The Economist (July 23)
With bank stress tests complete in Europe, Japan breathed a sigh of relief. Perhaps the euro would strengthen and the yen finally weaken. The Economist suggests otherwise. Based on the Big Mac index, the magazine believes the Euro is overvalued by 14% versus the dollar, while the yen is slightly undervalued and should rise to 85.7 versus the dollar. More extreme still, the yuan appears undervalued by 48% versus the dollar. The Big Mac index is based on the concept that wherever you are, standard goods like a burger should cost the same amount.
Tags: Big Mac index, euro, Exchange rates, Yen
The Financial Times (June 24)
George Soros writes that if the euro fails, it will be Germany’s fault. Germany used to be the euro’s biggest supporter, but it has turned inward. Germans, however, would do well to consider the consequences of a failed euro. “The restored Deutschemark would soar, the euro would plummet. The rest of Europe would become competitive and could grow its way out of its difficulties but Germany would find out how painful it can be to have an overvalued currency.”
Tags: Currency, euro, George Soros, Germany
Financial Times (May 24)
If Europe’s leaders fail, the euro will fail. But they mustn’t and the euro shouldn’t. During boom times, leaders could break the rules. Early on, France and Germany broke the public debt limits (less than 60% of GDP) of the Stability and Growth Pact. Today’s leaders need to establish tough rules and hold their countries accountable. Europe also needs productivity gains to grow faster. This means difficult structural reforms can no longer be put off.
If Europe’s leaders fail, the euro will fail. But they mustn’t and the euro shouldn’t. During boom times, leaders could break the rules. Early on, France and Germany broke the public debt limits (less than 60% of GDP) of the Stability and Growth Pact. Today’s leaders need to establish tough rules and hold their countries accountable. Europe also needs productivity gains to grow faster. This means difficult structural reforms can no longer be put off.
Tags: euro, Europe, Germany, Reform, Stability & Growth Pact
The Economist (May 20, 2010)
Despite a massive $950 billion rescue plan, investors “remain nervous” about the euro. More worryingly, European leaders remain confused. Major changes are necessary to save the euro: “How sad that most euro-zone governments still do not seem to get it; how pathetic that they cover their ignorance by blaming hedge-fund managers in London.”
Despite a massive $950 billion rescue plan, investors “remain nervous” about the euro. More worryingly, European leaders remain confused. Major changes are necessary to save the euro: “How sad that most euro-zone governments still do not seem to get it; how pathetic that they cover their ignorance by blaming hedge-fund managers in London.”
Tags: euro, Hedge funds, Investors
Financial Times (May 16)
The euro has touched an 18-month low against the dollar. Mourning this weakness, some Europeans hope the euro rapidly regains strength. The Financial Times calls this thinking wrongheaded. “A weaker euro would now be a blessing for the eurozone.” By making the region’s exports cheaper, a weak euro actually boosts the eurozone’s competitiveness.
The euro has touched an 18-month low against the dollar. Mourning this weakness, some Europeans hope the euro rapidly regains strength. The Financial Times calls this thinking wrongheaded. “A weaker euro would now be a blessing for the eurozone.” By making the region’s exports cheaper, a weak euro actually boosts the eurozone’s competitiveness.
