Re: European Market Manipulation...


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Posted by longtime lurker on December 07, 2000 at 19:37:47:

In Reply to: European Market Manipulation... posted by Anthony on December 07, 2000 at 13:39:56:

Consider this:
A Melton model 25 BBb tuba is listed for 10.800 DM at stoelzel-music.de.
The Meinl Weston Model 25 BBb is listed for $3,995.00 at tubastore.com.
Using today's exchange rates:
$3995 = 8.781 DM
10.800 DM = $4,915
Assuming Stoelzel's price accurately reflects the market price of this tuba in Germany*, if I lived in Germany, I would buy from tubastore.com if the cost of shipping, tariffs, and whatever else is less than 2.019 DM. It works the same way the other way, (buying in Germany and bringing it back to the States).

Taking advantage of what appears to be a low exchange rate is only worthwhile if you still come out ahead after calculating all of your costs, (including opportunity cost!).

Now to your question:
This is possible. The Fed will lower interest rates since Alan "It's only a recession bay-bee!" Greenspan is afraid that the Fed's policies might actually result in a recession. He is also working with banks to ameliorate the problems associated with bad debt, mainly to keep credit from tightening. The pro-business policies of a Republican administration** would also help the economy. Given Denmark's rejection of the euro, and Britain's continued avoidance, it's safe to say the euro continues to have problems.

The structural deficiencies are more of an impediment to progress in Europe than in the States. I expect the euro to continue to struggle against the dollar until the structural deficiencies are remedied. Our economy is not doing well because of the irrational exhuberance displayed by the stock markets these last few years. The irrational exhuberance was the result of the strength of the economy. Low inflation low, low unemployment, no overly tight credit - these lead to continued economic success. Germany's unemployment rate, at 8.9%, is over twice that of the US. Which economy is struggling?

Good luck hunting for bargains!
/ /
/ongtime /urker
+---- +----


* This is an unreasonable assumption given Germany's anti-competitive trade practices and the American government's willingness to let archaic mercantilistic trade go both ways to no one's benefit.
** I am not a Republican, nor am I a Democrat.



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