EUCOM Economic Analysis - Part I

[Firn]

...which accounts for little unless we compare the inflation rates.

The really interesting thing about exchange rates is in the long term not the official exchange rate, but its movement in comparison to purchasing power parity (PPP).


One example about PPP; Krugman recently published some stats about Japan which made Japanese workers look rather unproductive in comparison to U.S. workers. This can be wholly explained with the undervaluation of the Yen; the same statistic expressed with PPP would have looked very differently.
This PPP thing contributes to an outdated and false sense of superiority of Americans in regard to their economic standing.

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Somewhat related to the topic in general:
A short story and defence-related concern about the Euro crisis.

Leaving the PPP issue aside, which has it's merits even despite the difficulty to calculate it, as it is usually better to be roughly right then exactly wrong, I can not imagine that the slight difference in inflation in the last, say 20 or 30 years can explain the rise of the Franken. Swiss and German inflation differ only slightly even if compounded.

The radical gain of the Franken in such a short time is IMHO only explainable by the same, almost desperate rush for perceived safety which drives up the parked money at the ECB to ever greater heights and which has driven the interest rates on Danish and German bonds into the negative.

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The story in the liberal ZEIT states to some extent the obvious and well-known. Greece has a very large military compared to it's size, seemingly mostly due the perceived Turkish threat, composed of many products bought abroad with big German share. The German politicians have pressed (like others) the Greece to buy German (or European, for example the Eurofighter) and the German defense industry has long established Greek subsidiaries to better play the political game which created some odd purchasing decision. And last but not least Greece doesn't seem to be ready to cut the defense budget nearly as much as other ones, for example that of social security even if it is running a massive current budget deficit...