't happen. If someone were paying it, then we would have big tech natively in Europe, and we haven't.
      - ElCheapo 4y ago
        Could you give an example of a technology that needs to be scaled up in Europe?

unpopularopp 4y ago

> German economy, among the most exposed to disruptions in Russian gas supply, is "likely" to suffer a recession over the winter if the energy crisis continues to deepen At this point I feel the EU is pretty much done and the war just showed how weak the EU leadership is along how individual member nations acting sometimes totally against each other (see France doubling down on nuclear while Germany does the opposite). Like I don't see any positive outcome for the Union no matter what happens in the war, unless you see the US having an even greater influence over Europe as a positive thing. Personally I'm extremely pessimistic.

JumpCrisscross 4y ago
> I don't see any positive outcome for the Union no matter what happens in the war If you put zero value on European unity, and the security and economic benefits that brings, of course you aren’t going to value the EU. If Texans didn’t care when New York was attacked, it would be reasonable to ask why the U.S. is a thing. For what it’s worth, France building nukes while Germany snubs them is analogous to e.g. Kentucky burning coal while California puts down solar.
thiago_fm 4y ago
KingOfCoders 4y ago
Let the Russians bomb and invade Washington State and we'll see how the dollar does.
- emaginniss 4y ago
  I think if the Russians bombed Washington State, the rest of the US would actually help defend it by attacking Russia. While the military help that the EU is giving Ukraine is great, it is far below the level that the other states would provide Washington. I know that isn't exactly your point, but you can't say that Ukraine is as intrinsic to the EU as Washington State is to the rest of the US.

thiago_fm 4y ago

This is great for German exports. Expect to see more Mercedes Benz in the streets of America. It generates some inflation as imports are pegged to the dollar(somebody mentioned that it is hedged, it is just by some extent), but overall is actually good for the economic block. The EU needs to export to survive. The EU has been fighting a possible deflation for most of the 2010s, this is actually not so negative as people might think. If ECB would raise interest to the same rate as the FED, Euro would become too strong. Inflation is already decreasing in Germany even with that 0% interest rate. The main inflation concern is the gas prices for this winter and this isn't fixable with monetary policy. If we have no gas, no amount of money will be able to buy it.

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01100011 4y ago
This thesis only holds if MB can afford to keep running its factories. Modern economies cease to function without energy, or when the price of that energy is sufficiently high.
simonh 4y ago
>This is great for German exports. Expect to see more Mercedes Benz in the streets of America. A lot of MB sold in the UK are made in Mexico.
- OJFord 4y ago
  Import/export is really about money flow though, it's not (directly) that important where the goods are made or end up.
mutatio 4y ago
Could you link a source regarding inflation decreasing in Germany? Only days ago German central bank chief Joachim Nagel said it will soon breach 10%.
Ancalagon 4y ago

nine_zeros 4y ago

EU is lucky they invested in rail lines and trains. The average person can at least attempt to stop using gas guzzlers and keep living their life. If the USD falls and oil prices rise, we in America are screwed. We almost had it handed to us this summer.

BenjiWiebe 4y ago
Would it really be that bad? Now I work very close to home, but when I didn't, I'd meet people commuting the other way. If it was no longer profitable to commute, we could either move to be closer to our job or switch jobs to be closer to home.
- nine_zeros 4y ago
  > Would it really be that bad? Are you asking about America? This summer, my wife's friend ($70k/yr) was considering a tradeoff between eating healthy vs supporting her mom's rent. Going closer to work is not a choice for many as rents closer to work are prohibitively high. Further, a lot of driving is errands and healthcare. I can't even get something to eat without driving 5 mins.
  - v-erne 4y ago
    Wow that's really bad - I have like four big supermarkets in 5 min walking distance from my flat and at least 4 convinience stores and even two real old school street markets. And I live on the far outsikrts of my town. And this is the norm here. How Americans could screw themselves so much and let this happen ?
- causi 4y ago
  Would it really be that bad? Sure, for the fools who saw a couple years of two-dollar gas and decided they needed an F-350 to drive to their office job. It's hard to work up any sympathy for them, especially when most of them lived through the gas prices of the Bush years.
brundolf 4y ago

yuan43 4y ago

The headline is "Gas crisis sends euro back below parity against dollar." Yet the article does not explain how a "gas crisis" leads to a weaker currency. What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices: https://www.reuters.com/world/europe/german-economic-outlook-gloomy-finance-ministry-says-2022-08-18/ https://www.reuters.com/world/europe/german-economic-outlook... And the ECB has done basically nothing about it. Deeply negative real rates and little indication that the ECB has the stomach for any substantive action. On the US side, there have been sizable interest rate hikes, which will continue at least until the midterm elections get underway. Real rates are still deeply negative. That difference in rates attracts a lot of capital that might otherwise be parked on the EU side. The US doesn't need to be a pillar of financial responsibility to attract the world's capital. It just has to be the cleanest dirty shirt in the hamper.

blibble 4y ago
the euro was supposed to make its constituent economies converge, but the exact opposite happened the only real solutions are: full fiscal union (the EU decides Germany/France/...'s budget, with redistribution) or collapse of the euro
jmnicolas 4y ago
If the ECB raises interest rates most European nations wouldn't be able to pay their debts. It's an untenable situation, something will have to give.
- candiodari 4y ago
  But it's nowhere near the braking point, in fact it isn't nearly as bad as the PBOC or, arguably, the BOJ and the FED (per person EU debt is still less than the US), so they definitely still have the option to kick the can down the road. Ergo, you can safely bet both your kidneys that nothing's going to happen. It's crazy how hard it is to make 1 European country agree on finances these days, all the EU member nations agreeing to seriously tighten is about as likely as the President of the US declaring he is an alien.

KingOfCoders 4y ago

Last time a major war was in Europe, currencies tanked much more. I'm glad the EUR is as stable as it is while Europe is bombed by Russia.

jmnicolas 4y ago
While it has the potential to become one, this is not a major war by any means, it's contained in south-eastern Ukraine.
- KingOfCoders 4y ago
  Sure, no world war. But Russia has lost 45.000 people (roughly the same as US combat deaths in Vietnam) and 2000 tanks. Most European powers are involved with weapon deliveries and target of economic warfare as well as targetting Russia. Several European states are targetted with cyberwarfare attacks.
- HatchedLake721 4y ago
  What's the definition of "major war"? It's the biggest war on the continent since WW2 where two countries with 100,000s of soldiers fight each other with modern weapons.
  - mytailorisrich 4y ago
    People tend to forget Yugoslavia, which was really in the heart of Europe and killed about 150k people. There is a lot of hyperbole about Ukraine, not least because of Russia but so far it is not intrinsically disruptive outside of Ukraine's (and Russia's) borders beyond the disruption to Ukraine's exports (e.g. wheat). The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war.
    - s1artibartfast 4y ago
      >The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war. If Europe wanted, they could simply go back to business as usual and ignore the war entirely. It's surprising that people forget that the EU initiated the financial war with Russia

rvense 4y ago

Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?

robjan 4y ago
Borrowing becomes more expensive so it reduces the amount of cash sloshing around.
- clownpepe 4y ago
  Just to clarify for the rest; the borrower (ECB) is literally printing new money every time they give out a loan.
  - karatinversion 4y ago
    The ECB is printing money to give out loans to itself?
    - StanislavPetrov 4y ago
      Every central bank does. If you think the ECB is bad, take a look at Japan. Unfortunately the entire "global financial system" is based on this. But don't call it a ponzi scheme or Serious Economists will tell you why it is totally sustainable.
      - afiori 4y ago
        It cannot be a Ponzi scheme; if it can print unbounded amount of money there can be no risk f money running out.
    - everforward 4y ago
      "Literally" was probably an exaggeration, but they are in a way. If you deposit $100 with bank A, and they give a loan for $80 to person B, you have $100 to spend and person B has $80, so $180 can float through the economy. The $80 debt should cancel out person B's surplus, but it kind of doesn't if interest rates are low enough because they'll never actually pay it back. That's my potentially poor understanding of it.

FollowingTheDao 4y ago

Nothing to see here! Back to work! Put away the pitchforks! Keep voting! Move along now...

FollowingTheDao 4y ago

I guess no one here has heard there is no more gold dollar? All that is left is the petro dollar. This is the result.

vkou 4y ago
Yes, now the value of money is tied to a mixture of policy and macro-economic trends, as opposed to how many gold mines opened last year.

klqquant 4y ago

Germany and Russia playing a Kindergarten war with Nordstream. Putin throttles Nordstream-1 and says he'd supply via Nordstream-2. Germany refuses to open Nordstream-2. For Germany, apparently gas flowing through Nordstream-1 is ideologically pure, but gas flowing through Nordstream-2 is evil. The West will continue to celebrate its hawkish Ukraine policies as a success. Looks like Taiwan will be the next success.

joshe 4y ago

“Let's be honest here: Europe's a museum, Japan's a nursing home and China's a jail. We don't need to worry about those currencies being some kind of major threat to us.” - Larry Summers

westpfelia 4y ago
Is this the same Larry Summers who openly knew about the practices that led to the 2008 crash and did nothing? Simply because it made him money?
fomine3 4y ago
Jail with top tier productivity

randomopining 4y ago

The idea of Merkel and the useful greenies in Germany is simply one of the most perplexing geopolitical decisions of the 21st century. I'll never understand. If anybody knows the train of thought, please tell. If Germany was more energy independent, Russia would be crushed this winter.

drpgq 4y ago

Wow EUR/CAD is below 1.30 as well. Glad I switched (against my will) to working remotely for a California company from a German one.

skinnymuch 4y ago
Why wouldn’t you want to work for an American company if given the choice? Isn’t the pay a lot more for American companies? Or am I off here?

vondur 4y ago

Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.

nopehnnope 4y ago
Some problems with that: * The US had a single national language (despite regional linguistic minorities). In the EU, the closest would be English, which is the universal second language but very few people’s first language. * Relatedly, the US in 1789 was very culturally homogenous by modern standards. Europe is not. * The wealth disparity between countries inside the EU is absolutely massive. Federation would lead to unfathomably massive wealth transfers from the North and West to East and South. This would lead to resentment and rekindled nationalism that would create extreme political strife and tear the whole continent apart.
- lostmsu 4y ago
  I think the only real problem in this list is convincing countries to adopt English (people tend to be self-important). Culturally, EU is quite homogenous. There may be 1-2 small countries with moderately different approach, but if you compare to the rest of the world, it is basically the same. The wealth disparity in the US does not cause what you describe, so why would it happen in EU?
  - nopehnnope 4y ago
    The disparity is much greater among EU countries. The average Bulgarian income, for example, is well below bare survival income in Western Europe. US geographic disparities are much smaller, and less geographic than racial (which then bears out geographically through different demographic mixes). Also, for the first 150 years of existence, the US was not a federal welfare state. The federal government was even limited to taxing states at an equal per capita rate until after the 16th amendment, ratified in 1909.
4y ago