Euro: Safer than the U.S. Dollar?

[Hans Olo]

Quote:Finally, note that we believe an exit of, say, Germany, from the Eurozone is not in the cards. A ‘new Deutsche Mark’ would kill Germany’s export-driven economy.

How so? If the new DM was a stronger currency than the Euro, then that would actually not kill but boost Germany's export driven economy. A weak currency is bad for the economy, be it export driven or not. I believe this to be true based on these reasons:

A strong currency reduces cost of imports, and many goods that are exported are made from things that are being imported first.

Imports are paid for with exports. When imports become cheaper for the importeur, because of a country's strong currency, that means less money needs to be spent on imports, that means more money is available to consumers who then buy goods that are made in the country, it can be saved or loaned out.

A strong currency helps reduce labor cost while maintaining purchasing power over time. It's the opposite effect of what a weak, greatly inflated currency like the Dollar has.

A strong currency encourages an economy of savings and production instead of borrowing and consumption because interest rates would be raised and savings would not diminish but strengthen as time goes by.

While a weak currency makes exported goods cheaper to buy for importers in other countries, the exporteur's real profits shrink. So how is that 'good for exports'? You export more but get less. The profit gains are made overseas.

Most people don't realize that the argument, a strong currency hurts exports, is a fallacy. A strong currency is bad for politicians who want to print money to give away to interest groups. A weak currency is a too seductive policy for a politican to withstand, but until the people of Germany realize this, we get to keep the Euro, and keep it weak, "to keep exports alive".

It's time for a German Ron Paul. Then again, the German media would probably character assassinate the shit out of that guy.