http://finance.yahoo.com/news/euro-hits-12-low-parity-dollar-looms-123434508--finance.html
In this article on finance and the Euro, it describes how for the first time in 13 years the Euro is dropping and possible could be in parity with the U.S. dollar. As of last Friday the euro is at its lowest price since 2003, it was bought at $1.085. The affects of this make traveling to Europe less expensive and also have boosted tourism in Europe, especially Greece. Greek tour companies have already reported more interest from U.S. travelers. Companies who are based in Europe stand to benefit, while those in the US will see a decrease in profits from European buyers. The euro has decreased in value between the dollar because difference of performances. The European Union has diluted the euro by its stimulus program and the U.S. has decided to end theirs. When the dollar will reach the same ratio depends on market fluctuations.
The European Central Bank implemented policies to help reinstall a money making stimulus while the Federal Reserve reacts by rising interest rates. The global economy is so interconnected that each country feels an effect good or bad. The interdependence of each actor whether they are states, corporations, or consumers are all affected by outcomes of the globalized economy and world. Political polices are ensued to equalize the certain events by different countries. Additionally, is it possible that the Euro shows that globalization is flattening the market and equalizing it for powerful countries by showing a parity between the dollar?
I don't think the decreasing value of the Euro, relative to the US dollar, is due to globalization. The Fed has slowed the rate at which new money is printed under Janet Yellen, and the US GDP increased by 2.4% last year. When compared to the 0.1% increase in GDP of the EU last year, the value of the dollar should increase relative to the Euro because the value of what it represents has also increased (relative to European goods)
ReplyDeleteNoah is mostly right, though the ability to float currencies and the manner in which they move is certainly due to globalization. So while any particular move may not, the entire system is globalized and economic and financial shocks reverberate.
ReplyDeleteThink of it as similar to the relationship between climate change and larger storms. As far as I know our current best science tells us that climate change will create more favorable conditions for hurricanes and other extreme weather events. However, it is virtually impossible for us to say that any particular storm was caused by climate change. It is too structural for that.
I think that this post definitely supports the argument that an interdependent economy means that fiscal policy changes in states are felt universally. It will be interesting to observe how the decreasing value of the Euro relative to the US dollar influences the tourism and trade sectors.
ReplyDeleteI agree with Noah. The article states that "the rise in the currency movements are mainly driven by the actions of central banks. While the European Central Bank has slashed interest rates and launched a massive money-creating stimulus, effectively diluting the value of the euro, the U.S. Federal Reserve is doing the opposite". So it does not have much to do with Globalization and more so to do with the economic policies that the respective countries are making.
ReplyDeleteI think that Noah was right in stating that the decreasing value, relative to the U.S dollar is not due to globalization. There are many economic policies and fiscal changes occurring that we cannot come to the conclusion that it is due to globalization.
ReplyDeleteNoah , Grace, and Professor Shirk your points is very accurate. I guess I was looking more into the affects of the interdependent relationships that all of the policies have in relation to one another. Also more agreeing with Sarah statement on how policy changes are felt universally.
ReplyDeleteI agree with Noah, Grace and Prof. Shirk as well however I do think that it is very a very interesting point that Riannon brings up initially in saying that it does seem that the US could be influencing it. In the future it could be that states will be so interconnected that the US could potentially affect the EU in such a massive way.
ReplyDeleteMichael I also thought that point was interesting. As professor shirk mentions, the manner and way states move currency is affected by globalization. A countries actions can affect any state in the globalized economy and definitely have implications for the future. Currently I think we do see that the interconnectedness in the world already has shown how the US can affect the EU in a massive way. But to what extent the US affects the EU in the future could be an interesting and a scary thought.
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