This is an excellent topic for discussion. Thanks, John, for bringing it up. I'll add my 2-cents worth here.
Actually, this reminds me of a couple of class meetings I had when I was still taking my MBA at McGill. One took place at my macroeconomics class, and the other was in my International Business one. The conclusions (or consensus) I remember we have reached was that a strong currency is ALWAYS the best approach *in the long run*! Regardless of whether your a net importer or a net exporter. Currency devaluation is a perverse illusion! The benefits accruing to the exporter from a weak currency eventually get superseded by 'imported inflation', potential lack of stability of your currency, potential lack of sustainability of your standard of living, lack of power/influence, among other factors. Canada is undergoing exactly that kind of process now, since our currency has been hammered by the US dollar for over 20 years now! Therefore, I'd like to cast my vote to the valuation camp as a long run sustainable target/objective. I wouldn't want my country to have it any other way actually! What we may lose in initial competitiveness we could recover by an increase in productivity, which could result in keeping our products' prices attractive! Marcus On Tue, 29 Jan 2002 00:11:46 kilopascal wrote: >2002-01-28 > >I too saw the value of the Euro in the paper today at 86 "(US), but I really >don't think it means anything. The rises and falls of one currency to >another are more psychological then practical. > >Each of the European countries inside and outside of the Eurozone are small >potatoes economically speaking. They do not have enough resources in their >own lands to produce what they need to be affluent. Thus, they depend on >each other for trade. When that trade is played by different rules in >different countries and the currencies of the individual countries varies >uncontrollably, that also affects the cost of trade and living in each of >the countries. > >With 80 % of the goods produced in Europe staying in Europe, the above >situation would destabilise many economies and decrease profits and stymie >investments. And thus lower the standard of living Europe wide. Now, with >the Euro, and not only because of the Euro, but changes in laws dealing with >trade, the opening of borders and the elimination of tariffs, has made the >Eurozone more profitable and less vulnerable to price uncertainties. Thus, >no matter what the Euro's value is externally, the relative internal >stability of the market will negate any negative pressure on the Euro from >outside. > >In addition, when it comes to external trade, Europe is a net exporter. >Thus a "weak" Euro is advantageous to increased business activity between >the EU and the rest of the world. Since the Euro seems to fall relative to >the dollar, the effect is commodities priced in dollars are too expensive to >buy and Euro goods are cheaper and the customer is thus drawn to the Euro >products. Being a net exporter, the "weakness" of the Euro when it come to >buying needed necessities priced in dollars is somewhat offset by the >profits earn in sales. > >The US, however is a net importer. A strong dollar makes foreign products >cheaper than local products. With being a net importer, one would need a >strong currency in order to offset the loss of export sales. Thus a strong >dollar is in America's interest. > >So, it may be that the dollar/Euro ratio is being altered to give both sides >the needed boost to end the recession. > >Any comments? > >John > > > > > >----- Original Message ----- >From: "Han Maenen" <[EMAIL PROTECTED]> >To: "U.S. Metric Association" <[EMAIL PROTECTED]> >Sent: Monday, 2002-01-28 06:26 >Subject: [USMA:17698] euro is falling again > > >> The euro is falling again because of predictions, rumours and fears. It >has >> dropped to about 86 dollarcents. No valed economic reason at all. A >> prediction that the US economy would do better than the European >> economy was enough to set this nonsense in train once again. >> >> Han >> >> > > Is your boss reading your email? ....Probably Keep your messages private by using Lycos Mail. Sign up today at http://mail.lycos.com
