AlwaysCurious
Contributor
@randallg99:
Maybe I misinterpreted your statement, so I try to clarify: At any given time, the value of any currency is rated relatively to all other currencies. The actual exchange rates represent an equilibrium that permanently levels out. But this is not constant over time, especially if you talk about "the cumulative value" which I interpreted as "the sum of the individual intrinsic values" of the currencies. And the intrinsic values do change over time to a great extend. That's why I objected against your statement above.
Now, the intrinsic value of a currency is determined by several factors including the money supply. If this supply is massively increased, I cannot help but think that the value will drop if demand doesn't grow as well. However the exchange rate of the US$ is rated against the intrinsic value of all other currencies, that may have the same economic problems right now. So the only way for the dollar to rise relatively to the EUR is when the intrinsic value of the EUR falls even faster. Of course I cannot foresee the future, but I rate it as a good sign for the EUR that contrary to the FED the ECB is not at a zero interest rates policy, yet. This is a nice read regarding this topic: ECB to Enter ZIRP?
No bank in Germany has been nationalized. At least none that I am aware of. There has been an increase of governmental control for Commerzbank and several Landesbanken, however only the first is a private one and it is intended to be a limited action for two years at max.
[Edit: Darn, forgot about Hypo Real Estate, but well...]
The Landesbanken are public institutes anyway. Moreover the governmental influence upon the bank sector was always quite high even before the crisis - around 45% according to Wikipedia. So the recent actions won't change that much. In France the banking sector is less affected than in Germany, don't know about England. Sure Iceland and Hungary are nearly bankrupt, but that won't affect the Euro zone that much.
However, you are right about the bank's leverage, that's why I don't invest in this sector right now. Let's see how this plays out...
Maybe I misinterpreted your statement, so I try to clarify: At any given time, the value of any currency is rated relatively to all other currencies. The actual exchange rates represent an equilibrium that permanently levels out. But this is not constant over time, especially if you talk about "the cumulative value" which I interpreted as "the sum of the individual intrinsic values" of the currencies. And the intrinsic values do change over time to a great extend. That's why I objected against your statement above.
Now, the intrinsic value of a currency is determined by several factors including the money supply. If this supply is massively increased, I cannot help but think that the value will drop if demand doesn't grow as well. However the exchange rate of the US$ is rated against the intrinsic value of all other currencies, that may have the same economic problems right now. So the only way for the dollar to rise relatively to the EUR is when the intrinsic value of the EUR falls even faster. Of course I cannot foresee the future, but I rate it as a good sign for the EUR that contrary to the FED the ECB is not at a zero interest rates policy, yet. This is a nice read regarding this topic: ECB to Enter ZIRP?
No bank in Germany has been nationalized. At least none that I am aware of. There has been an increase of governmental control for Commerzbank and several Landesbanken, however only the first is a private one and it is intended to be a limited action for two years at max.
[Edit: Darn, forgot about Hypo Real Estate, but well...]
The Landesbanken are public institutes anyway. Moreover the governmental influence upon the bank sector was always quite high even before the crisis - around 45% according to Wikipedia. So the recent actions won't change that much. In France the banking sector is less affected than in Germany, don't know about England. Sure Iceland and Hungary are nearly bankrupt, but that won't affect the Euro zone that much.
However, you are right about the bank's leverage, that's why I don't invest in this sector right now. Let's see how this plays out...
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