Forex - Q & A Tell Me Why?

[forex999]

Hi Guys, tell me how the national currency works;

I understand how US dollar works - (I Think) well US just keeps printing it, and printing it and basically get all the services for FREE, guess cos oil is traded in US Dollars.

But what I do not understand is about the EURO - It is NOt a national currency, and just who decides how many EUROs to print, in the old days they needed gold or reserves b4 they printed the currency, So just how does the EURO work? as it is not a national currency

HELP!!!

 

[westernforce]

A collection of the value of the member countries, mixed together, blended, diluted with pessimism, bleached with optomism and there you have it :whistling (no idea really)

 

[Rhody Trader]

But what I do not understand is about the EURO - It is NOt a national currency, and just who decides how many EUROs to print, in the old days they needed gold or reserves b4 they printed the currency, So just how does the EURO work? as it is not a national currency

Euro works like any other currency. Just because it's not the currency of one single country, but rather of an economic zone doesn't change anything at all in that regard.

Keep in mind that most of the money in the system isn't actually physical. It's electronic. The management of the money supply from that perspective - meaning tightening and loosening credit and such - is in the hands of the central bank.

 

[forex999]

Thanks John for your feedback - appreciate that!
C'mon guys - 90,000 members here, at least someone make an effort to help me!!!!
US can get along printing the $$$ - it ends up with a DEBT.
So what happens in EUROZONE, although it is all electronic stuff, but surely it does impact on economy, ie when euro is printed, a debt is created - but eurozone is not a country, but a collection of nations

I want as much help on this as possible

all contribution will be appreciated! - just how does the euro work

 

[fibonelli]

Money as Debt Money As Debt

 

[MrGecko]

Although the US$ is the currency of one "nation", think of the contributors to this - California is (or at least used to be) the 5th biggest economy in the world; combine this with, say, Louisiana, whose economy was severly damaged by the events of Hurricane Katrina. Whilst both the same country, these two seperate economies face wholly different economic pressures simultaneously. This is similar for the Euro, where the "country" is it's member states, and the states are the individual countries (Germany etc..). Each member "state" faces their own set of economic pressures, (although these are much more aligned than that of the USA; unemployment in Germany and France, for example).

As for the injection of money, look into the M(0); M(3) and M(4) measures of money supply (I think this is what Rhody means by the money being electronic). Through Monetary (and, though less directly, Fiscal) Policy, the "government" (or treasury, ECB, whatever) can "create" money - e.g. by reducing the reserve ratio for Banks, which means they can lend more, and so on.

 

[Rhody Trader]

C'mon guys - 90,000 members here, at least someone make an effort to help me!!!!
US can get along printing the $$$ - it ends up with a DEBT.
So what happens in EUROZONE, although it is all electronic stuff, but surely it does impact on economy, ie when euro is printed, a debt is created - but eurozone is not a country, but a collection of nations

You're asking again won't change the answer. Mr Gecko's analogy to the US states is spot on. Nations are often referred to as states and the dollar is the currency of the United States.

Of course increases and decreases impact the economy. And just like the US states with the dollar, how exactly that increase is felt will vary based on local economies, though there is broad general impact. For example, gasoline has generally risen in dollar terms, impacting the general US economy, but prices vary considerably from state to state based on local economies, taxes, etc.

And when a country creates money it doesn't create a debt. A debt implies money received by the debtor in exchange for a repayment agreement (and generally interest payments due). Issued money is a liability in that the citizenry can bring it back to the gov't to receive gov't services or to pay off a tax bill. Actually, when a country issues debt, it actually decreases the money supply.

 

[Exolon]

Money as Debt Money As Debt

Whoa! That's a pretty disturbing video in some ways.

 

[Victor90]

Money as Debt Money As Debt

really good!!! Although some things are stupied! =P