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Higher prices?

post #1 of 30
Thread Starter 
I don't know if this belongs here, but since the exchange rate of the euro vs. the dollar determines our buying power I decided to put this here. I was reading that some European finance ministers in Luxemborg were endorsing a strong euro. It turns out oil is denominated worldwide in dollars, so that a stronger euro versus the dollar could effectively mute the effects of soaring energy costs for Europeans. So, it sounds like the dollar will continue to the deapreciation we've suffered since 2002, which is why all those european goods are so expensive. I don't work in Wall Street, but it seems like this trend will continue.
post #2 of 30
The reason that the dollar is weakening against the euro has to do with our monetary policy, the US is weakening the dollar on purpose so that US exports are relatively cheaper, it doesn't have anything to do with the oil market, and has nothing to do with the European countries, as a stronger currency reduces their export market, to their detriment. As US interest rates rise, we will have to allow the dollar to return to its natural value (approximately $1 = E1, or else we will face the potential of inflation. Also keep in mind that European gasoline prices are several times what they are in the US anyways, they aren't as sensitive to oil prices as the US because less people drive and it isn't as serious an issue.
post #3 of 30
Originally posted by drizzt3117:
Quote:
.... Also keep in mind that European gasoline prices are several times what they are in the US anyways, they aren't as sensitive to oil prices as the US because less people drive and it isn't as serious an issue.
HUH??? Tell that to the people here. Yes, less people drive than in the States, but the number of car owners is on the increase. And gas prices not only affect car owners, prices of good increase due to higher transportation costs, and other products that use oil products also increase like plastics. That is madness saying that we are unaffected.
post #4 of 30
Another thing to keep in mind is that rising oilprices (in dollars) and a falling dollar are, in some ways, just two different aspects of the same phenomenon. How do you tell the difference between the effects of falling dollar and rising oil prices (in dollars) ? There is no such thing as the absolute value of the dollar - it has to be measured against other currencies, that them seleves fluctuate. Record oil prices today are a product of a weak dollar and high oilprice. Measured against the Euro, I suspect the oil has often been more expensive but that is never mentioned in the news. Bjorn, the armchair economist. Edited for incrimentally better spelling...
post #5 of 30
I wasn't saying that Europeans are unaffected by higher gas prices, but the gas prices in the EU are much higher than those in the US and always have been, because the US government heavily subsidizes gas prices here. Gas prices are far more important in the US than in the EU, the outcome of this election could very well be determined by the price people pay at the pump... Certainly the number of car owners in the EU are rising but especially considering the entry of the new states, it is substantially lower than that in the US. currently the US averages 2.47 cars per household when the EU (prior to new entrants) was at about 1.1... Also, if you did a study on miles driven per person in the EU vs US, you would see a tremendous difference as well. While transportation costs are an issue, the EU has a much more well-established rail infrastructure for transport, while the majority of goods in the US are transported interstate via trucks. The main issue is attitudinal, people in the US are much more attached to their vehicles than those in the EU (generalization, but IMO true) and vote accordingly.
post #6 of 30
Quote:
The reason that the dollar is weakening against the euro has to do with our monetary policy, the US is weakening the dollar on purpose so that US exports are relatively cheaper, it doesn't have anything to do with the oil market, and has nothing to do with the European countries, as a stronger currency reduces their export market, to their detriment.  As US interest rates rise, we will have to allow the dollar to return to its natural value (approximately $1 = E1, or else we will face the potential of inflation. Also keep in mind that European gasoline prices are several times what they are in the US anyways, they aren't as sensitive to oil prices as the US because less people drive and it isn't as serious an issue.
Unfortunately many people here didn't listen to you, this morning I was blocked a couple of hours in a traffic jam out of Milan ...
post #7 of 30
try driving in LA... or even worse, in SE Asia.... When I commuted to LA from orange county, 2 hours was a FAST commute in the morning
post #8 of 30
I have made 26 trips to Europe and can now, to some extent, can see the USA through European eyes. They think that we are obsessed with low gasoline prices and that we mainly go to war these days to protect our oil supplies from the Middle East. However, I think most Americans take low prices and abundant oil supplies for granted. In truth, $2 a gallon for gas seems very low to Europeans, and should also seem low to us, compared to greater price increases on most everthing else for the past several decades. When Europeans visit the USA, they cannot help but take note of our cheap gasoline, our huge vehicles (mostly SUVs these days), our lack of trains (and over-dependence on vehiclular and airline travel), our spread-out suburbs, our dying inner cities, the fact that no one walks except in NYC and a few other places, and our housing construction (larger than theirs, constructed with wood framing, sheet rock and a wood or brick veneer, versus their cinder block construction with heavy tile roofs) which they assume to be less energy efficient. It must be apparent to them that people who live the way Americans do have to be obsessed with keeping oil prices low. The sinking dollar is deliberate policy, to lower prices of USA goods abroad and thereby increase sales. It raises prices of European goods here and should hurt their sales, but it has not done much.
post #9 of 30
jerrysfriend, I think to be european but I don't think like that.
post #10 of 30
Originally posted by drizzt3117:
Quote:
I wasn't saying that Europeans are unaffected by higher gas prices, but the gas prices in the EU are much higher than those in the US and always have been, because the US government heavily subsidizes gas prices here.
THe main reason why gas prices are so high in Europe is the taxes on it. If we did not have such high tax, it would be closer in prices to the States.
Quote:
Also, if you did a study on miles driven per person in the EU vs US, you would see a tremendous difference as well. While transportation costs are an issue, the EU has a much more well-established rail infrastructure for transport, while the majority of goods in the US are transported interstate via trucks.
Majority of Europeans who have a car, travel by car to holiday destinations in other countries. In the U.S, you fly more. Are you sure the distance travelled is greater? Your stats may be looking at the average of all people, not the average of all car owners. Remember that electric trains run on electricity generated by oil buring powerplants. Believe me, the increases have been aggravating people, and they are as upset as the Americans.
post #11 of 30
Quote:
In the U.S, you fly more.  Are you sure the distance travelled is greater?
In the Northeast (roughly from Washington to Boston) the train is popular, because the distances are shorter.  Washington to New York is less than 3 hours on the fastest train.  To get from New York to Chicago by train (for example) think takes almost two days.  Flying takes less than three hours. California could and should have better train service.  But it doesn't.  There is no train from San Francisco to Los Angeles.  You have to take a bus accross the bay, and then take a torturously long (14+ hours) train ride to LA.  Plus, Amtrak runs on the tracks of the all-powerful Southern Pacific Railroad, and the frieight trains get priority.  Once I stopped for nearly two hours near Santa Barbara waiting for the rails to clear.  Flying, on the other hand takes a little more than one hour. Other distances in the US tend to be too long for the train.
post #12 of 30
Yeah, the train system really only works along the northeast corridor. I use the train between DC and NYC (major stops include Baltimore and Philly) but fly everywhere else. The train time between DC and NYC is less then to approximately the same as the flight time, especially when you factor in possible flight delays and security lines. Whereas with a train I just go to the station, use the quiktrak to buy a ticket on the spot and hop onto the next train. I don't own a car, so gas prices have very little effect on my day to day life.
post #13 of 30
T4, the majority of people in the US commute to/from work, and the average car in the US is driven about 1000-1500 miles per month. Typically, people here are willing to commute much farther via car than people in Europe, here in Southern California, there are people that drive 100 miles each day to go to work, and Southern California is bigger than the entire Benelux area combined.
post #14 of 30
Thread Starter 
If we're allowing the dollar's value to slide to help our exports and our trade defecits, it seems that this would prove to be ineffective as long as the Chinese peg the yuan to the American dollar. So, no matter how low the dollar drops, this wouldn't affect our trade inbalance with the Chinese. Although, this might be better for everybody if China continues its exponential growth. And, if we continued to let the dollar drop, won't this ultimately lead to higher interest rates?
post #15 of 30
Higher interest rates are coming no matter what because they are artificially low, and actually it's better for us to have higher interest rates because it means down the road we can stimulate the economy by lowering them, otherwise if the economy was sluggish with close to zero interest rates, we would be up sht creek w/o a paddle. As for China, they will need to allow the yuan to float soon, as keeping it artificially low is going to cause inflation soon. The reason it hasn't caused inflation yet is because the Chinese national bank is buying dollars (US Govt bonds) like it is out of style, but if their GDP growth slows at all, they are f*cked. Allowing the standard of living to deteriorate in China is the quickest way to cause a revolution, people have ignored the communist rulers for now because they are quasi-capitalist but start having double digit unemployment and a lower standard of living and hyper inflation, and you will see civil war. BTW, as for your comment in the other board about Chinese military spending, a huge percentage of their GDP goes towards buying US govt bonds, in order to prevent inflation at home. The reasons for this are fairly complex economically, but I can walk you through it if you are interested.
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