My euro --emergency aid package

digme

With regards to the emergency aid package.

Why does the euro weaken?
Why does another currency then get stronger compared to our Euro?
Is it 100% certain to cause inflation?
How is the aid package used?
How are Euros are created,and what's stopping them making as much as they like?

cavedave

digme

Is it 100% certain to cause inflation?

Almost nothing is 100% certain. Inflation is not certain to happen after this. A volcano could explode today killing off most of humanity and making the concept of money worthless for example.

digme

cavedave wrote: »

Almost nothing is 100% certain. Inflation is not certain to happen after this. A volcano could explode today killing off most of humanity and making the concept of money worthless for example.

Great insight lol

cavedave

if someone gives you p=1 or 0 it means no possible piece of evidence could change their mind about an event happening. Including the event happening/not happening. Which in most cases means the person is being irrational.

If someone says "i am 100% sure man utd will win this game". Then they have no need to watch the game as even if man utd lose they won't believe what they see

suckslikeafox

digme wrote: »

With regards to the emergency aid package.

How are Euros are created,and what's stopping them making as much as they like?

I'll take the easy one

Simple version is that the ECB buys bonds, easiest example to use is ECB buying from a normal bank. ECB buys the bonds, the debits the bank's account with the price. The bank is then free to lend the money, keep it as reserves or whatever they like.

Theres nothing to stop the ECB creating as much money as they like but creating money generally leads to inflation, which is definitely not what we need at the moment

Flamed Diving

Why does the euro weaken?

Supply & Demand. Money broadly follows the same principles as any good. If you introduce a lot of it onto the market, the value of it decreases.

Why does another currency then get stronger compared to our Euro?

Well, it is more like the Euro getting weaker. But it could also be due to people shifting investment in dollars. Supply & Demand kicks in again.

Is it 100% certain to cause inflation?

Aside from cavedave's accurate statement, the best I could say is that empirically, increasing the money supply tends to cause inflation. However, if the economy is going through a deflationary phase (recession), the two could well cancel out.

How is the aid package used?

http://www.irishtimes.com/newspaper/opinion/2010/0510/1224270049596.html

http://baselinescenario.com/2010/05/10/eurozone-the-kitchen-sink-goes-in-now-it%E2%80%99s-all-about-solvency/

How are Euros are created,and what's stopping them making as much as they like?

http://www.ecb.int/ecb/educational/html/index.en.html

They can't keep creating money because of inflation and because it devalues your currency, internationally. Zimbabwe make as much as they like. Go look them up.

digme

Lads i want to thank you for your insight and fantastic posts
You cleared up a fair bit for me.

Hasschu

The linked scathing article on EU leadership will give you some clues as to why things are going the way they are. From Bruxelles. Blogs France.

http://translate.google.ca/translate?hl=en&sl=fr&u=http://bruxelles.blogs.liberation.fr/coulisses/2010/05/barack-obama-the-president-of-the-european-council-potec.html&ei=C8rtS_O9EsH48Aahw9T9Cg&sa=X&oi=translate&ct=result&resnum=1&ved=0CBcQ7gEwAA&prev=/search%3Fq%3Dhttp://bruxelles.blogs.liberation.fr/coulisses/2010/05/barack-obama-the-president-of-the-european-council-potec.html%26hl%3Den%26client%3Dfirefox-a%26hs%3Dig3%26sa%3DG%26rls%3Dorg.mozilla:en-GB:official%26channel%3Ds

Hasschu

Europe is dominating business news in North America and all of it is quite negative. Link to a small selection of top business strories in the Canadian Globe and Mail. The underlying tone and tenor is that Europe's austerity program is leading to a decade of stagnation and deflation with serious consequences for the rest of the world. Up until a couple of months ago the US was deemed to be in the exact same position. Contagion?

http://www.theglobeandmail.com/report-on-business/top-business-stories/imf-warns-on-surging-debt-but-canada-stands-alone/article1569046/

Hasschu

An interesting graph originally from Bloomberg comparing public,company and private debt levels in some European countries including Germany and Ireland.


http://www.nakedcapitalism.com/2010/05/german-households-owe-more-than-greeces-do.html