The Eurozone Is Staggering
Don't bet on the Euro
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Table of Contents
Parity and its Implications
Toxic Debt - a Metaphor
Toxic Debt - a Reality
The Euro Below Parity
Family Breakup
Conclusion
1. Parity and its Implications
We’ve covered the European Central bank here and the significant pressures on the Euro that can’t be sidestepped. Today, the Euro reached parity with the dollar for the first time since 2002. For a long time, the Euro has been worth more than the dollar, and quite a lot of people are unaware that there have been times when the Euro has been worth less than the dollar because most people have been used to it always being worth more over the last 20 years. You might see takes like this from people who are totally unaware of the macro levers at play here. For instance, this Adjunct Professor of Real Estate Econ. at NYU can be seen recommending Commercial Real Estate Investments to arbitrage the currency with an assumption it will return to being worth more than the USD.
Ignoring his claim that this has never happened before (lol, average salary for adjunct professor at NYU is $219k), we are going to do a bit of a deep dive and bring all of the pieces together that I’ve been laying out over the last 9 months (wow, it’s been that long) and try to get a view of what Europe’s future likely holds, and potential paths out of the current malaise for member countries. I suspect the tweeter above likely has a decent grasp of commercial real estate, but is likely underestimating the current global macro or unaware of it entirely.
The last time the Euro was worth less than the dollar, it only lasted for a few years, and it’s likely that a real estate investment made from the dollar to the Euro would have paid off, however this time that assumption will fall flat on it’s face. So what’s wrong with the Euro and why will it have lasting implications? Lets discuss.
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