# Can the ECB devalue the Euro?



## RMCF (1 Nov 2011)

Just listening to the doom and gloom for the last few months about how badly the Eurozone is doing in terms of growth, and was wondering if its possible for this to happen?

After all, when individuals countries are in bother, they devalue their currency to help them compete. Could the Euro itself be devalued or is this not possible?


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## Purple (1 Nov 2011)

Yes, they can just "print more money". If money supply increases then the value of tat money decreases.


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## Chris (2 Nov 2011)

Yup, and the question is not whether they can do it, but to what extend they have been doing it. Money supply has been increasing for the entire life of the euro and this is what causes prices in general to rise, as measured by the CPI. 
What the ECB have refrained from so far is the same amount of money printing as the US Fed and the BoE, but all that means is that the ECB is less badly behaved than its counterparts.


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## moneyworrier (2 Nov 2011)

Does anyone know what will happen to our savings in the event of the euro being scrapped? I have worked my butt off all my life and have saved 100K which was supposed to help as a pension and to put kids through college and would really rather not loose it. Any help would be appreciated as nobody seems to know


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## RMCF (2 Nov 2011)

I assume they will just be converted back into the new punt, assuming the Euro fails to exist in the future.


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## horusd (3 Nov 2011)

moneyworrier said:


> Does anyone know what will happen to our savings in the event of the euro being scrapped? I have worked my butt off all my life and have saved 100K which was supposed to help as a pension and to put kids through college and would really rather not loose it. Any help would be appreciated as nobody seems to know



Actually there have been protests in the UK by savers about Quantative Easing- money printing. Inflation in the UK is running at 5% as a result. The ECB has resisted calls to do the same. There may well be legal reasons preventing the ECB from money printing due to its inflation target mandate of 2%.


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## Chris (3 Nov 2011)

horusd said:


> Actually there have been protests in the UK by savers about Quantative Easing- money printing. Inflation in the UK is running at 5% as a result. The ECB has resisted calls to do the same. There may well be legal reasons preventing the ECB from money printing due to its inflation target mandate of 2%.



The BoE have exactly the same mandate and it hasn't stopped Mervyn King from printing more money. The ECB has been printing money all along, just not in the large scale amounts as other central banks. More importantly, the ECB has undertaken significant Qualitative Easing by accepting junk bonds as collateral. Ultimately central banks will do what politicians want them to do and they will find excuses to ignore even their own price inflation numbers.


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## Woodie (3 Nov 2011)

As far as the Euro goes its chiefly what Germany wants with a side glance to France.  The inate German fear of barrow loads of money to buy a loaf of  bread will probably be the guiding force behind the ECB wanting to keep inflation under check.  They will support the fraying bond markets under the table and round the back door but I'd say they will stay clear of a course of QE for the moment.   
Hell knows though in these times.   Its all a bit like Fr Ted in the one about Dougal milk float, except  instead of a Mass, its lets call another summit.


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## Chris (4 Nov 2011)

The ECB has already been doing QE, it just hasn't announced it with big fanfare. Since August 2008 the monetary base of the Euro has been increased by 25%. That is quantitative easing. What it isn't, is QE on the same scale as the BoE and UD Fed have been doing.
The ECB under new leadership has already shown what it thinks of the risk of price inflation, by decreasing the central bank rate while Euro are price inflation is running at 3% for the second month in a row.


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## t915651 (30 Nov 2011)

RMCF said:


> I assume they will just be converted back into the new punt, assuming the Euro fails to exist in the future.


What woudl happen to money held outside of the Eurozone?

For example, an offshore EURO account held in Gibraltar or the Channel Islands?


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## Smart_Saver (30 Nov 2011)

Is massive QE the answer? Watching VB last night and the regular economist on his panel Constantin Gurgdiev argued that QE was not the answer. He seemed to claim that it would not make the debt go away and is only a temporary solution. I.E. kick he ball down the road again. And that the markets would see through it.

Is the idea of QE for EU that the ECB buys all the debt from all of the countries experiencing problems? How can they guarantee that the deficits that created the huge debts will not return within 1,2 or 3 years and the debt come back?


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## Chris (1 Dec 2011)

Your questions are spot on!!! The US has done QE to the tune of about $1.8tr and the Federal debt has gone from $10tr in 2008 to $15.5tr by the end of this year. QE has never ever worked and will not work in this case.


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