If Euro is supposed to be valued higher, why are Europeans asking for Dollars ?!

[52ndStreet]

Can some explain to me now that their is this debt crisis in Europe, why are many european economist and central bankers asking for U.S. dollars to prop up the Euro.?

 

[Vengeance]

This is a short and neccesarily undetailed explanation but hopefully it'll be helpful-

1) To increase the pure volume of currency in the system as digital money is erased in bad debts.

2) The US dollar is the worlds reserve currency, see Invetopedia link for a brief explanation:

Reserve Currency Definition

3) With a weakening Euro, USD are widely anticipated to increase in relative strength or more bluntly, to depreciate less and be more redeemable in the long term. This is a situation that is purely evaluated moment to moment and changes continually as conditions change.

 

[Toro]

Can some explain to me now that their is this debt crisis in Europe, why are many european economist and central bankers asking for U.S. dollars to prop up the Euro.?

They aren't trying to prop up the price of the euro. What they want is to be able to meet their dollar liabilities of European banks and corporations. The Fed executes a dollar for euro currency swap with the ECB who then supplies dollars to meet the liabilities. The swap fixes the euro/dollar price, and the swap is unwound and dollars paid back to the Fed with the Fed receiving an interest rate from the ECB. This is done to contain a liquidity crisis, which could take down European, and thus most likely American banks.

 

[52ndStreet]

This is a short and neccesarily undetailed explanation but hopefully it'll be helpful-

1) To increase the pure volume of currency in the system as digital money is erased in bad debts.

2) The US dollar is the worlds reserve currency, see Invetopedia link for a brief explanation:

Reserve Currency Definition

3) With a weakening Euro, USD are widely anticipated to increase in relative strength or more bluntly, to depreciate less and be more redeemable in the long term. This is a situation that is purely evaluated moment to moment and changes continually as conditions change.

I hear talk of the Euro replacing the dollar , as the worlds "reserve" currency?.
How could this happen, with so many European countries carry so much debt, and
unable to pay back loans. And talk of a Euro collasp.

People are still asking for U.S. dollars, over the Euro as a hedge against a Euro collasp.!?

Whats going on here.?
Why is the U.S. dollar still wanted by many throughout the free, and unfree world.?
Is the U.S. Dollar still king of currencies?

 

[Vengeance]

I hear talk of the Euro replacing the dollar , as the worlds "reserve" currency?.
How could this happen, with so many European countries carry so much debt, and
unable to pay back loans. And talk of a Euro collasp.

People are still asking for U.S. dollars, over the Euro as a hedge against a Euro collasp.!?

Whats going on here.?
Why is the U.S. dollar still wanted by many throughout the free, and unfree world.?
Is the U.S. Dollar still king of currencies?

In my opinion, the Euro is not a candidate to replace the dollar, now less than ever. There has been lots of talk of replacing the USD as reserve currency, even some notable attempts made so far with no good results for those who tried it. One of the prime contenders at present is a unit called the SDR (Special Drawing Rights) issued by the International Monetary Fund, Google it for a far more detaled description than I could possibly give you.

If you're interested in the mechanics of the dollar in particular and money in general, I reccomend to you (or anyone) that they spend a few minutes watching any of the money related G Edward Griffin videos on Youtube and if that piques your interest, pick up a copy of his book The Creature From Jekyll Island- A complex but fascinating read.

 

[52ndStreet]

I hear talk of the Euro replacing the dollar , as the worlds "reserve" currency?.
How could this happen, with so many European countries carry so much debt, and
unable to pay back loans. And talk of a Euro collasp.

People are still asking for U.S. dollars, over the Euro as a hedge against a Euro collasp.!?

Whats going on here.?
Why is the U.S. dollar still wanted by many throughout the free, and unfree world.?
Is the U.S. Dollar still king of currencies?

In my opinion, the Euro is not a candidate to replace the dollar, now less than ever. There has been lots of talk of replacing the USD as reserve currency, even some notable attempts made so far with no good results for those who tried it. One of the prime contenders at present is a unit called the SDR (Special Drawing Rights) issued by the International Monetary Fund, Google it for a far more detaled description than I could possibly give you.

If you're interested in the mechanics of the dollar in particular and money in general, I reccomend to you (or anyone) that they spend a few minutes watching any of the money related G Edward Griffin videos on Youtube and if that piques your interest, pick up a copy of his book The Creature From Jekyll Island- A complex but fascinating read.

My question also is, if the Euro, and Euroup were in this much trouble, why would they even suggest replacing the U.S. dollar with the Euro?, as the worlds reserve currency?.
I will check into your recommendations, the book and the you tube video.

 

[Mad Scientist]

I hear talk of the Euro replacing the dollar , as the worlds "reserve" currency?.
How could this happen, with so many European countries carry so much debt, and
unable to pay back loans. And talk of a Euro collasp.

People are still asking for U.S. dollars, over the Euro as a hedge against a Euro collasp.!?

Whats going on here.?
Why is the U.S. dollar still wanted by many throughout the free, and unfree world.?
Is the U.S. Dollar still king of currencies?

In my opinion, the Euro is not a candidate to replace the dollar, now less than ever. There has been lots of talk of replacing the USD as reserve currency, even some notable attempts made so far with no good results for those who tried it. One of the prime contenders at present is a unit called the SDR (Special Drawing Rights) issued by the International Monetary Fund, Google it for a far more detaled description than I could possibly give you.

If you're interested in the mechanics of the dollar in particular and money in general, I reccomend to you (or anyone) that they spend a few minutes watching any of the money related G Edward Griffin videos on Youtube and if that piques your interest, pick up a copy of his book The Creature From Jekyll Island- A complex but fascinating read.

My question also is, if the Euro, and Euroup were in this much trouble, why would they even suggest replacing the U.S. dollar with the Euro?, as the worlds reserve currency?.
I will check into your recommendations, the book and the you tube video.

The European Union was just away to implode all those countries economies and solidify them under one Global Bank.
The aforementioned SDR is a Fiat currency as well because it will be printed in massive numbers as is Dollars are here and backed by nothing.
It's just a trick to bankrupt countries and get them to give up their sovereignty (independence) to International Bankers.

The best thing to do with a Huge Debt that cannot be paid off is to write it off. The International Bankers don't want that because they'll take the hit. They want YOU and ME to pay for THEIR LOSSES.

They created 1.5 Quadrillion (1,500 Trillion) in derivative debt and now they want us to pay for it? How do they do that?: They get paid off politicians like Papandreous in Greece to sign the country onto that Banker debt. The crooked politicians put tax hikes and austerity measures in place so that they can pay off the banks! But the debt is mathematically impossible to pay off so what will the bankers demand? Everything!

Do you see why we must oppose both tax hikes and benefits cuts? The cuts won't go to pay off OUR NATIONAL DEBT, no! It'll go to pay off the International Bankers Debt! We'll be in debt bondage for the rest of our lives!

Are you beginning to understand why the Gov't never seems to listen to the people? Do you see why the Courts and our Politicians always seem to side against us, the US Citizens whom they are suppossed to be serving? It's because they're bought and paid for! They're totally corrupted!

But they are Masters at playing us off against each other to keep us distracted aren't they?

 

[52ndStreet]

In my opinion, the Euro is not a candidate to replace the dollar, now less than ever. There has been lots of talk of replacing the USD as reserve currency, even some notable attempts made so far with no good results for those who tried it. One of the prime contenders at present is a unit called the SDR (Special Drawing Rights) issued by the International Monetary Fund, Google it for a far more detaled description than I could possibly give you.

If you're interested in the mechanics of the dollar in particular and money in general, I reccomend to you (or anyone) that they spend a few minutes watching any of the money related G Edward Griffin videos on Youtube and if that piques your interest, pick up a copy of his book The Creature From Jekyll Island- A complex but fascinating read.

My question also is, if the Euro, and Euroup were in this much trouble, why would they even suggest replacing the U.S. dollar with the Euro?, as the worlds reserve currency?.
I will check into your recommendations, the book and the you tube video.

The European Union was just away to implode all those countries economies and solidify them under one Global Bank.
The aforementioned SDR is a Fiat currency as well because it will be printed in massive numbers as is Dollars are here and backed by nothing.
It's just a trick to bankrupt countries and get them to give up their sovereignty (independence) to International Bankers.

The best thing to do with a Huge Debt that cannot be paid off is to write it off. The International Bankers don't want that because they'll take the hit. They want YOU and ME to pay for THEIR LOSSES.

They created 1.5 Quadrillion (1,500 Trillion) in derivative debt and now they want us to pay for it? How do they do that?: They get paid off politicians like Papandreous in Greece to sign the country onto that Banker debt. The crooked politicians put tax hikes and austerity measures in place so that they can pay off the banks! But the debt is mathematically impossible to pay off so what will the bankers demand? Everything!

Do you see why we must oppose both tax hikes and benefits cuts? The cuts won't go to pay off OUR NATIONAL DEBT, no! It'll go to pay off the International Bankers Debt! We'll be in debt bondage for the rest of our lives!

Are you beginning to understand why the Gov't never seems to listen to the people? Do you see why the Courts and our Politicians always seem to side against us, the US Citizens whom they are suppossed to be serving? It's because they're bought and paid for! They're totally corrupted!

But they are Masters at playing us off against each other to keep us distracted aren't they?

So this SDR IMF currency, when is it supposed to be introduced to the world, what happens to the U.S. dollar after this SDR currency is introduced.?What happens to the Euro currency after this SDR currency is intorduced.?

 

[Toro]

The SDR is not a currency. It is a basket of currencies of which the US dollar is the largest component. It has been around for decades.

 

[Vengeance]

The SDR is not a currency. It is a basket of currencies of which the US dollar is the largest component. It has been around for decades.

That is correct. What is different is it's proposed usage as a form of currency , the wiki touches on this point under Alternative to US dollar

Special Drawing Rights - Wikipedia, the free encyclopedia

 

[Toro]

The SDR is not a currency. It is a basket of currencies of which the US dollar is the largest component. It has been around for decades.

That is correct. What is different is it's proposed usage as a form of currency , the wiki touches on this point under Alternative to US dollar

Special Drawing Rights - Wikipedia, the free encyclopedia

It is impractical. It can't be used as a currency in the form of how we think of currencies. It has historically been used as a unit of account for transfers between central banks but it can be replicated by central banks holding allotments of the currencies comprising SDRs. The only real benefit is for nations who don't trade much in the major components of the SDRs, but those benefits in aggregate are minor. It can also be a benefit for those countries that don't want to reallocate their reserves themselves. But it's hard to really care too much about those countries - i.e., China - because their massive dollar reserves are a result of their own internal policies. It's funny to listen to these countries bitch about a declining dollar when they could mitigate their own problems by implementing sound internal economic policies.

 

[iamwhatiseem]

When the FED trades the currencies...what happens to the risk?
Is the risk then transferred, in whole or in part, to the FED? (aka US taxpayers)

So..is this a simple exercise to transfer some of the risk and debt from Euro to America?

 

[52ndStreet]

When the FED trades the currencies...what happens to the risk?
Is the risk then transferred, in whole or in part, to the FED? (aka US taxpayers)

So..is this a simple exercise to transfer some of the risk and debt from Euro to America?

This is exactly my question, why should the U.S. , and the Fed resv board, attempt to transfer European dept, and insolvency to America, and Americans, when many of these Europeans don't even pay their Taxes!!?. Shouldn't these Europeans figure out how to solve their own economic problems, and begin to pay their own Taxes!?.
Don't we here in America have our own economic problems to solve?.

 

[Toro]

When the FED trades the currencies...what happens to the risk?
Is the risk then transferred, in whole or in part, to the FED? (aka US taxpayers)

So..is this a simple exercise to transfer some of the risk and debt from Euro to America?

This is exactly my question, why should the U.S. , and the Fed resv board, attempt to transfer European dept, and insolvency to America, and Americans, when many of these Europeans don't even pay their Taxes!!?. Shouldn't these Europeans figure out how to solve their own economic problems, and begin to pay their own Taxes!?.
Don't we here in America have our own economic problems to solve?.

That's incorrect. There is no transfer of debt. The Fed is providing currency to the ECB in a swap so the ECB can supply the demand for dollars in the European inter-bank lending markets. By law, that currency must be transferred back to the Fed at the end of the swap.

 

[iamwhatiseem]

When the FED trades the currencies...what happens to the risk?
Is the risk then transferred, in whole or in part, to the FED? (aka US taxpayers)

So..is this a simple exercise to transfer some of the risk and debt from Euro to America?

This is exactly my question, why should the U.S. , and the Fed resv board, attempt to transfer European dept, and insolvency to America, and Americans, when many of these Europeans don't even pay their Taxes!!?. Shouldn't these Europeans figure out how to solve their own economic problems, and begin to pay their own Taxes!?.
Don't we here in America have our own economic problems to solve?.

That's incorrect. There is no transfer of debt. The Fed is providing currency to the ECB in a swap so the ECB can supply the demand for dollars in the European inter-bank lending markets. By law, that currency must be transferred back to the Fed at the end of the swap.

But wouldn't that assume that they will have currency to trade back?
Hmm...I am going to make a wild guess and say that the FED has forgiven the currency re-exchange in the past. Sort of laundering your debt.

If I understand right...

Bank A holds $10 in debt that Gov. B owes it.
Gov. B has Euros, so to pay Bank A - Gov. B goes to the Fed and exchanges currency and then pays Bank A.
But Gov. B still owes the FED dollars to buy back their Euro...so the dollar debt transfered to the FED.

 

[Toro]

This is exactly my question, why should the U.S. , and the Fed resv board, attempt to transfer European dept, and insolvency to America, and Americans, when many of these Europeans don't even pay their Taxes!!?. Shouldn't these Europeans figure out how to solve their own economic problems, and begin to pay their own Taxes!?.
Don't we here in America have our own economic problems to solve?.

That's incorrect. There is no transfer of debt. The Fed is providing currency to the ECB in a swap so the ECB can supply the demand for dollars in the European inter-bank lending markets. By law, that currency must be transferred back to the Fed at the end of the swap.

But wouldn't that assume that they will have currency to trade back?
Hmm...I am going to make a wild guess and say that the FED has forgiven the currency re-exchange in the past. Sort of laundering your debt.

If I understand right...

Bank A holds $10 in debt that Gov. B owes it.
Gov. B has Euros, so to pay Bank A - Gov. B goes to the Fed and exchanges currency and then pays Bank A.
But Gov. B still owes the FED dollars to buy back their Euro...so the dollar debt transfered to the FED.

The counterparty for the Fed is the ECB. The risk is with the ECB. The risk to the Fed is that the ECB cannot pay it back. However, that is extremely unlikely because if the ECB becomes insolvent, by law and charter, it is recapitalized by the member nations.

The ECB will supply dollars swapped to them by the Fed to the European bank. The bank will then repay it's dollar obligations. Often times, that is a US bank. But even if it is not, the ECB has to buy back dollars and repay the Fed at cost plus interest. Thus, the risk is with the ECB, not the Fed.

In this transaction, debt does not change hands between the Fed and the ECB.

 

[iamwhatiseem]

That's incorrect. There is no transfer of debt. The Fed is providing currency to the ECB in a swap so the ECB can supply the demand for dollars in the European inter-bank lending markets. By law, that currency must be transferred back to the Fed at the end of the swap.

But wouldn't that assume that they will have currency to trade back?
Hmm...I am going to make a wild guess and say that the FED has forgiven the currency re-exchange in the past. Sort of laundering your debt.

If I understand right...

Bank A holds $10 in debt that Gov. B owes it.
Gov. B has Euros, so to pay Bank A - Gov. B goes to the Fed and exchanges currency and then pays Bank A.
But Gov. B still owes the FED dollars to buy back their Euro...so the dollar debt transfered to the FED.

The counterparty for the Fed is the ECB. The risk is with the ECB. The risk to the Fed is that the ECB cannot pay it back. However, that is extremely unlikely because if the ECB becomes insolvent, by law and charter, it is recapitalized by the member nations.

The ECB will supply dollars swapped to them by the Fed to the European bank. The bank will then repay it's dollar obligations. Often times, that is a US bank. But even if it is not, the ECB has to buy back dollars and repay the Fed at cost plus interest. Thus, the risk is with the ECB, not the Fed.

In this transaction, debt does not change hands between the Fed and the ECB.

So in short...they exponentially spent more than they took in...and now they need to beef up the Euro to keep it from imploding by mixing in a more solid currency.

 

[52ndStreet]

But wouldn't that assume that they will have currency to trade back?
Hmm...I am going to make a wild guess and say that the FED has forgiven the currency re-exchange in the past. Sort of laundering your debt.

If I understand right...

Bank A holds $10 in debt that Gov. B owes it.
Gov. B has Euros, so to pay Bank A - Gov. B goes to the Fed and exchanges currency and then pays Bank A.
But Gov. B still owes the FED dollars to buy back their Euro...so the dollar debt transfered to the FED.

The counterparty for the Fed is the ECB. The risk is with the ECB. The risk to the Fed is that the ECB cannot pay it back. However, that is extremely unlikely because if the ECB becomes insolvent, by law and charter, it is recapitalized by the member nations.

The ECB will supply dollars swapped to them by the Fed to the European bank. The bank will then repay it's dollar obligations. Often times, that is a US bank. But even if it is not, the ECB has to buy back dollars and repay the Fed at cost plus interest. Thus, the risk is with the ECB, not the Fed.

In this transaction, debt does not change hands between the Fed and the ECB.

So in short...they exponentially spent more than they took in...and now they need to beef up the Euro to keep it from imploding by mixing in a more solid currency.

This is my question also, they spent more than they took in, and then they continue to amass
debt by borrowing from the U.S. Fed Reserv Bank multiple times, aren't they just compunding their debt?, and then they try to wright off the debt that they do owe.
Isn't this hurting the value of the U.S. dollar also.? They are using the U.S. dollar to prop up
their insolvent Euro at th expense of the United States.!?

 

[Toro]

But wouldn't that assume that they will have currency to trade back?
Hmm...I am going to make a wild guess and say that the FED has forgiven the currency re-exchange in the past. Sort of laundering your debt.

If I understand right...

Bank A holds $10 in debt that Gov. B owes it.
Gov. B has Euros, so to pay Bank A - Gov. B goes to the Fed and exchanges currency and then pays Bank A.
But Gov. B still owes the FED dollars to buy back their Euro...so the dollar debt transfered to the FED.

The counterparty for the Fed is the ECB. The risk is with the ECB. The risk to the Fed is that the ECB cannot pay it back. However, that is extremely unlikely because if the ECB becomes insolvent, by law and charter, it is recapitalized by the member nations.

The ECB will supply dollars swapped to them by the Fed to the European bank. The bank will then repay it's dollar obligations. Often times, that is a US bank. But even if it is not, the ECB has to buy back dollars and repay the Fed at cost plus interest. Thus, the risk is with the ECB, not the Fed.

In this transaction, debt does not change hands between the Fed and the ECB.

So in short...they exponentially spent more than they took in...and now they need to beef up the Euro to keep it from imploding by mixing in a more solid currency.

Well, kind of. It's not about supporting the euro per se. It's about meeting liquidity needs in the funding markets. Think of it as there aren't enough physical dollars in the world to meet the demand for dollars. When banks and businesses get scared, they start calling back their loans. If their loans are in dollars, they will want to be repaid in dollars. So there is a demand for dollars. To meet the demand, the Fed supplies dollars into the market, in this case via a currency swap. When people get less scared, the demand for dollars will fall, and the ECB will pay back the Fed the dollars it swapped with the Fed.

 

[Toro]

The counterparty for the Fed is the ECB. The risk is with the ECB. The risk to the Fed is that the ECB cannot pay it back. However, that is extremely unlikely because if the ECB becomes insolvent, by law and charter, it is recapitalized by the member nations.

The ECB will supply dollars swapped to them by the Fed to the European bank. The bank will then repay it's dollar obligations. Often times, that is a US bank. But even if it is not, the ECB has to buy back dollars and repay the Fed at cost plus interest. Thus, the risk is with the ECB, not the Fed.

In this transaction, debt does not change hands between the Fed and the ECB.

So in short...they exponentially spent more than they took in...and now they need to beef up the Euro to keep it from imploding by mixing in a more solid currency.

This is my question also, they spent more than they took in, and then they continue to amass
debt by borrowing from the U.S. Fed Reserv Bank multiple times, aren't they just compunding their debt?, and then they try to wright off the debt that they do owe.
Isn't this hurting the value of the U.S. dollar also.? They are using the U.S. dollar to prop up
their insolvent Euro at th expense of the United States.!?

The euro isn't insolvent. A few countries who use the euro will default but the euro is not insolvent.