The Euro vs. The Dollar

Posted November 23, 2020

Since the Covid-19 pandemic began, Macro Watch has focused primarily on the economic policy response to the crisis in the United States.  The new Macro Watch video looks at how the policy response in Europe compares with that of the US – in terms of its impact on government debt, central bank balance sheets, the Money Supply, interest rates and inflation.

The purpose of the video is to: 

1. Describe Europe’s fiscal and monetary response to the crisis; 
2. Add to the understanding of the US response by comparing it with that of another large currency block; and 
3. Consider whether there is any compelling reason to expect the Dollar to fall relative to the Euro during the months ahead.

The video shows that the economic policy response to the pandemic has been very similar in the US and Europe.  Government debt, Central Bank assets and the Money Supply have all jumped sharply in both places, while Interest Rates have fallen.  Inflation is low in the US and has turned negative in Europe, even though the ECB has grown to be the world’s largest central bank ranked by total assets.

Finally, the video considers the factors that will determine inflation and interest rates in both areas; and what they suggest regarding the outlook for the value of the Euro versus the Dollar.

Macro Watch Subscribers can log in now and watch The Euro vs. The Dollar for all the details.  The video is 17 minutes long with 32 slides that can be downloaded.  

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A new video will be added approximately every two weeks.

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