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starbucks4ever (98.98)

" I have yet to meet a central bank that doesn't inflate once it gets a whiff of deflationary pressures"

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October 03, 2010 – Comments (8)

This was a comment by player whereaminow in ETFsRule's blog about gold. It looks correct overall, but it got me thinking and prompted me to write this reply:

"One case where it is happening, to a degree, is European Central Bank, which printed relatively little, and the reason is very interesting. Since Germany and France are controlling shareholders, the eurobureaucrats feel that PIGS economies are expendable. However, any threat of PIGS defaulting will send the Euro sharply down, which is just what controlling shareholders want. By NOT printing enough money, the ECB can drive the Euro lower than it could drive it by printing too much of it, while confining the austerity pain to the colonies and positioning the metropolis as a safe haven. 

Maybe we too should accept Mexico into a dollar union, let it absorb as much debt as it can carry, and then shut the printing press off, getting a cheap dollar AND a low inflation? What do you think? "

Indeed, I am interested to know your opinions. Perhaps it is after all possible to have our cake and eat it too if we can find some other sucker who will not have his cake and will not eat it either? I am for now putting aside the question if cheaper dollar is actually a good thing (Geithner sure thinks it is), and I am also putting aside the ethical aspect of it (since ethics has never been a problem for the US government anyway). Just the pragmatic aspect: do you think this trick could possibly work?


 

8 Comments – Post Your Own

#1) On October 03, 2010 at 3:41 PM, portefeuille (99.44) wrote:

USD/DEM.



enlarge

 

USD/EUR.



enlarge

 

The intraday-low of the USD made on July 15, 2008 is at around 0.6235 EUR * 1.95583 DEM/EUR ≈ 1.22 DEM. The exchange rate currently is at around 

1 USD = 0.7247 EUR  * 1.95583 DEM/EUR ≈ 1.42 DEM.

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#2) On October 03, 2010 at 3:46 PM, starbucks4ever (98.98) wrote:

What is DEM? i thought deutschemark was dead for 10 years?

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#3) On October 03, 2010 at 3:51 PM, portefeuille (99.44) wrote:

yes, good old D-Mark.

http://en.wikipedia.org/wiki/Deutsche_Mark

http://de.wikipedia.org/wiki/Deutsche_Mark

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#4) On October 03, 2010 at 3:53 PM, portefeuille (99.44) wrote:

----------------

On 31 December 1998, the European Central Bank (ECB) fixed the irrevocable exchange rate, effective 1 January 1999, for German mark to euros as DM 1.95583 = €1.

----------------

(from here)

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#5) On October 03, 2010 at 3:55 PM, portefeuille (99.44) wrote:

As 1.95583 is close to 2 quite a few Germans still calculate in DEM ("times 2 minus a little bit ...", hehe ...).

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#6) On October 03, 2010 at 4:02 PM, portefeuille (99.44) wrote:

#1-4 also see comments #22,23 here.

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#7) On October 03, 2010 at 4:04 PM, portefeuille (99.44) wrote:

"times 2 minus a little bit ..."

and of course

"divided by 2 plus a little bit ..."

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#8) On October 04, 2010 at 10:45 AM, GNUBEE (26.93) wrote:

Never underestimate the ability of gamers to invent new tricks.

Failure to do so means their demise.

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