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Showing posts with label but keep its value relatively high euro. Show all posts
Showing posts with label but keep its value relatively high euro. Show all posts

11/05/2011

Euro: What is the secret of survival is high?



See Kenneth Rogoff, professor of economics at Harvard University to understand theexchange rate in general is not easy, but keep its value relatively high euro, remains vague and elusive.

Rogoff and wondering if it was due to the confidence of what he calls the "demons" in thecurrency markets that the plan to save the single currency reached by the leaders of the Governments of the euro will endure for more than a few months.

And adopt the new deal on the "mix" of financial scams suspicious and vague promisesfrom Asian countries to contribute to the financing of the plan and even the most important part of the deal (which proposes a waiver creditors 50% of the debts owed ​​to Athens) is not sufficient to restore stability to Greece engulfed in a sea of ​​debt will give life to its economy.

And the secret of the continued rise of the euro against the dollar at a time when doubtsare growing investors in the future debts of the South European continent Rogoff says that he has a good reason one should justify the fall of the euro and the six other reasons do not explain the relevance of which remains stable or upward.

The collapse of the euro
Rogov believes that the European Monetary System (ie the euro) incomplete growth seems increasingly unable to continue in its current form, in the absence of a clear path tothe establishment of the Federation of Mali, a strong political, which would not occur untilconstitutional changes.

It seems that the ECB will find itself forced to buy very large amounts of debt securities(WEEE) for the euro countries. Such a move may be useful in the short term, but if the specter of bankruptcy of some euro countries a reality (which nominated it occurred in theprevious paper), the European Central Bank itself will find itself in need of funding.

If the North has been the most powerful European countries is not ready to accept thistrend and increased the pace of the "resistance" in which the political, the European Central Bank finds itself forced to refinance itself by printing money, and in both cases, therisk remains high, the financial crisis deepens.

The secret of the height
Rogoff explains Alaratf current euros constantly in the Nordic countries to provide assistance to their counterparts in the south as well as the likelihood of continued foreign central banks and sovereign wealth funds to continue to buy the euro to hedge against any risks linked to the dollar and their economies.

The investors in the end, convinced that the risks the U.S. equivalent in size to the European risk. This is true, the U.S. political system seems unable to progress with a plan to achieve stability in the budget deficit over the medium term.

The other factor, according to Rogoff, behind the euro is to the fact that the current value of the euro does not look very abnormal as measured by purchasing power to him.

But Rogoff acknowledges that the comprehensive reform of the euro was inevitable for a country or countries and in what time, but not all the States and soon, he said, adding that it is not possible to bet on the stability of the euro against the dollar in the coming year.
 
 
Source: Project Syndicate

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