I’ve written a number of times about how currency exchange rates play a role in domain name buying patterns. Thanks to a strong Euro over the past 5 years, a number of European domainers have been able to buy domains from weaker currency nations (e.g. U.S.) at what seemed like “discounted prices”.
This is quickly changing. With troubles in Greece mounting and fear of its debt troubles spreading to other Euro nations, the Euro has fallen nearly 12% to the U.S. dollar since the beginning of the year. It’s still up substantially from a decade ago, but the sharp slide could just foreshadow what’s to come.
This isn’t an economics blog, but here it is in a gist: Euro countries all have different economies but only one currency. So each country can’t change monetary policy as needed.
As the Euro falls, European domainers have to pay what seems like more money to buy domains denominated in other currencies. On the flip side, people in areas with different currencies can now pay “less” when buying domains denominated in Euros.
Of course, if there’s an all-out currency crisis then we might have to buy domain names with gold.
Nicco says
QUOTE: Euro countries all have different economies but only one currency. UNQUOTE.
That’s right, with the exception of Great Britain and the GBP, the British Pound, the Suisse and their CHF, Suisse Franc, and the Swedish with their Krona, SEK.
To bad we can’t have the Deutsche Mark back again. That was as solid as Gold.
Acro says
The only thing “mounting” with relation to Greece, is the number and complexity of the games being played by Goldman Sachs and other banks that manipulate the stock market. It’s clearly war against the euro launched by the same hawks that brought the British pound down in 1992. Today’s technology and market size allow predatory bankers to play these games, free from any regulation; definitely not that of the US government.
Now, simplifying matters by stating domainers won’t pay as much due to a 12% drop in the USD/EUR exchange rate is rather naive. Corporations that function on a budget and plan retain these strategies; if you’re asking whether Bill Bobopoulos will be able to afford a .com at the same price as before, the answer cannot be given by simply following the stock market. What most people don’t realize is that Greece is a poor country made of rich people. The national debt ballooned by the government not having the means to collect payments from its citizens, along with the state overspending. In turn, when the state needs to make payments and they cannot, they issue austerity measures that are de facto unpopular.
Add to this the extortion caused by the foreign lending banks that raise the interest rate and lower the national credit capability and you have a situation that is very fluid and unstable.
At any rate, it’s a complex issue that it affects the domain market very superficially; domaining is far too small to be considered a volatile microeconomy.
Andrew Allemann says
You’re right, Acro. There’s absolutely nothing structurally wrong in Greece. It’s all Goldman’s fault.
And when European domainers have told me for years one of the reasons they were ramping up buying was the week dollar, I guess they were just lying.
Acro says
Andrew, perhaps you want to believe what it suits you to believe: that the ‘bad Greeks’ brought it all to themselves.
Have you witnessed first hand life in Greece or why people took to the streets? Are you a political expert sitting on a chair 6,000 miles away?
I find it amusing how emotional the market has become by the manipulation of news, along with the lack of understanding of a different culture. It took me 12 years to feel comfortable in the US, not sure how much time you spent wandering the streets of Athens.
Again: 12% loss for the Euro is nothing. Now, I ask you to remember how the US domain market froze when the real estate scandal broke out. If it weren’t for the US government bailing out the banks with money it literally invented by printing, you would not have these predatory bankers switching over to a different focus and market.
Greece was used due to its cultural and social volatility. It’s a game of politics and financing.
DN abc says
As an European (from Portugal) I can tell you that both Andrew and Acro are right.
Yes I bought much more domains (thousands) in the past years because of the weak dollar…
BUT
I won’t stop buying (or less) just because the euro is weaker now… I will just cut my “losses”.
Nuno Alex Oliveira
DNabc.com
Acro says
Exactly my point, Nuno.
Methodology of investing doesn’t change based on mere fluctuations of the market.
I recall a time where the Euro was at $1.54 – during that time I bought like crazy despite my wallet being full of USD.
owen frager says
Andrew you should have quit with the line “this isn’t an economics blog” and left it at that. From experience you can’t breach these topics with domainers. And if you look at some of the political blogs and the arguments that go on- every side is right and has the heated passion to tell you why you are wrong.
DN abc says
And when the euro was higher (above $1.60 I think) I sold a good domain for euros… that was the time… most of the money was reinvested in domains bought with USD.
Same thing last year, sold a name for 16,000 euros and bought a lot of good domains in USD.
But now that things are changing I continue buying, yes they may be more expensive for me but I won’t skip good deals because of that.
Even 2 hours ago I bought lcdhdtv (.net) in a Snap auction and 10 other names.
I guess some european people may buy less but that is not the case with everyone, as with everything in life.
Duane says
I see it as Andrew. The fall of the euro will cut european investors.
Greece had problems from day one, when they entered the EU.
For example both country’s Greece and Germany loose aprox. 30 Billion in taxes each because of people not filing there income correct or being corupt.
There is only one big difference between both country’s.
Total Household productivity in Greece is aprox. 48 Billion. Germany aprox. 300 Billion.
Sorry but the numbers say Greece is doomed because of being to corupt.
Just MHO
DN abc says
Another important factor I should share is that although my savings account is in euros, most of the end users with whom I close deals pay me in USD (perhaps 60%), and most affiliate programs as well, so “what comes around, goes around”.
It’s “harder” now when we have to convert euros to usd to buy or renew, but I don’t mind about a strong dollar because it means my payouts will also be better.
Jim says
What we are seeing right now is fraudonomics, focusing on Greece to devalue the euro. Let’s be very clear, that the main players shorted the euro long before this sustained news/attack came on the euro. The credit agencies are in overdrive doing the devious business that they are paid to do.
This is a game of “wag the currency” and when the ratings agencies and bankers have exhausted the gains from the devalued euro, they will focus on the “overvalued” US dollar and report on California (eight largest economy in the world) that is bankrupt or start to circulate the stories of unemployment in major cities in the US between 30% & 50%. Causing huge uncertainty in the financial markets is helping a certain sleasy element within the investment banking industry who have become experts at financially raping the system.
This is not a US dollar vs Euro story, this is about financial gaming, where the only losers are the middle classes. Be aware that the GDP of an almost bankrupt California is five times that of Greece, but don’t tell that to anyone, not yet at least, until the bankers have made their killing on the euro first.
AcroMonius says
Acro, come on man, where is your sense of humor. Just do a write up on domaingang about the bad greeks and all will be well. You don’t need to walk around the streets for 12 years to get a feel for things. I was on domaingang once and saw it for the joke that it is.
domain guy says
to euro to the dollar will be one to one.
some countries already peg their currency artifically one to one dollar
Tia Wood says
RE: AcroMonius
Attacking someone’s character anonymously is a clear sign that you are a cowardly jackass.
Jim F says
Greece is an absolute basket case, years of extremely poor management, what is happening now was probably inevitable. Major changes are needed, like proper taxation laws, fiscal responsibility etc.
The Greeks taking to the street, burning banks, people getting killed, will only make things far worse for themselves. As well as a very deep recession they will see tourists avoid the place due to that rioting – that is an issue that will linger for some time.
As far as the more fiscally responsible Euro countries it was obviously a very big mistake to align their fortunes with some of these countries.
But yes…all this is Goldman’s fault.
Acro says
AcroMonius – not sure what you’re referring to. DomainGang has nothing to do with my posts here. Perhaps though an article is in order: how the Goldman Sachs bankers used Greece as the Trojan horse to cause chaos in the markets.
Jim F – If I started to number the amount of social unrest and rioting in the US in the past, caused by bigotry, racism and financial poverty I’d run out of space.
Everyone is obsessed with Greece right now and when you put a country under the microscope you miss the full picture.
Just hope that you do things perfectly ‘at home’. If anything else, Americans at least now know where Greece is on the world map.
Andrew Allemann says
Acro, I don’t think anyone here would say the U.S. is doing things perfectly and Greece didn’t. Regardless of why Greece has some much debt, the difference, as I stated, is that the U.S. can use monetary policy and Greece can’t b/c of the Euro.
Acro says
The US can print its own currency ad nauseam due since the removal from the gold standard. Effectively, the US is using monopoly money for years now.
Incidentally, if you want to know what caused today’s dive: http://blogs.forbes.com/streettalk/2010/05/06/greek-woes-or-traders-mistake-take-your-pick/
Andrew Allemann says
Acro – it was a combination of both.
Acro says
You can safely now go back to trading domains, folks. A banker’s typo almost brought the house down. Thanks, Wall Street 🙂
Steve M says
We are witnessing the beginning of the end of the Euro …
By Jan 1, 2012 the Deutsche Mark will be back … the German people (understandably) are not going to put up for long paying off the debts of their irresponsible neighbors.
Jim F says
Steve, that could well be the case.
Acro says
Steve – On January 1, 2013 martians invade *both* the Earth *and* the moon.
Today’s “glitch” was an orchestrated attempt to sync the stock market with world events. There was no coincidence. Read http://www.cnbc.com/id/36999483 and OPEN your eyes.
cvbcvbcvb says
Who is that:
Hairy, smelly, lazy and his dream is to work for government because he will get double of private company salary and retire at 50…
Louise says
Would you write an opinion piece about the New U.S. Push to Regulate Internet Access? If the government checks Cable telecommunications’ stanglehold on broadband in favor of net neutrality, it is good news for internet companies and domains in general, way more than a one-day fluctuation in the market or temporary unrest in Greece.
Francois says
For me it’s totally the invese.
I dream of 1 Dollar >= 1 Euro.
These past 10 years I am doing +95% of my business in dollars.
I pay/earn in dollars, so the change rate don’t affect me.
I lost money when I change to Euro the benefice.
DN abc says
Like Francois I’m also not afraid of parity or even worse (for the euro). I’m an european investor BUT I won’t stop investing or sell all my domains quickly just because the euro is dropping…
Most european investors receive USD from advertising, whether we are talking about PPC or CPA programs.
It will not cut european investors, by the contrary, I never bought so many domains like in the last few months…
Tim says
@Tia Wood…..quote:
“RE: AcroMonius
Attacking someone’s character anonymously is a clear sign that you are a cowardly jackass.”
Okay then, who is ACRO? What is his name? Why does he get to insult behind a screen name?
ACRO, as far as I can tell will not be satisfied until he has argued with and pissed off every domainer alive.
As far as I can tell the only thing he has done in the industry is make enemies by acting arrogant, incredulous, and disrespectful.
Makis.TV says
Being a Greek and in my 30’s I ve discussed many times that new Greeks have had enough with our economy based on tourism mostly. We had enough of tourists, backpackers, it will hurt in our pockets if all those people dont come for the summer but it wont hurt our land that each year is being raped by some of those “tourists” trashing beaches and sidewalks.
When I € dominated over $ I ve bought many domains that normally I wouldnt, now its time to unload some selling in $’s.
ps: We cant print money, if we could then we would so. Thats the big difference with the US.
Gazzip says
“Everyone is obsessed with Greece right now and when you put a country under the microscope you miss the full picture.”
True, Europe is really screwed, they just ain’t admitting it yet !
DN abc says
Europe isn’t the only place with problems but to solve them there it’s more complex than at a single country…