Posted Sep 26, 2013 by Martin Armstrong
José Manuel Durão Barroso is a Portuguese politician and Member of the EPP . Since the end of November 2004 Barroso became President of the European Commission. On September 16, 2009 he was elected by the European Parliament for a second term of five years. He is indicative of why politicians should not be allowed near economic policy. Barroso is on TV predicting a strong Euro in the face of an ongoing debt crisis. Barroso is still caught up in the idea that a strong euro proves the politicians have confidence yet he cannot grasp that a strong currency defeats exports by making them too expensive. This also masks the problem of Europe dependency on Russia for energy because a strong euro makes imports cheaper yet exports more expensive.
This was the whole idea behind creating the G5 (now G20) back in 1985 at the Plaza Accord. It was James Baker who wanted to lower the value of the dollar by 40% to reduce the trade deficit since a strong currency makes imports cheaper than domestic products. European politicians are still plagued by World War II since they have argued that a strong currency proves they have done a good job rebuilding Europe. Unfortunately, the comment of Barroso illustrates that this fundamental thinking process from WWII is still present. Europe should want a WEAKER Euro so they can create jobs and export goods rather than import. They will never tackle the high unemployment among the youth with a strong Euro,
I am in Switzerland. At Starbucks a Venti Skinny Vanilla Latte is 8SF or $8.797976 compared to the States where it is $4.76. The cost of everything in Europe is just so much higher it is no wonder unemployment if so high. Europe needs to see the Euro collapse by 50% to even begin to turn the dark corner in the economy. It is cheaper and far more efficient to manufacture in the USA than in Europe.