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Economists claim Euro did not cause inflation

Economists claim Euro did not cause inflation

Feb 27th, 2006, 08:14 AM
  #1  
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Economists claim Euro did not cause inflation

Based on reports from Europeans, most agree that the introduction of the Euro led to immediate price increases, and the situation has only gotten worse.

Economists claim otherwise, however.
http://www.iht.com/articles/2006/01/...iness/euro.php
WillTravel is offline  
Feb 27th, 2006, 08:50 AM
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First problem - Central Bankers, economists, EU bureaucrats. do not live in the real world.
Second Problem- they are paid inflated salaries, huge pensions when retiring and do not need to worry that something costs more due to the Euro
Their assertions are known to be false by those that buy anything in the EU.
The average person knows that the introduction of the euro led to significant price increases.
In Austria, all prices were qouted in old Austrian Schillings and new euro on the same price tag.
Ask the old pensioner that knew all the old prices and then was forced to pay the new ones in euro. They do not need a degree in economics to determine this They do not make educated guesses, they are the trying to stretch their euro to live.
My neighbor can tell me the price of most everything before and after.
This is called reality where I live.

molker is offline  
Feb 27th, 2006, 09:00 AM
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ira
 
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Folks in Italy (2003)told us the same thing; when the euro came in prices went up significantly.

ira is offline  
Feb 27th, 2006, 09:03 AM
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Isn't it interesting that when those people who supposedly don't live in the real world predict something that actually happens....
Intrepid1 is offline  
Feb 27th, 2006, 09:09 AM
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Oh, well..not all the economists, sure..my best friend is one and doesn't dare to say such a thing !!
As molker said, if you live in real life, you don't need to be a genius to notice it
Sometimes the thing is not the euro itself, but the people who took profit of the moment to rise prices.
Here in Spain, we have a very popular kind of shops that were called "Todo a 100" (Everything at 100), pesetas, of course. Now these shops are called "Todo a 1 Euro"..but the Euro is not 100 pesetas, is 160
This is just a little example. If we began with greater necessities (electics, light, heating...) you just have to compare your bills )
kenderina is offline  
Feb 27th, 2006, 09:18 AM
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Maybe the street is correct, but the history of economics usually reports serious problems and consequences when inflation reaches a double digit rate. Anything above 6% causes official concern. Have such concerns been reported?
Michael is offline  
Feb 27th, 2006, 09:25 AM
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The problem is that people remember the price of something as it was the day before the Euro, and expect that if the Euro was abolished tomorrow, the price would revert to what it was at that time.

My Grandmother was the same with Decimalisation in the UK, in her mind the price of a loaf of bread was always pegged at 1 shilling (I am using his as an example - I have no idea how much a loaf of bread cost). Twenty years after the event she would still compare that cost of 1 shilling to the price that day - regardless of how her income may have risen.

I am in no position to judge how much inflation the Euro has caused, but I think people need to look at hard evidence, and not compare to some glorious "everything was better in the old days" world.
willit is offline  
Feb 27th, 2006, 09:39 AM
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"Everyone" or "the street" or the "average person" knows all sorts of things that aren't true.

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Feb 27th, 2006, 10:17 AM
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I skimmed about half the article -- are wages constant?

--

"When people are having a hard time, when their wages are staying constant, inflation becomes much more dramatic for them," said Giovanni Mastrobuoni, an economist at Princeton University, who studies inflation perceptions in Europe. "Effectively, they have to start consuming less."

111op is offline  
Feb 27th, 2006, 11:15 AM
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Well, duh.
Dayle is offline  
Feb 27th, 2006, 11:17 AM
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But is it true that wages have been constant? Or rising less than the cost of living? I doubt it somehow.
111op is offline  
Feb 27th, 2006, 11:41 AM
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Wages have be stagnant + cost of living rising = unhappy people.

There's probably some inflation and price increase associated with the switch to Euro. That article says about 2%. But the rest, it's going to happen euro or otherwise.

In fact, I think the euro simply becomes an excuse for certain politicians. The real problem is slow growth on the continent, and few people in power have the will to tackle that problem.
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Feb 27th, 2006, 11:46 AM
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What seemed to have happened in most countries that adopted the euro was that many shopkeepers, restauranteurs and hoteliers etc took advantage of people's confusion over the new currency and hiked their prices, hoping nobody would notice it. While this may have raised some of the component items for consumer price index, other, more substantial items like salaries and wages, mortgage payment, utilities, fuel and durable goods were simply converted to euro at the official rate and thus had no impact on inflation.
For tourists of course, whose major expenditure encompasses accommodation, food and service costs, the inflationary effect of euro introduction was certainly pulpable.
Alec is offline  
Feb 27th, 2006, 11:53 AM
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I am part of the minority who does not feel that prices went up because of the euro, or rather that people who paid more were willing accomplices. I switched brands, I switched cafés, I switched all sorts of things when I felt that prices had been rounded up excessively, and this was extremely easy to do, because I am not a slave to habit, and there were lots of merchants willing to undercut their competitors. Besides that, the governement rounded DOWN most of its fees, taxes, even traffic fines, when the conversion to the euro was made.
True, after about six months of stability, there were some significant jumps in certain prices, as soon as some of the shops felt they could get away with it -- just as they would have done if the currency had not changed.
Tourists suffered the most, because they have no concept of prices. In Paris, a can of Coke on the street that had been sold for 5 francs suddenly was priced at 1 euro (6.56 francs). If people are dumb enough to pay that rather than going into the nearest supermarket, I have no sympathy for them.
kerouac is offline  
Feb 27th, 2006, 12:54 PM
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Well, rkkwan, what you say can be true in theory, but we know how unreliable people's perceptions can be. That's why eyewitness accounts can turn out to be wrong. Haven't we all been in situations when someone said "I swear blah blah blah" and whatever was claimed was completely false?

I don't know. This is not exactly related, but I live in NYC and I look at how much apartment sale prices here have gone up. However, the economists say that there's little inflation in the US.

I do wonder how people measure these things.
111op is offline  
Feb 27th, 2006, 01:06 PM
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ira
 
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>...more substantial items ...were simply converted to euro at the official rate and thus had no impact on inflation.<

I respectfully disagree with the statement.

You might recall that the euro was introduced at about $1.20 and almost immediately fell to about $0.9. This is because it was overvalued with respect to the currencies that it replaced.

This did cause inflation in the countries that switched to the euro because the people who now bought goods in euro at the official rate were paying more for those goods than they would have had the exchange ratio been set at a more reasonable figure.



ira is offline  
Feb 27th, 2006, 06:10 PM
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I won't argue with any EU resident who says that they can afford less than they used to. I'm not certain, though, that WHY they can afford less than they used to is due to the intro of the euro; the rise in prices might have been correlated with the intro of the euro, but as we all know, correlation is not cause.

Prices rise as a result of inflation, true, but they also rise due to increasing demand. Demand can increase for not just the product itself but all the things associated with its production, such as oil/gas. For example, food prices outside the EU have also increased, possibly due to the rise in gas prices in turn causing increased cost of getting food to markets.
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