How to explain "Euro collapse - buy dollars" to freaked out relatives

dashboard_hula

"C'mere, think of this as practice for going back to college, go on the internet there and tell me if the Euros going to collapse and should we all put our money into dollars."

That was my aunt the other night. Apparently there's a text message flying around the more middle-aged members of my family tonight urging them all to buy dollars and....I don't know. I presume shove them into the lagging jacket in the hotpress, it's not really thought out.

I kind of went when I heard this but said I'd have a look. One frustrating go at google, boards and wikipedia later, I'm still no clearer.

What happens if the Euro collapses?
Why is dollars the seeming saviour? I thought that currency was just as screwed as the Euro? Why not an Asian currency, or even gold?

I do know of people who've pulled out of State-controlled Irish banks, and have their money in European banks, which are still Euro. I know still others who have gone to British banks and yet more who have a sturdy steel box down under the septic tank. Everything points towards September/October if anythings going to happen at all.

I'm sure my future economics lecturer will be very proud of me. :pac:

I'd appreciate your opinions because I don't really want to go back to her with "You're imagining things" or "Has your mattress any holes?"

ei.sdraob

Its not the euro they should be worried about for now but where their euros (or dollars) are kept

dashboard_hula

How so?

ednwireland

dashboard_hula wrote: »

How so?

US national debt is currently just below 14.5 trillion dollars

which is nearly 100% of US GDP

ei.sdraob

dashboard_hula wrote: »

How so?

Irish bank goes under, Irish govt gives you an IOU

snowstreams

If the euro does collapse, or we are kicked out of the euro. Your best option would be to hold some sort of foreign currency surely?
Sterling would prob be a handy one, but they will prob get hit too.
Most of us know people in Australia, that might be a good currency to invest in?

Nijmegen

Swiss Francs are the currency of choice, by the way. It's seen as the last great currency actually backed by something (all that nazi gold )

And if they're buying dollars or anything else, don't keep them in Irish banks: Even foreign denominated accounts in an Irish bank would be switched to Punts Nua (if it so happens.)

If we default there's a lot to be said for going back to the punt, for competitiveness and to devalue. It's not much more pain than the default itself. If that happens they'll lock our bank accounts and won't open them until the changeover happens and the Punt Nua has depreciated 20, 30, 40%+ against the Euro.

later12

Nijmegen wrote: »

If we default there's a lot to be said for going back to the punt, for competitiveness and to devalue.

No there really isn't.

If we default, then we will already be writing down or extending our obligations, and as for competitiveness, that can be enhanced (further) by lowering our unit labour costs and by rigidly enforcing wage restraint. So the benefits of leaving the euro are not dependent upon leaving the Euro. You can have those benefits whilst retaining the single currency.

On the other hand, the advantages that the Euro brings to us, and the potential advantages under an integrated union, cannot reasonably be won should we be out on our own with an unstable currency on the margins of Europe.

Corsendonk

What about copper? Gold? Silver? Platinum? Art works?

later12

None of them are free from risk - significant risk, at that.

The traditional 'risk free' (pffft) entities have been German Bunds, US treasuries and UK gilts. If anything is perceived to be safe, it is these.

ei.sdraob

later10 wrote: »

None of them are free from risk - significant risk, at that.

The traditional 'risk free' (pffft) entities have been German Bunds, US treasuries and UK gilts. If anything is perceived to be safe, it is these.

Of course there is no such thing as no risk (now someone tell that to the ECB) but Irish banks are nothing but risk and this is reflected in their junk status (and now the country itself)

dashboard_hula

Would Zimbabwe be an example of a currency crashing, or ridiculously high inflation? If so, what is an example in history of a currency going belly up to the point where the citizens of the country used another currency instead?

sink

dashboard_hula wrote: »

Would Zimbabwe be an example of a currency crashing, or ridiculously high inflation? If so, what is an example in history of a currency going belly up to the point where the citizens of the country used another currency instead?

Zimbabwe is quiet a different case. The best modern day example of a country defaulting and devaluing is Argentina.

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)

ei.sdraob

Argentina is very different to just about everywhere else, they came from being the top 5 largest economy at turn of 20 century to being a developing country due to decades of isolationism, protectionism and substitution which led onto attempts to peg against the dollar and then the default. There is even a word coined for this > "peronism"

Ireland on the other hand is one of the most open economies.

later12

dashboard_hula wrote: »

what is an example in history of a currency going belly up to the point where the citizens of the country used another currency instead?

Argentina (2002) would be an example of that.

later12

sink wrote: »

The best modern day example of a country defaulting and devaluing is Argentina.

Define best example?

I would think they are a pretty unrepresentative example, a what-not-to-do case study.

ei.sdraob

later10 wrote: »

Argentina (2002) would be an example of that.

The collapse of the USSR (split up of the 15 republics) and the original rouble would be a much better example, with the US dollar being used for just about everything

crumlinbob

Go up north and open a sterling account in a bank up there. When the new punt comes in and your deposits down here are reduced by 40 - 50% your savings up north will still be worth something.

Scofflaw

crumlinbob wrote: »

Go up north and open a sterling account in a bank up there. When the new punt comes in and your deposits down here are reduced by 40 - 50% your savings up north will still be worth something.

There is only one real certainty in the current situation, which is that as long as the euro continues to exist, a euro is worth a euro. As to whether the euro is likely to stop existing - it seems unlikely on the face of it, because it is being supported, thus far, by a set of governments whose economies total vastly more than the cost of supporting it. Its continued existence, therefore, is a political question - there is no inevitability involved.

cordially,
Scofflaw

n900guy

dashboard_hula wrote: »

"
What happens if the Euro collapses?
Why is dollars the seeming saviour? I thought that currency was just as screwed as the Euro? Why not an Asian currency, or even gold?

There is no crisis because we are in the Euro. In the ECB's eyes, there are zones of high and low risk in the EuroArea, but ultimately, there is one, single giant euro area. Portugal, Greece and Ireland account for a small % of the overall EuroArea. So, it is far more likely that the dollar or pound would collapse (well, even more than it has already - 50-60% for the dollar and 30% for the pound, both compared to the euro) seeing as the periphery of the UK is also screwed (Wales, northern England) and vast swathes of US states are entirely bankrupt (California for example).

Furthermore, fi the Euro did restructure (literally - a core northern europe vs outside), why would Netherlands, Germany, etc., suddenly be holding useless currencies? They have excellent economies, so naturally will have a stable euro currency.

The only people that want the euro to disappear are wall street and city of london, because the EuroArea is one of the biggest economies in the world, and they cannot profit out of it unless it's picked apart. This is why the "crisis" exists in primarily english-speaking newspapers, but you rarely if ever get the anti-euro sky is falling hysteria here in Holland or Germany.

Debtocracy

Precious metals are a safer option relative to U.S., U.K. or German bonds. Be very wary of the first two as if you get paid back, you will be doing so in a rapidly depreciating currency. The Chinese have said that the U.S. is effectively defaulting on its debt obligations through money printing. If feeling very conservative, go for gold as a precious metal. With the entire global financial system (or global Ponzi scheme) on a knife edge, I can’t see how gold will not increase in value in the coming years. If gold is in a bubble, then it’s been going on for the last 4,000 years. Silver is also likely to make huge gains over the next year or two although you’ll have to hold your nerve in a volatile market.

Icepick

Debtocracy wrote: »

Precious metals are a safer option relative to U.S., U.K. or German bonds. Be very wary of the first two as if you get paid back, you will be doing so in a rapidly depreciating currency. The Chinese have said that the U.S. is effectively defaulting on its debt obligations through money printing. If feeling very conservative, go for gold as a precious metal. With the entire global financial system (or global Ponzi scheme) on a knife edge, I can’t see how gold will not increase in value in the coming years. If gold is in a bubble, then it’s been going on for the last 4,000 years. Silver is also likely to make huge gains over the next year or two although you’ll have to hold your nerve in a volatile market.

irishh_bob

dashboard_hula wrote: »

"C'mere, think of this as practice for going back to college, go on the internet there and tell me if the Euros going to collapse and should we all put our money into dollars."

That was my aunt the other night. Apparently there's a text message flying around the more middle-aged members of my family tonight urging them all to buy dollars and....I don't know. I presume shove them into the lagging jacket in the hotpress, it's not really thought out.

I kind of went when I heard this but said I'd have a look. One frustrating go at google, boards and wikipedia later, I'm still no clearer.

What happens if the Euro collapses?
Why is dollars the seeming saviour? I thought that currency was just as screwed as the Euro? Why not an Asian currency, or even gold?

I do know of people who've pulled out of State-controlled Irish banks, and have their money in European banks, which are still Euro. I know still others who have gone to British banks and yet more who have a sturdy steel box down under the septic tank. Everything points towards September/October if anythings going to happen at all.

I'm sure my future economics lecturer will be very proud of me. :pac:

I'd appreciate your opinions because I don't really want to go back to her with "You're imagining things" or "Has your mattress any holes?"

the american dollar is on a permanent downward trojectory , get out of the euro if you wish but dont get it into the american dollar , despite all the volatility in the eurozone this past week , the american dollar has seen relatiivley modest gains against the single currency

irishh_bob

Scofflaw wrote: »

There is only one real certainty in the current situation, which is that as long as the euro continues to exist, a euro is worth a euro. As to whether the euro is likely to stop existing - it seems unlikely on the face of it, because it is being supported, thus far, by a set of governments whose economies total vastly more than the cost of supporting it. Its continued existence, therefore, is a political question - there is no inevitability involved.

cordially,
Scofflaw

if the single curreny has the same resiliance and dedication to the monatory union as you do , everything will be A-OK , nothing seems to weaken your resolve when it comes to all things euro or europe

irishh_bob

Debtocracy wrote: »

Precious metals are a safer option relative to U.S., U.K. or German bonds. Be very wary of the first two as if you get paid back, you will be doing so in a rapidly depreciating currency. The Chinese have said that the U.S. is effectively defaulting on its debt obligations through money printing. If feeling very conservative, go for gold as a precious metal. With the entire global financial system (or global Ponzi scheme) on a knife edge, I can’t see how gold will not increase in value in the coming years. If gold is in a bubble, then it’s been going on for the last 4,000 years. Silver is also likely to make huge gains over the next year or two although you’ll have to hold your nerve in a volatile market.

silver reacts well to strong growth , gold reacts well when the house is falling down economically and financially , silver rose 100 % in value from may 2010 to 2011 , silver then saw a massive sell off in early may , it dropped around 40 % and has gone nowhere since , i dont see silver going anywhere for a while , with a weakening U.S and even chineese economy , manufacturing will slow , gold on the other hand ( in euro ) rose twice as much in the past week than it did in the previous nine months , while it may be in a bubble , the recent surge is entirely justifiable

n900guy

irishh_bob wrote: »

if the single curreny has the same resiliance and dedication to the monatory union as you do , everything will be A-OK , nothing seems to weaken your resolve when it comes to all things euro or europe

He has a point: the euro is under relentless attack by the city of london for months now. This is an attempt to break up something from the euro before the US explodes in debt in Sept/Oct.

Even so, the Euro is still trading at 1.41 dollars, and the UK pound strengthened (lol!) from appalling (90p to the euro) to slightly less appalling but still really bad (88p). The BBC articles on the currencies are particularly amusing.

hmmm

For a start I'd tell them to stop taking financial advice from a text message.

"Buy dollars because the Euro is going to collapse". God almighty, we're a nation of financial idiots.

Damokc

tell them to buy shares in baby food companies....one thing that always happens after recessions is baby booms!!!!!get in my son!!....or daughter...:D

doubleglaze

I'm almost a financial illiterate myself, but can't help wondering that, if the euro goes down, so also might other currencies - domino effect.

Everything seems so unhinged worldwide and nearly every country in the world is in debt, in most cases that debt is seriously high. Common sense tells me that this situation is unsustainable and that something has to give.

hmmm

doubleglaze wrote: »

Everything seems so unhinged worldwide and nearly every country in the world is in debt, in most cases that debt is seriously high. Common sense tells me that this situation is unsustainable and that something has to give.

OK then, what situation is unsustainable, what do you mean by "unhinged worldwide" and what exactly is it "has to give"? Because I'm not a financial illiterate and I haven't a clue what most people are on about.

Also, what do you mean by "if the euro goes down". Down where? What do you see happening?

Godge

doubleglaze wrote: »

I'm almost a financial illiterate myself, but can't help wondering that, if the euro goes down, so also might other currencies - domino effect.

Everything seems so unhinged worldwide and nearly every country in the world is in debt, in most cases that debt is seriously high. Common sense tells me that this situation is unsustainable and that something has to give.

How can all currencies go down? If a euro is worth 90p sterling today and both go down, a euro is worth 90p sterling tomorrow!

irishh_bob

doubleglaze wrote: »

I'm almost a financial illiterate myself, but can't help wondering that, if the euro goes down, so also might other currencies - domino effect.

Everything seems so unhinged worldwide and nearly every country in the world is in debt, in most cases that debt is seriously high. Common sense tells me that this situation is unsustainable and that something has to give.

thier is a conspirocy doing the rounds which seems to sugest that all theese rating agencys etc ( which are american based ) are attacking the european financial framework as a means of drawing capital out and into america which itself is facing the prospect of default

ei.sdraob

And a conspiracy is all it is, a way of deflecting from the cluster**** happening at the eu level

hmmm

irishh_bob wrote: »

thier is a conspirocy doing the rounds which seems to sugest that all theese rating agencys etc ( which are american based ) are attacking the european financial framework as a means of drawing capital out and into america which itself is facing the prospect of default

Utter tosh.

Tora Bora

But tinned food, condensed milk, flak jacket, kalashnikov, secure underground bunker, veg seeds for after the long winter, good books on survival techniques, coal ... lots of it, .......... your'e gonna need a lot of basic stuff, once the panic sets in proper:cool:

Debtocracy

The dollar now looks to be a terrible place to invest your money. Watch precious metals rally in the next few months. Ben Bernanke is my new best friend

http://www.irishtimes.com/newspaper/breaking/2011/0713/breaking80.html

DublinWriter

GOLD FTW

FloatingVoter

Invest in propert....whoops, wrong decade.

cursai

Im gonna invest all my money in prostitutes when i go to LAS VEGAS next week!:pac:

Manach

Please keep away from Mr. Tyson's tiger.

hmmm

DublinWriter wrote: »

GOLD FTW

Weren't you recommending property as a sure thing a few short years ago?

DublinWriter

hmmm wrote: »

Weren't you recommending property as a sure thing a few short years ago?

As a 20-25 year investment.

irishh_bob

hmmm wrote: »

Utter tosh.

a weakened euro nearly always results in a strengthened dollar

irishh_bob

Debtocracy wrote: »

The dollar now looks to be a terrible place to invest your money. Watch precious metals rally in the next few months. Ben Bernanke is my new best friend

http://www.irishtimes.com/newspaper/breaking/2011/0713/breaking80.html

watch a significant sell off in gold in the coming weeks , gold having had a remarkable week is back down again today in euro , its also nearing the 1600 dollar mark , i too think that metals will surge but now is not the time to get in , wait till its back at around 1050 in euro ,( it was at 1029 the begining of last week ) , its at 1115 now , was at 1121 yesterday

Sticky_Fingers

irishh_bob wrote: »

thier is a conspirocy doing the rounds which seems to sugest that all theese rating agencys etc ( which are american based ) are attacking the european financial framework as a means of drawing capital out and into america which itself is facing the prospect of default

Not according to the BBC article linked below:
http://www.bbc.co.uk/news/business-14142621

From the article:

Ratings agency Moody's has warned it may cut the US AAA debt rating because it is increasingly likely its debt ceiling will not be raised in time to avoid a default.
It has placed the US on a downgrade watch, saying the likelihood of a default was "low" but not "de minimis".
Federal Reserve head Ben Bernanke said earlier a default would send shockwaves through the entire financial system.

This could be very bad news for nearly everyone in the Western world, the knock on effects would be catastrophic and would more than likely push many countries over the edge.

We truly are living in interesting times:(

SupaNova

Scofflaw wrote: »

There is only one real certainty in the current situation, which is that as long as the euro continues to exist, a euro is worth a euro. As to whether the euro is likely to stop existing - it seems unlikely on the face of it, because it is being supported, thus far, by a set of governments whose economies total vastly more than the cost of supporting it. Its continued existence, therefore, is a political question - there is no inevitability involved.

cordially,
Scofflaw

I'm not sure what you mean when you say a euro will be worth a euro as long as it exists. The people who thought a dollar is a dollar since its existence have lost over 95% of their purchasing power, and i'm not 100% sure of figures but in the decade from 1970 to 1980 they would have lost about 40% of their purchasing power.

Scofflaw

SupaNova wrote: »

I'm not sure what you mean when you say a euro will be worth a euro as long as it exists. The people who thought a dollar is a dollar since its existence have lost over 95% of their purchasing power, and i'm not 100% sure of figures but in the decade from 1970 to 1980 they would have lost about 40% of their purchasing power.

I don't think anyone would be silly enough to think the reference is to inflation, or to claim that the purchasing power of a euro is somehow fixed in stone.

The point is very simply that in transferring savings into another currency, one is taking on an exchange risk which, as long as the euro exists, is unnecessary. You'd be taking on definite uncertainty because of the fear of possible future uncertainty - and certainly in respect of dollars, one shouldn't allow the eurozone's woes to distract from America's.

cordially,
Scofflaw

SupaNova

Scofflaw wrote: »

I don't think anyone would be silly enough to think the reference is to inflation, or to claim that the purchasing power of a euro is somehow fixed in stone.

The point is very simply that in transferring savings into another currency, one is taking on an exchange risk which, as long as the euro exists, is unnecessary. You'd be taking on definite uncertainty because of the fear of possible future uncertainty - and certainly in respect of dollars, one shouldn't allow the eurozone's woes to distract from America's.

cordially,
Scofflaw

When you say "a euro is worth a euro" i really didn't know what you could mean other than its purchasing power which goes hand in hand with inflation.

FlashD

DublinWriter wrote: »

GOLD FTW

Well dublinwriter if you're on the gold bandwagon then i'm definately off it.:D

Your the last one i'd be taking advise from after reading that property thread from 3 years ago that's doing the rounds here.

Roaring from the rooftops ya were!:)

Scofflaw

SupaNova wrote: »

When you say "a euro is worth a euro" i really didn't know what you could mean other than its purchasing power which goes hand in hand with inflation.

It means exactly and literally what it says - one euro is worth one euro. If you have ten euro, and exchange it with me for ten euro, the exchange is exactly equal. There is no currency fluctuation.

Sure, ten euro now and ten euro in ten years time aren't equivalent, but you have to add the rider in yourself in order to confuse yourself, as you appear to have done.

amused,
Scofflaw

maxmo

Buy dollars....Make sure they're the silver ones!