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I want your... Euros
by Thanos Kalamidas
2007-11-07 10:25:06
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What does it mean when a fashion model refuses to be paid in US dollar but insists on being paid in Euros emphasizing that the US dollar is not a strong currency? To many probably nothing, but to bankers it raises a most likely huge, gigantic question mark. The Brazilian supermodel Gisele Bundchen has been for sometime avoiding US currency payments because of uncertainty over its strength.

Please put aside the usual stereotypes and think that women and men that do this job have a very limited professional life and they must do most in these time limits. They must make enough to last them a life time in a life style they are used to and that means a lot of money. This certain model supposedly earned from January to June this year 30m US dollars - a lot of money for six months.

As I mentioned before try to escape the usual stereotypes, all these men and women at least have the brains to be surrounded by men and women who can invest their money and multiply them. They are huge financial organizations with one product. And when these organizations abandon the US dollar, the currency that dominated international finance the last century, then this is …bad news for the bankers. Worst of all, it is another sign of the long war between Europe and the US.

Five years ago when the Euro was in its infancy everybody was hoping one dollar would soon equal one Euro, and there were many reasons to hope that. First of all, commerce stability, an easy exchange between the two continents with a strong Euro but a dollar that wouldn’t lose face and still be in control. Five years later the dollar definitely become weaker to the Euro and is gradually losing face, so what Ms Gisele Bundchen did is just the tip of the iceberg.

Japanese and Chinese companies have started turning to the Euro over the last two years, while Africa uses the Euro even in the smallest transactions. There are African countries that use the Euro as their official currency and the only thing that turned positive for the US was the increasing number of tourists. Of course that was until the restrictions with the visas due to terrorist fears became harder and made people turn to other destinations, especially in Europe. You see the expansion to the east helped Europe regain loses in tourism, since East European countries soon became a favourite cheap holiday destination.

What’s next? I’m not a financial analyst to know but if Beckham starts asking for his payment in pounds or Euros I will start to really worry. What happened some months ago with the housing loans in the USA, the collapse of major companies and the warnings of the federal bank then the puzzle of the American economy looks very, very dark and let's hope that other than returning the boys from Iraq the Democrats have some kind of plan for the economy because this war will become the nemesis of the American economics.

Oddly, at the same time, on the other side the collapsed Russian economy seems to thrive over the last few years with a constantly raising growth figures.

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Emanuel Paparella2007-11-07 13:06:53
It is however a mixed picture no matter which side of the Atlantic one looks at it. From what I read in the papers, due to a weaker dollar US corporations have substantially increased their exports and earnings while the German economy, the motor of the EU economy, went into a recession in 2004 partly due to the strong euro making European exports expensive. On a more personal level, now I need not go to Italy so often to see my Italian cousins; they come here, while I opt to go to the Grand Canyon or New York which had been on the back-burner.
Kissinger used to ask: which telephone number do I use when I call the EU? I suppose he has his answer now: that of the EU Central Bank. In Renaissance Florence the florin was a strong currency and financing several European royalties besides the economic life of the city. However, without the likes of Da Vinci, Dante, Michelangelo, the humanists, culturally speaking Florence would still be today a back-water little town in central Italy and would be remembered solely for having been founded by the ancient Romans. Food for thought.

Emanuel Paparella2007-11-07 14:55:14
P.S. A brief follow-up: the florin was so influential in the Renaissance that it was imitated in both Germany and England. Edward III introduced it in 1343. It did not reappear in the English coinage till 1849 when silver coins with the name florin were struck at a value of one-tenth of a pound.

What is intriguing about this particular issue is that the original inscription of the florin “Dei gratia” (by the grace of God) was omitted on this coin and it was therefore referred as the “Godless” florin. One wonders: had the economic masterminds of England had finally grasped that one cannot serve two masters at the same time, i.e., God and Mammon? Or were they pre-announcing Nietzsche’s madman’s shout: God is dead? In any case, in florin they fully trusted. Nevertheless, the Empire where the sun never set effectively ended with the end of World War II. Sic transeat gloria mundi!

Thanos2007-11-07 15:38:44
It is true that US exports increased but even that slowed down lately.

Eero Nevalainen2007-11-08 02:10:13
I am becoming almost convinced that there is an intention to make the dollar toilet paper, and the banking crisis that is going to be caused by the massive still-hidden losses in exotic financial instruments held by major Wall Street banks is just going to end up being bailed out by the US taxpayer. Great way to bankrupt government, which seems to be the Republicans' goal.

The Russian economy on the other hand is buoyed by commodities prices, and the simple fact that when you're starting from zero, it's easy to grow 500% :)

Emanuel Paparella2007-11-08 09:52:53
This below from the site of the EU Commission:

"The EU and the USA are each other’s main trading partners (taking goods and services together) and account for the largest bilateral trade relationship in the world: together, they account for almost 40 % of world trade. Every day, about EUR 1.7 billion of transatlantic trade (in goods and services) takes place. The transatlantic relationship defines the shape of the global economy as a whole as either the EU or the USA is also the largest trade and investment partner for almost all other countries. The huge amount of bilateral trade and investment illustrates the high degree of interdependence of the two economies. Close to a quarter of all US–EU trade consists of transactions within firms based on their investments on either side of the Atlantic. Our mutual investment stocks add up to EUR 1.5 trillion, generating employment for about 12 million to 14 million workers."

Assuming that we can trust the veracity of the above statement, it appears that on an economic level the interdependence is total. One or the other economies doing badly is not good news for either one. In any case, the real alarming problems of the two trading partners lie in the field of cultural understandings and misunderstandings. Unless those are examined and dealt with no central bank on either side will get the chestnut out of the fire.

Thanos2007-11-08 10:36:06
True and unfortunately the 'understanding' distance has become deeper the last few years.

Emanuel Paparella2007-11-08 22:07:14
And need desperately to be analyzed beyond ahallow sloganz such as "Europeans from Venus, Americans from beyond the stars."

Sand2007-11-09 05:59:26
The latest move of the Chinese out of the dollar and into the euro puts further grease under the slipping US economy. The steady build up of America's Frankenstein monster in China leaves the USA with very little concrete product to sell so the dollar represents very little substance. The product "American freedom" does not seem to be attracting many consumers in Iraq and Afghanistan. And it's price tag is extremely high.

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