Second Life: Euro-Dollar Exchange Rate

Someone in the forum is thinking now is the time to cash out their dollars for Euros. It might be. But, it is not a simple decision. Both market and personal factors set when is best.

Today the exchange rate is US$1.00=€0.95. (That changes by the minute) January 1, 2015 it was €0.826. So, if you cashed out US$1,000.00 in January you got €826. If you cash out today, you will get €951. Is that a good deal? It depends.

Dollar to Euro Exchange Rates 2015

Dollar to Euro Exchange Rates 2015

According to the graph the trend is a strengthening dollar and a weakening Euro. So, the longer you wait the more Euros you are likely to get for your dollar. Said another way, euros are getting cheaper, losing value. The problems with Greece and the European banks is portending big problems. People are abandoning the euro in anticipation. 

So, the deal is like buying gasoline. If prices are going up, you buy gas as often as possible to average your price down. If prices are going down you wait as long as possible, to more quickly average the price down. Over time we get the most gas for the least cost. The same is true for dollars or euros. Of course we, most of us, don’t sell gas, but we do sell currency.

Selling is the opposite of buying. So, we reverse what we do when we sell currency from when we buy. When selling dollars it is buying the other currency. So, when the price is going down we wait to get it as cheaply as possible. But, if we are, and this can get confusing, selling dollars to BUY euros and the euros are what we want and plan to use, like gas, we are buying euros, not selling dollars. So, we are buying euros and their dollar price is going up. We unload the dollars and buy euros often to average our price down.

Another confusing aspect is value, worth, or wealth. If one is trying to conserve wealth, then being in a currency that is losing value is a bad idea. This is why the big kids are moving their wealth in euros into dollars. For years the dollar was losing value and people were abandoning the dollar. Now, it has reversed.

If one does not need euros right now, then staying in dollars conserves wealth while the dollar price, in euros, is going up. Wait and convert when you need euros.

10 thoughts on “Second Life: Euro-Dollar Exchange Rate

  1. A very large portion of land in Second Life is owned or rented by people from Europe. A declining value of the Euro makes land significantly more expensive for them, land that already is a lot more expensive to them compared to US residents, due to VAT.

    • I understand. And that significantly changes whether now is the best time to cash out Lindens (essentially dollars) to euros.

      • Well, markets anticipate the future. So it does not matter when to sell. All current knowledge should be included in the current price. The exchange rate is bad for US exports, which big brother Obama will not like. So there will be some pressure in the other direction. I for my part cash out every month. Linden Lab is not a good bank, so better not kept too much money in your SL account. We all know how fast regulations ragarding virtual currency can change.

        • Your point about Linden currency is well taken.

          Your point about markets anticipating the future seems to presuppose they actually know the future. They don’t. We can anticipate somethings, like who can and cannot replay debit. But, when they will default or what banks will figure out to avoid a default is a guess. So, timing is always an issue. Currency traders make big money because they accurately anticipate when to move a currency, timing. But, they do make mistakes and lose money.

          As in buying gasoline, we can reduce our cost by being smart about when we buy. The same is true about currency. But, we can ignore the changing price of gas and just buy what we need. It probably won’t bankrupt the individual consumer. Being smart is often a necessity for those on low or fixed income. It is a matter of the daily process for the uber wealthy, which suggests something about how they got that way.

  2. —- The problems with Greece and the European banks is portending big problems. People are abandoning the euro in anticipation. —–

    Not exactly. The main reason is because the European Central Bank cut interests rates and started buying government bonds, injecting more euros into the financial system as a measure against the economic crisis and deflation. There were also many complaints that the euro was too strong against the dollar and that the exchange rate affected goods exports toward the US market. At the same time the Fed is boosting the dollar and that explains why the euro lost value mostly against the dollar. The Greek crisis is also a factor but not as relevant. On top of all that, large economies of European countries such as France, Italy and Spain are still stagnant. In general a weaker euro is a welcome change here in Europe.

    Not so much for European users in SL, as Jane points out. For years I have enjoyed a 30% discount on the significant monthly bill I pay to Linden Lab for my land. Within a few months that discount vanished.

    • We’ll disagree on the causes. But, your points are valid and show the complications in the currency markets. Whatever the causes, the result is the same. The euro is weakening against the dollar.

        • I do consider that many want the devaluation and some are pushing for it. But, it does screw over the middle class that can’t protect their wealth with currency trading, commodities, stocks, and other measures. It should be better for businesses in general. But, Greece is a US$471 billion problem. If the Euro banks have to write it off along with other countries debits, like Argentina, they may not be able to control the rate of devaluation.

    • I am looking forward to the day when we widely use cryptocurrencies like the bitcoin. Then evil banks and politicians will finally be left out of the equation and can’t play with our money anymore. Word is that High Fidelity will actually have its own cryptocurrency.

      • That is a nice dream. I would like that. But, governments have already started moving against virtual currencies. It isn’t something that is just going to happen. Citizens will have to force their governments to accept the idea and fight for their freedom. I don’t see many joining the fight for freedom.

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