Categorized | Random Rants

An Overvalued Euro = Huge Problem for European Domainers/Entrepreneurs

Posted on 11 March 2013 by Andrei

During the 2000 – 2002 period, one Euro was worth less than a Dollar and that made sense. After all, the Dollar is the world’s reserve currency and it has been around for a considerably longer period than the Euro. But something happened and during certain periods of 2008, the Euro ended up costing almost 1.6 Dollars.

What does this mean for European businesses?

Bad news, plain and simple.

What does it mean for most European countries?

Once again, bad news because their debt became even more of a burden due to an overvalued Euro and, more importantly, Europe became less and less competitive.

That’s the most important problem BY FAR in my opinion.

Europe isn’t competitive enough and an overvalued Euro doesn’t make things easier.

Let’s assume you bought an asset for $10,000 back when one Euro was worth 85 cents.

In other words, you paid about 11,750 EUR for it.

Great, now let’s assume you sold it for $15,000 a few years later when the euro was worth $1.5.

A 50% return isn’t bad, right?

Well, how many Euros could you buy with $15,000 at a $1.5 EUR/USD exchange rate?

10,000 EUR.

Exactly, it sold for 50% more yet you can’t even buy the amount of Euros you paid for it.

You paid 11,750 EUR and ended up with 10,000 EUR a few years later even though you sold the asset in question at a 50% profit in dollars.

If you’re from the US, you probably don’t care about this stuff all that much but believe me, European domainers and entrepreneurs care 🙂

3 Comments For This Post

  1. Konstantinos Zournas Says:

    Hi,
    nice article. The good thing is that I don’t have a 50% profit margin.
    My profit margin is much much higher so small euro/dollar fluctuations are not so important.

    The current exchange is at about 1.3 and that is not so bad compared to 1.6.

    I see that you are from Romania. I visited Bucharest once a few years back. It was very nice. I have a few friends from Greece living there.
    Hope to visit Romania again.

  2. Andrei Says:

    @Konstantinos: you want to visit Romania again? Now that’s what I call masochism 🙂

    Shoot me an email at admin@domainingtips.com whenever you’re in the Transylvania region (yep, I live in Transylvania, most people think I’m kidding when I tell them this) and maybe we can meet, would be nice!

  3. Konstantinos Zournas Says:

    Come on… Masochism??? 🙂
    Bucharest was very nice.

    The one place I wanted to visit and didn’t had time to was Transylvania. That were I am going next time.
    See you there… I want to buy some garlic too…