Thursday, 22 January 2015

parity, parody

For more than a decade, the euro has outpaced the US dollar—consistently rising from a worth of under a dollar to this present inverted affair.

Though some may argue that such baited and contentious policy decisions are already figured into the markets and exchanges, others anticipate a precipitous fall in the worth of the euro against the dollar, perhaps settling at 1:1, should the European Union decide—be sold on—unanimously to introduce what’s called a bond-purchase programme. The plan (EN/DE), according to those in the know, provides for around fifty billion € in debt underwritten by reserve banks per month, and is just a dressed-up (or dressed-down) of the quantitative-easing (printing new money in order to cover old obligations) that’s been the standard-practise of America, Japan and the UK for decades. The EU has been philosophically and constitutionally opposed to resorting to such ends—even when things looked their bleakest for the Eurozone, but I suppose now do not want to be seen as kicking the can down the road, merely deferring future crises by not being bold and robust enough with the recovery. I think it is also a path not to trot down, but what do I know? Some of the same sagacious individuals point to the monetary policies of those countries above as having a net positive effect, since it served to keep the value of those currencies artificially low and thus favourable for foreign trade; Germany and Europe’s other industrial producers would benefit from more attractive exports.
Wage stagnation and inflation also seem to accompany this maneuver, no matter how good it is for trade. Though there are certain expectations and cursory discussions that seem to point to foregone conclusions, all nuance may not yet be exhausted or explored. Germany is rather vituperatively opposed to committing to quantitative-easing in its current form, seen as enabler and co-morbid with inflation and irresponsible governance. So that Germans tax-payers are not seen as liable for the weaker economies that can’t repay their debts under this latest scheme, two ideas are under consideration—either managing the whole programme through the ECB in Frankfurt or making national reserve banks accountable to the disbursement and repayment of those loans—essentially monies owed to themselves. What do you think? Does just spinning gold from straw become eventually too tempting?