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Global Currency Crisis

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great topic rvr. i hope my friend hari chips in :)

here is my theory. i think countries like greece, had no business joining the euro zone.

they historically had not the discipline for managing their fiscal affairs, which germany is famous, and france can 'do by. france & germany have have a huge industrial base and population to support its industries.

greece has neither. greece lives on tourism, agricultural export and fishing. not good commodities for a robust high priced currency.

in the time of drachmas, greece was a cheap country for the tourists to visit. with the coming of euro, what was 1 cheap drachme, overnight got converted to 1 expensive euro. literally.

nowadays greece is one of the most expensive countries to visit, on par with western europe.

also greece corruption is much like ours.

Greek Wealth Is Everywhere but Tax Forms - NYTimes.com

rich greeks do not pay taxes. they have a bloated bureaucracy which does nothing (10% of the work force). generous government pensions.

well, i think greece should default payments, get out of euro, return to drachma and straighten its fiscal affairs. anything else is a band aid and increasingly rest of euro throwing money in a bottomless pit.

wait till problems of spain, portugal & italy's payments get due.
 
greece sounds more like 'greasing' palms,which is an Indian Patented art,lol :)

seriously,the rich are getting richer and the poor are getting poorer and the middle getting lost totally,gasp.
 
rvr,

i agree with you. greece, will be followed by spain, portugal and possibly italy.

countries like u.k. must be relieved that they did not contribute to the euro zone, but things are not so clear cut. there is a big debt crisis in the western world.

today there is report that the banks have stopped lending each other money, as each do not know the exposure of the others to the european debt. this is bad news. this is what precipitated the u.s. bank crisis - the absence of trust between banks to do their daily transactions.

should india be worried. i would say yes. we are all connected. yesterday, there was advice from rbi to the exporters who quote in euros - buy the euros now, as the value of euro is expected to fall, and when realized in the next few months, would realize more ruppees, ie more profit.

atleast that is the way i understood it.
 
kunjuppu said:
rvr,

i agree with you. greece, will be followed by spain, portugal and possibly italy.

countries like u.k. must be relieved that they did not contribute to the euro zone, but things are not so clear cut. there is a big debt crisis in the western world.

today there is report that the banks have stopped lending each other money, as each do not know the exposure of the others to the european debt. this is bad news. this is what precipitated the u.s. bank crisis - the absence of trust between banks to do their daily transactions.

should india be worried. i would say yes. we are all connected. yesterday, there was advice from rbi to the exporters who quote in euros - buy the euros now, as the value of euro is expected to fall, and when realized in the next few months, would realize more ruppees, ie more profit.

atleast that is the way i understood it.
Click to expand...

India has to definitely worry since trade with Europe will be affected to a great extent. Global trade will get affected due to the problems in Europe.

The worst part is European Union is trying to retain Greece and is attempting to bail it out. If they throw out Greece out of European Union, at least other countries can insulate themselves from the problems in Greece to a great extent. By attempting to bail out, all the countries including Germany and France are going to be affected.

There is going to be a cyclic effect affecting entire globe.

Global economic recovery will further slow down. India is not export dependent to a large extent and hence will not face the heat like China and Asean countries.

But still Indian recovery will take a beating in the short run.

All the best
 
Sri.Kunjuppu said:-

yesterday, there was advice from rbi to the exporters who quote in euros - buy the euros now, as the value of euro is expected to fall, and when realized in the next few months, would realize more ruppees, ie more profit.
Click to expand...

Greetings. It is slightly confusing to me. If the Euro is expected to fall, would it not be advisable to get rid of the Euros now? If we buy Euro's now, wont we realise less money in the future, if Euro fall and lose its value? I am not too sure!

Cheers!
 
Raghy said:
Sri.Kunjuppu said:-



Greetings. It is slightly confusing to me. If the Euro is expected to fall, would it not be advisable to get rid of the Euros now? If we buy Euro's now, wont we realise less money in the future, if Euro fall and lose its value? I am not too sure!

Cheers!
Click to expand...

i may be wrong but this is the i understand it.

let us say that the indian exporter quotes 1000 euros for his product which in indian ruppees to keep it simple is now 40,000 ruppees. the indian exporter pays his suppliers in ruppees.

3 months from now, when he gets the money for the goods supplies from the european importer, he is going to get 1000 euros. let us say that the euro has fallen by 10%. so the indian exporter will get only 36,000 ruppees. so, he takes a beating.

but if he buys the euros now at a fixed rate for the ruppee, he can lock it with the bank for the current rate. or something like that. i agree this taking short or long, process, is all confusing to the layman.

:(
 
If an exported has quoted in Euro, say 1000 Euros for his goods, and expects to ship goods after one month. He can sell the Euros today on forward trading at Say 58 Rs. per Euro for delivery after one month.

Suppose Euro falls to 55 Rs after one month, without this forward trading he will only 55 Rs instead of 58 Rs as above.

Suppose if the Euro climes to 61 Rs after one month, he stands to lose.

Forex trading business is a high risk, high return business much larger than stock markets.

If Euro collapses then US $ will appreciate.

All the best
 
kunjuppu said:
rvr,

won't he now get 61 ruppees for every euro? how does he stand to lose?

thanks..
Click to expand...

If he sells today using forward trading at the prevailing rate of 58 Rs of his future receipts, he stands to lose if the Euro appreciates to Rs.61. If he has not done forward trading, he would have realised Rs.61

On the contrary if he sells today at Rs.58 per Euro using forward trading and if the Euro falls to 55 Rs, he would have gained.

It is a mind boggling game, some lose, some gain.

All the best
 
there are softwares available to assist decision making for currency trading,today dollar is still the strongest,comparing to euro,but then,american dollar is far more stable than euro,imho.
 
kunjuppu said:
i agree this taking short or long, process, is all confusing to the layman.
Click to expand...

Let me try to explain short and long, no promise it will be any better than others....

Shorting is selling something now that you don't own, but have borrowed. After a lapse of time, you buy the same stuff and pay back the one from whom you borrowed in the first place. This dual transaction of borrowing/selling now, and later buying/pay back, will benefit you if price falls in between, because you are selling when price is high, but buying it after price falls. If you do the reverse, it is long. So, short means you expect the price to fall, and long means you expect the price to go up.

In the case of Euros, shorting it would be like borrowing 1000 Euros now from someone, and sell it right away and receive Rs. 50000, assuming exchange rate is Rs. 50. A month later, suppose that Euro has fallen to Rs. 40. Let us also suppose that with fees and interest you now owe 1100 Euros on the 1000 you originally borrowed.

From the Rs. 50,000 proceeds you got from selling Euros when it was Rs. 50 to one Euro (let us ignore the interest you may have earned on the rupees), you now buy 1100 euros for Rs. 44,000 and pay back your loan. Well, with these two transactions you have made Rs. 50,000 - Rs. 44,000 = Rs. 6,000, with no investment on your part, a handsome return, don't you think?

Take these transactions to billions and billions of dollars and you will see the killing these greedy Wall Street SOBs made shorting mortgage based securities, leaving the poor and middle class holding the bag. This story has been repeated in human history over and over again. What is happening in Greece is only the latest.

Cheers, I think!
 
rvr,

i agree with you 100%. the only folsk who will profit are the banks, who made the mistake of lending cheap money to greece, spain, portugal and ireland.

and ofcourse now the u.s. budget has the biggest $ deficit in the world.

one thing which will ease the pressure, willbe to devalue both the euro and the dolla.
 
kunjuppu said:
..... the only folsk who will profit are the banks, who made the mistake of lending cheap money to greece, spain, portugal and ireland.
Click to expand...

It is always the poor and sometimes the middle class who pay. The so called third world has been a victim for a while now. In the name of development WB and IMF offer loans that go to pay western mega corporations to come in and build infrastructure so that precious mineral resources can be extracted at sweet-heart deals. Local politicians get taken care of sufficiently. More money for the Swiss banks.

When the debt load becomes unbearable and the state is about go bankrupt, in comes the same old usual suspects, WB and IMF, offering more loans on the condition strict austerity measures are imposed on those who did not benefit one single cent.

More debt, more profits for western banks, MNCs, and politicians. The cycle goes on.

Now, for the first time (?) it is happening in the west. It is the big banks and politicians who pushed Greece into Euro zone. It is the big banks that hid the debt load of Greece making the problem much worse. But, it is the common Greek who now suffer the pain.

The cycle continues, this time in Europe.

regards ....
 
the west,especially the leaders of various political parties,confide with religious leaders,and make standard of living comfortable.for one,less people more resources available and harnessed scientifically.todays currency crisis is an artificially inflated one,on paper whereas this crisis is only to deflect the actual problem,which is dormant.only if consumers buy,producers produce,exchanges will take place.china india as emerging markets are changing their lifestyles.even here its only the metros which are speed-pedalling,the villages of both countries,are as laid back,as it has always been.thewest is able to manage to obtain profits,on the back of chinese,indians,....etc by way of technology transfer....this global currency crisis is just a ruse....the rich and powerful created this....make hay while the sun shines..
 
hi folks,
after another 3rd world war....the US economy will revive...like after great depression...the 2nd world war helped US economy a lot....
every world war brings US economy flourish....the war is main criteria
for world econoimy....

regards
tbs
 
rvr said:
if an exported has quoted in euro, say 1000 euros for his goods, and expects to ship goods after one month. He can sell the euros today on forward trading at say 58 rs. Per euro for delivery after one month.

Suppose euro falls to 55 rs after one month, without this forward trading he will only 55 rs instead of 58 rs as above.

Suppose if the euro climes to 61 rs after one month, he stands to lose.

Forex trading business is a high risk, high return business much larger than stock markets.

If euro collapses then us $ will appreciate.

All the best
Click to expand...
rvr sir,
let your words come correct it is good . Expecting usd to get stronger and resulting gold price will come down. Usd linked currencies will appriciate.

Yellow metel gold- price is alarmingly high to reach to the common man even for the minimum required level.

Hope for the best.
 
AnanthaNarayanan said:
rvr sir,
let your words come correct it is good . Expecting usd to get stronger and resulting gold price will come down. Usd linked currencies will appriciate.

Yellow metel gold- price is alarmingly high to reach to the common man even for the minimum required level.

Hope for the best.
Click to expand...

Sri Ananthanarayanan


Globally the investors have lost faith in most of the western currencies. Both US $ and Euro have the same problems.

If at all any worthwhile manufacturing which is taking place in USA, it is nothing but printing of currencies. USA has lost its competitiveness in almost all the traditional products. If at all they can sell, it is mostly defense and nuclear equipments.

Now Euro is also joining USA with indiscipline in countries like Greece, Spain, Portugal, Italy etc. However Germany, France etc are more disciplined members in the Euro currency cartel and are trying to keep the currency up.

Since both the currencies are treated as global currencies, they are able to manage the pressures so far. But it may not last long.

Due to the above, global investors have started investing precious metals such as Gold and Silver abandoning both the currencies. Both the metal prices are rising due to the above phenomena.

I earnestly feel that investing in Gold Bonds is a better option. Exchange traded gold bonds are available in India. Investing in physical gold is not advisable since the gold traders make more money both at the time of buying and selling as compared to the actual investors in Gold.

But things are changing regularly and we don't know when the investors will dump gold and silver also. Once they dump, prices will fall.

Net result, whether it is head or tail, investors are losers.

All the best
 
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