Wow, with the current exchange rate that's USD 665,150. Given the way that currencies are trending (USD closing in on the appropriate value to the Chinese Yuan (which doesn't float outside a pre-specified range) since we have so much trade with China, and therefore dropping in comparison to European Currencies), that situation is only going to get worse. Importing US talent is becoming a more expensive proposition for Euros in value terms versus players from other parts of the world.
I should clarify that the only reason the relative value of US talent is rising in this case is that there is a fixed price floor on US talent. The real price of US talent is dropping versus Euro market talent because of the dropping value of the dollar. In fact, this is a strong argument that increasing the number of international players in the league at this time, given that the price of imported talent is generally rising versus the price of domestic talent.
Can you clarify? Are you saying that: 1) US players are getting cheaper to Euro clubs, because of the weaking dollar, and 2) Bringing over Euro players to MLS is getting more expensive, but 3) a good investment, because of the trend of the dollar getting weaker? Or did I miss the point?
Hm, rereading it, apparently I had no point. It should read: "In fact, this is a strong argument against increasing the number of international players in the league at this time, given that the price of imported talent (from EMU Nations) is generally rising versus the price of domestic talent." Holland is an exception to this because they subject the contracts of international players to a Euro denominated floor. EMU Countries without such a floor would find American talent cheaper as the dollar weakens versus the Euro. By comparison, MLS will have to pay more dollars to aquire equivalent talent from EMU countries as the dollar weakens versus the Euro.
Good news for us but bad news for Clint. He'll get his payday in a year or so. A few more NAT appearances and a little more name recognition and he'll get an offer. Right now, Americans don't get much respect and have to be better then 1/2 the team to get a nibble.
Theory: He'll be among the guys who go to Germany in 2006 for the World Cup, and then stay on that side of the ocean.
Actually because Holland has their salary floor in $E terms then there is no change for them on a cost basis (in their eyes), it just means more relatively for the US based player in dollar terms. What does change is their ability to get a good value on transfer fees. MLS will be asking for X million for a specific player, and as the dollar weakens that means less in $E terms. If the dollar continues to plummet vs the Euro then I foresee more euro teams looking towards the US for cheap talent. If we ever see a 2 for 1 dollar to Euro ratio, US players would be phenomenally cheap. MLS would have no problem getting 1 or 2 million in transfer fees since it would mean so little in Euro terms. On the flip side European based players would get prohibitively expensive to buy for MLS. They would have to focus on Euro players who intend to move to the US, and would therefore not care about the dollar vs the Euro....or on South and Central American talent.
but, of course, the more dollar dependent economies of South and Central America (esp. currency pegged Argentina) will also weaken more or less in step with us. Since we import like 90% of our players from them anyways, there shouldn't be a big difference. If anything, it will add a little more caution to MLS when it looks for the Steve Howey's of the world, which certainly isn't all that bad. Of course, Latin American players will become cheaper to European teams as well.
I agree with what you said about transfer fee value, however, I think that Holland having a Euro denominated floor puts them in a situation where they have a fixed view in Euros of what a player is worth, but that player's value to other leagues in EMU will have decreased due to the fluctuation in rates. In other words, the EMU market says: Clint Dempsey is worth USD500, and the transfer rate is USD1.25 per Euro, so we'll pay him: 400 Euro. Holland says: The market says Clint Dempsey is worth 400 Euro, but we have to pay out at least 500 Euro for an international, therefore we have to pay him a premium of 100 Euro if we want to sign him. Whether that actually works in practice, I don't know, but remember that within EMU, all players are domestics, so a team from Holland might be more likely to sign a displaced equivalent value EMU player rather than an international player, and that international will go to an EMU country that doesn't have the floor (thus producing the displayed equivalent value EMU player). It's just a theory. I'm not a real economist (yet). Overall though, US in the current currency market is more likely to be an exporter of dollar denominated player contracts than an importer of players from EMU countries.
Actually Jeremy the Chinese currency and the USD dollar are pegged to each other. JUan is about 40% below the USD regardless. The Euro and USD are not, they are allowed to float freely. Curent US to pound ratio is for every 1.93 USD nets you 1 pound. cheers
Hong Kong Dollar was formerly pegged to USD at about 7.80 to 1, the Yuan floats within a peg range to the dollar. It's been effectively pegged at 8.2765 Yuan to the Dollar for months since the float range is too small though. However, the two together as a single market are floating against everything else, and that pressure is what is driving the downward motion of the dollar versus Europe. If the Yuan was unpegged, the dollar would go up, and the Yuan would go down.
Wait, I got this partially wrong. That last sentence is not correct, the Yuan would go up. The dollar would, I think, go up against Europe if the Yuan was correctly valued though.