We have witnessed history again:
On July 13, the euro fell below 1 to 1 against the dollar for the first time since December 2002.
This is not just a change in the euro itself – the euro, which was born after long discussions and planning, not only has monetary functions, but also bears the long-cherished wishes of European countries:
Lead Europe towards political and economic integration through monetary integration.
Euro supporters believe that the euro-led European integration process will reduce the risk of wars and crises, allowing European countries to resolve frictions and problems through peaceful means as much as possible.
Today, however, what we see in Europe is precisely wars and crises. The driving forces behind them are blocking European “integration” in the exact opposite way, and making the euro farther and farther away from its mission.
This pusher is the United States.
In the more than 20 years since the birth of the euro, the United States has never been absent at some key points affecting the exchange rate of the euro against the dollar .
Now, the euro-dollar exchange rate has fallen below 1 to 1. At this historical moment, it is the exchange rate that has fallen, and the process of European integration is what has been broken.
This is the trend chart of the exchange rate of the euro against the dollar this year.
It can be seen that over the past 6 months, the exchange rate of the euro against the US dollar has shown a downward trend as a whole. Since the United States entered the cycle of raising interest rates, it has formed a siphon effect on the world. The currencies of various countries have generally depreciated against the US dollar, and the euro is no exception.
But it is clear that the euro has experienced several sharp falls .
The time of the first sharp decline was between February 14 and March 8—before and after the escalation of the Russian-Ukrainian conflict. The initiator and biggest driver of the Russia-Ukraine conflict is the United States.
More than a month after the escalation of the Russian-Ukrainian conflict, more than $27 billion of funds flowed out of the European stock fund market. At the same time, just in the first three weeks after the escalation of the Russian-Ukrainian conflict, more than $40 billion in funds flowed into the United States.
As a market bellwether, these capital flows have spread panic in European markets.
Subsequently, the United States targeted the key points of European countries and resorted to a trump card – provoking European countries to sanction Russian energy. The sanctions-induced energy crisis has done structural damage to the European economy , hitting the euro again.
The damage is most pronounced in Germany.
According to the latest data released by the German Federal Statistics Office, in May this year, Germany experienced its first trade deficit in more than 30 years, amounting to 1 billion euros.
You know, as a traditional industrial power, Germany has always maintained a trade surplus by relying on industrial exports such as automobiles and machine tools. The reason for the deficit is that the energy price has risen sharply due to the energy crisis – for an energy importing country like Germany, its import cost has greatly increased, causing its import value to be higher than its export value.
The rise in export commodity prices cannot keep up with the rise in energy prices, which is bound to compress the profits of German foreign trade companies. Nearly one-third of the employed people in Germany are engaged in export-related work-the pressure that Germany is going to bear can be imagined.
As a major economic power in the euro area, the German economy is also the vane of the euro area economy. Germany’s predicament has undoubtedly cast a shadow over the European economy.
The energy crisis is still consuming the future of the European economy.
Dong Yifan, an expert on European economics at the China Institute of Contemporary International Relations, told Mr. Tan that the EU originally wanted to promote digital transformation and green transformation, but now, these financial resources should be tilted towards energy subsidies and other aspects, which will give the European economy a year or two or more in the future. competitiveness is overshadowed.
The euro, which has suffered multiple blows, faces a more thorny problem:
The latest data showed that the U.S. consumer price index (CPI) rose by 9.1% year-on-year in June, the highest increase in nearly 41 years. The market sees a much more than 75 basis point chance of a 100 basis point Fed rate hike.
What about the euro? This is another problem for the ECB.
Without raising interest rates, Europe could only watch assets flow into the United States, and the euro exchange rate fell further. At the same time, inflation in the euro zone will not be eased.
What if interest rates are raised?
Higher interest rates will put more pressure on the already weak European economy.
Yu Xiang, a senior researcher at the China Construction Bank Research Institute, told Tan Zhu that the stubborn problem of the European economy is that the economy itself lacks endogenous growth momentum, is highly dependent on external energy imports, and has long-term separation of fiscal and monetary policies. These problems are further exacerbated in the context of the current high global inflation and the conflict between Russia and Ukraine. In the future, the European economy will face the pressure of sluggish growth and rapid price rises.
The conditions for raising interest rates in Europe are not as mature as in the United States, and a faster rate hike will hurt the European economy.
What ‘s more serious is that raising interest rates will increase the borrowing costs of euro area countries , which is undoubtedly a catastrophic blow to some highly indebted countries.
Italian Prime Minister Mario Draghi announced that he would resign. The data shows that the proportion of Italy’s debt to GDP exceeds 150%, and raising interest rates will undoubtedly increase the risk of its debt default.
Sadly, Italian Prime Minister Draghi served as president of the European Central Bank 10 years ago. In the face of the European debt crisis that year, Draghi said that he must defend the euro at all costs. Now, he chose to resign and leave. And the debt crisis may make a comeback in Europe.
Inflation, energy crisis, exchange rate drop, all kinds of factors are intertwined, and the European economic outlook is becoming more and more uncertain. This pessimism started to spread further when the euro fell below parity against the dollar. Now, the US media has begun to hype the ” euro recession theory .”
The United States does not know what impact the United States will have on the world when it enters the rate hike cycle. Under such circumstances, the United States is still provoking war in Europe and taking the opportunity to hit the European economy, which undoubtedly pushes the euro to a dead end.
Why can’t the United States see the euro as a good thing?
The answer is simple, before the euro, the dollar was the dominant one. The United States, on the other hand, takes advantage of the special status of the dollar in the international system again and again to harvest the world.
The euro broke this situation. Since its birth, it has automatically become the second largest currency in the world. It provides another possibility for the international monetary and financial system – the possibility of choosing currencies other than the US dollar .
In the face of challengers, the United States strongly suppressed and even provoked a hot war in Europe. This is not the first time the United States has done this.
This is the trend chart of the exchange rate of the euro against the US dollar since its inception.
It can be seen that the exchange rate of the euro, which has just been born, against the US dollar has experienced a cliff-like decline.
At that time, the total GDP of the euro area countries was higher than that of the United States, and there was no reason for the euro to plummet all the way. It’s all about America.
On March 24, 1999, under the promotion of the United States, NATO bypassed the UN Security Council and launched an air strike against the Yugoslavia in the name of “avoiding a humanitarian disaster”.
The market is the most sensitive, and a conflict, which is enough to change the capital market situation, will also trigger exchange rate fluctuations.
After a war, the euro fell sharply against the dollar, and has been in a trough ever since. Until July 2002, the exchange rate of the euro against the dollar returned to the 1 to 1 mark. The euro has also begun to gain a firm foothold in the international market.
In the same year, the chief market analyst of the Organization of the Petroleum Exporting Countries also said that the European Union purchased more oil than the United States, and the balance of payments was more balanced, suggesting that the Organization of the Petroleum Exporting Countries settle oil transactions in euros .
In addition, Russia, Indonesia, Japan, South Korea and other countries have also made plans to increase the proportion of euro reserves. The euro is getting more and more attention, and its exchange rate against the dollar is also rising.
Yu Xiang told Tan Zhu that the daily fluctuation of the exchange rate is determined by the market mechanism, but the deeper determinants are the comprehensive national strength, development prospects and macroeconomic control capabilities. The outside world pays attention to the trend of the euro, but pays more attention to the strategic autonomy and macroeconomic trends of the EU and the euro zone.
The rise of the euro against the dollar shows that people are more optimistic about euro zone countries than the United States. This is naturally not what the United States wants to see. This time, Wall Street’s capital has become a tool for the United States to enter the market.
In 2001, Greece joined the euro zone. At that time, according to the EU’s treaty, countries in the euro zone must meet two basic conditions – the country’s budget deficit should not exceed 3% of GDP; the debt ratio should not exceed 60% of GDP.
These two hard conditions, Greece does not meet, at this time, the United States Goldman Sachs said it can help Greece solve the problem. But the way Goldman Sachs used it was to make false accounts. In the process, Goldman Sachs also received 300 million euros in facilitation fees.
In 2009, under the impact of the financial crisis, Greece’s debt problem could no longer be concealed, and other countries in the euro area were also implicated, and the European debt crisis broke out.
When the debt crisis spread in Europe, Goldman Sachs also joined Wall Street to profit by shorting the euro.
After such a “sniper” by Wall Street, the exchange rate of the euro against the dollar fell off a cliff. In the next few years, the exchange rate of the euro against the dollar will also rise in stages, but the scene of that year will never be repeated. This situation has continued to this day. Under the impact of the conflict between Russia and Ukraine, the exchange rate of the euro against the dollar even fell below parity.
Looking back on the history of the euro, since the birth of the euro, whenever the development of the euro is improving, the United States will always attack the euro. Whether using financial means or directly provoking a hot war, the purpose of the United States is to undermine European unity and weaken European integration.
This is the game behind the changes in the exchange rate of the euro against the dollar. Europeans should understand.
Otherwise, it will not only be a tragedy for the euro, but also a tragedy for Europe.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/1-eur-1-usd-is-not-just-the-exchange-rate/
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