[yummyfajitas]

The law of demand is only relevant if you are discussing the balance sheets of exporting businesses, which for some reason you seem insistent on doing.

I'm discussing the balance sheets of consumers. Maybe I'm just crazy, but I care more about consumers than I do about Mercedes-Benz Inc.

[veyron]

Ok take a step back.

Suppose that mercedes benz is only able to sell half as many cars as normal. What will happen? Will they keep the same number of employees? If the US is any example, the answer is clearly no. And once families lose their incomes, they have less income to deal with.

If you presuppose that they magically earned the same number of euros without concern for the demand, then yes. However, that's not how it works. You have to look at Mercedes Benz and other companies because they are the ones who are paying most of the consumers.

Put simply, a consumer with no income in a world with a stronger Euro is worse off than a consumer with an income in a world with a weaker Euro (something is better than nothing :)

[yummyfajitas]

You seem to wish to invoke second order effects only while saying "what's good for Mercedes is good for Germany".

Consider the second order effects of a stronger currency. Germans can now purchase big screen TVs, food and non-German cars for less money than before. They still have money left over which can be spent on personal trainers, pedicures, restaurant meals, etc. Or conversely, they can work fewer hours.

In this world, Germans have the same number of Mercedes-Benz cars as before, and they also consume more restaurant meals and leisure.