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Only solution is for Ireland to leave the euro

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  • Closed Accounts Posts: 10,012 ✭✭✭✭thebman


    We did not need to join the euro, low corporation tax and back door deals with Charlie and Bertie got most of the big MNC's on board - these MNC will leave us high and dry which a lot are doing now... (DELL) (SEAGATE) Great plan for 15 years of growth we have managed to get into so much debit we are going to be paying for it for the next 50.

    It all comes down to money, europe and the west in general are not compedative, India and China will do your job and mine for a 1/5 of the price, taking the euro we traded in any chance to compete for our own jobs.

    In that case no country in the Eurozone should be getting higher investment now that previous years.

    So why are Italy and Germany getting higher levels of investment? Magic?


  • Registered Users Posts: 876 ✭✭✭woodseb


    Aside from the economic/fiscal implications of leaving the euro which i don't think justify a move has any of the proponents of leaving the euro considered the practical consquences of suddenly ditching the Euro?

    There would be chaos as there would still be a propert function physical currency around the country and people would hoard Euros in the face of a plummeting New Punt. It could take years for a full switchover and those who rely on government payments (welfare, public service) would be much worse off long with punishing those who kept their savings in bank accounts.

    It is not as 'simple' a process as in other examples when the central bank just devalued an existing currency


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    woodseb wrote: »
    There would be chaos as there would still be a propert function physical currency around the country and people would hoard Euros in the face of a plummeting New Punt. It could take years for a full switchover and those who rely on government payments (welfare, public service) would be much worse off long with punishing those who kept their savings in bank accounts.

    It is not as 'simple' a process as in other examples when the central bank just devalued an existing currency
    They could hoard euros but all taxes would have to be paid in the new currency. All VAT from retailers, all government salaries etc would be in the new currency. Legal tender would be in the new currency. Hoarding Euros would protect savings from the initial devaluation but on an ongoing basis people would switch over to the new currency to avoid transaction costs and for convenience.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    They could hoard euros but all taxes would have to be paid in the new currency. All VAT from retailers, all government salaries etc would be in the new currency. Legal tender would be in the new currency. Hoarding Euros would protect savings from the initial devaluation but on an ongoing basis people would switch over to the new currency to avoid transaction costs and for convenience.

    Yes just like people used gold and us dollars in zimbabwe with the local currency being useless, and eventually the government gave up and switched to us dollars

    the use of money requires confidence, what you propose would shatter what little confidence is left (in exchange for what exactly?)

    checkout Russia's default in the 90's almost everyone switched to using us dollars then, why?


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    They could hoard euros but all taxes would have to be paid in the new currency. All VAT from retailers, all government salaries etc would be in the new currency. Legal tender would be in the new currency. Hoarding Euros would protect savings from the initial devaluation but on an ongoing basis people would switch over to the new currency to avoid transaction costs and for convenience.

    And where does this legal tender come from? They can hardly print/mint it all on the night before the switch over. Banks would have to be shut down until An Punt Nua can be delivered to them. How long would that take? What damage would happen to the economy with no functioning banks?

    Nate


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  • Registered Users Posts: 2,651 ✭✭✭ShowMeTheCash


    cson wrote: »
    To pre-empt; I'd imagine it would be in general terms. There is more to the economy than property despite what people of a few years ago would have you believe.

    Yeah we have business and we are too expensive - way to expensive - our nearest neighbour the UK. Is considerably cheaper, you just need to look at Newry on the weekend to see this. So what can we do to ensure Irish jobs? ensure Irish trade??? Tell everyone we need to take a 20 - 40% pay cut just to be compedative with the UK?

    Jobs are still being lost in ireland we have not yet hit rock bottom, without money coming in everything else is going to fail at some point.

    If the euro is devalued I think it will help the country with day-to-day business and I think this is where we need to start. Else people just need to get real and realise they are not worth the money they are being paid.


  • Registered Users Posts: 2,651 ✭✭✭ShowMeTheCash


    cson wrote: »
    They're not the type of jobs Ireland should be targetting and endeavouring to create in the first place.


    You are living in the dark ages - Going back 20 years there is a lot of things the asian countries may not have been able to do whether that be due to infrastrcture or the fact the country was too poor, this is no longer the case as a nation we do not stand head and shoulders anymore above these countries if anything they will over take us. Our education over the last 20 years in a gloabl sense is not nearly as strong as it was we do not have anything of real value that comes from ireland i.e. Dimonds, oil etc....

    Tell me exactly what jobs we should be looking to create that could not be done in say China or India?


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Yeah we have business and we are too expensive - way to expensive - our nearest neighbour the UK. Is considerably cheaper, you just need to look at Newry on the weekend to see this. So what can we do to ensure Irish jobs? ensure Irish trade??? Tell everyone we need to take a 20 - 40% pay cut just to be compedative with the UK?.

    once again our uncompetitiveness has little to do with the currency

    your logic is based on false premise hence its a fail ;)


  • Registered Users Posts: 43,274 ✭✭✭✭K-9


    Maybe the problem is we have a market of 500 odd million people using the same currency as us and we haven't exploited it as we were too busy selling houses and services to each other?

    The EU is our biggest single market and multinationals have taken advantage of it. Our indigenous exporters don't seem to have to the same level of success.

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • Closed Accounts Posts: 3,619 ✭✭✭fontanalis


    woodseb wrote: »
    Aside from the economic/fiscal implications of leaving the euro which i don't think justify a move has any of the proponents of leaving the euro considered the practical consquences of suddenly ditching the Euro?

    There would be chaos as there would still be a propert function physical currency around the country and people would hoard Euros in the face of a plummeting New Punt. It could take years for a full switchover and those who rely on government payments (welfare, public service) would be much worse off long with punishing those who kept their savings in bank accounts.

    It is not as 'simple' a process as in other examples when the central bank just devalued an existing currency

    Ah but back in Devs shamrock Disneyland they had the punt. Seriously, some people seem to have bad memory and a knack of not attributing our own failure to ourselves, not good when you want to get out of a blackhole.


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  • Closed Accounts Posts: 3,619 ✭✭✭fontanalis


    You are living in the dark ages - Going back 20 years there is a lot of things the asian countries may not have been able to do whether that be due to infrastrcture or the fact the country was too poor, this is no longer the case as a nation we do not stand head and shoulders anymore above these countries if anything they will over take us. Our education over the last 20 years in a gloabl sense is not nearly as strong as it was we do not have anything of real value that comes from ireland i.e. Dimonds, oil etc....

    Tell me exactly what jobs we should be looking to create that could not be done in say China or India?

    Noone would work for China or India level wages.


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Article by Professor Martin Feldstein (via the irish Economy blog) here recommending temporary exit from the Eurozone for Greece.
    The European economic and monetary union is doubly flawed. First, it forces diverse countries to live with a single interest rate and exchange rate that cannot be appropriate for all members. Second, combining a single currency with independent national budget policies encourages fiscal profligacy. The Greek situation is a manifestation of these flaws. If European political leaders nevertheless want to preserve the current system, allowing a temporary exchange rate reset for Greece may be the best option.


  • Registered Users Posts: 2,651 ✭✭✭ShowMeTheCash


    ei.sdraob wrote: »
    once again our uncompetitiveness has little to do with the currency

    your logic is based on false premise hence its a fail ;)

    What is currency? A value we put on something that is not real, owning our currency and shifting the goal posts is a lot easier than trying to adjust the entire country


  • Registered Users Posts: 2,651 ✭✭✭ShowMeTheCash


    fontanalis wrote: »
    Noone would work for China or India level wages.

    Exactly!


  • Registered Users Posts: 6,275 ✭✭✭evolutionqy7


    kaymin wrote: »
    Leaving the euro is the only way we will emerge from recession for the following related reasons IMO:

    a) there is too much opposition from the unions to sufficiently reduce our general wage levels
    b) inward investment will continue to fall due to high cost of doing business here resulting in increased unemployment
    c) domestic demand will remain low due to high personal debt and unemployment preventing any kind of domestic driven recovery
    d) export driven recovery won't happen because our costs are too high resulting in the price of our produce being uncompetitive on international markets.
    e) unemployment will worsen our fiscal position preventing Ireland (due to pressure from lenders for Ireland to balance the books) from stimulating the economy through increased spending
    f) higher interest rates in Euroland will be a barrier to a recovery in Ireland since we will be one of the last to emerge (if we ever do).

    It's a vicious circle that is almost impossible to extract oneself. The solution is to leave the euro imo - consequences are:
    a) Immediate reduction in cost of doing business here resulting in increased inward investment.
    b) Cost of exports are immediately lower resulting in increased demand on international markets for Irish produce facilitating an export driven recovery.
    c) Cost of imports will be too high favouring domestic producers thereby boosting employment in Irish companies facilitating a domestic driven recovery
    d) We will be able to keep interest rates low until we've properly recovered.
    e) Should solve the public versue private sector debate though we still need to make the public service more efficient


    Problem with this approach is our (Ireland's and our personal) debt is denominated in euro leading most likely to default. Euro personal debt would have to be redenominated in Irish punts at a rate that is consisent with current euro debt / euro earning ratio. Lenders inevitably would have to take a hit on the fx.

    The above approach is similar to what is recommended for Latvia and what happened in Argentina in 2001 - see link below. Latvia continues to peg its currency to the euro while Argentina pegged its currency to the dollar until it was forced to devalue. It was only when Argentina devalued that it emerged from recession.

    http://www.cepr.net/documents/publications/latvia-recession-2010-02.pdf

    Any views?

    mmm all of it is true but leave the euro? i know its the fault of idiots who kept increasing the living cost and the goverments fault for getting carried away with the tax rise...but surely lowered tax and lowered living costs would atleast bring back some foreign investors back...that was the 1st reason they came here wasnt it? ppl got carried away...prices and tax rise and they go somewhere else where its cheaper...makes sense


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    What is currency? A value we put on something that is not real, owning our currency and shifting the goal posts is a lot easier than trying to adjust the entire country

    yes instead of fixing our economy and addressing the root causes of this recession instead we go out with a bang Zimbabwe style :rolleyes:


    currency is not only something that people use as a unit of exchange when trading, as was mentioned over and over earlier having own currency would not have prevented our current problems (yet again have little to do with euro) and if anything made them worse (see Iceland)

    for any currency to work there needs to be confidence in the currency, as many posters over and over mentioned defaulting and devaluing would mean what little confidence is left goes poof into thin air, and most likely (as has happened before in many places) people would switch or continue to use whatever currency they have confidence in


    anyways this thread is getting ridiculous, the posters on the "lets leave euro" side of the debate are not bothering to contribute anything interesting and continue to ignore and not address manys of points that have been made

    /


  • Registered Users Posts: 7,476 ✭✭✭ardmacha


    This thread is indeed going nowhere. You can put the case for an independent currency, you can even put a case that Ireland should not have joined the Euro. However even if you argue these points this does imply that you should leave the Euro. There is no orderly or straightforward way to leave the Euro, there is only a crisis way to leave and the adverse impact of this would far outweigh any benefits.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    fontanalis wrote: »
    Noone would work for China or India level wages.

    No one could afford to.

    Typical (non-luxury) outlay per month :

    Mortgage/loans : €900
    Phone, broadband, TV : €100
    Transport : €100
    Heating : €50
    Food : €300

    That's €1,500 net before there's even a hint of a luxury! Average in car tax, house insurance, health insurance, car insurance, bin charges and whatever else and you need a minimum of €1,800 a month to survive in this country.

    Ironically, most of the most expensive items and services are things that the Government should have had control over, but privatised / licensed / forgot to regulate effectively.


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ardmacha wrote: »
    There is no orderly or straightforward way to leave the Euro, there is only a crisis way to leave and the adverse impact of this would far outweigh any benefits.
    But at least a crisis would be over relatively quickly. At what stage are we going to emerge from the current difficulties? Paul Krugman said last June that it would take about five years of deflation.


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    But at least a crisis would be over relatively quickly. At what stage are we going to emerge from the current difficulties? Paul Krugman said last June that it would take about five years of deflation.

    Please explain what you mean by "a crisis". Please explain what you believe the effect of "a crisis" would be. And please also explain what you mean by relatively quickly.

    Nate


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  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Please explain what you mean by "a crisis". Please explain what you believe the effect of "a crisis" would be. And please also explain what you mean by relatively quickly.
    The word crisis was used by Ardmacha. It would not necessarily be my choice of words. What I mean is that there would need to be preventative measures against runs on the banks during the period of switch over which would be unpopular and costly. By relatively quickly I would think a matter of months. There is a lot of uncertainty involved but equally so in staying in the union. One thing to take note of is that the health of the banks are more tied in with the health of the general economy due to the government guarantee which is already in place to protect against runs.


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    The word crisis was used by Ardmacha. It would not necessarily be my choice of words.

    Fair point, how would you describe it?
    SkepticOne wrote: »
    What I mean is that there would need to be preventative measures against runs on the banks during the period of switch over which would be unpopular and costly.

    i.e. Shutdown the banks. How fast do you think the banks, never-mind the wider economy, will be re-populated by An Punt Nua? Given that no printing/minting will be started until after an announcement is made and the banks are boarded up, due to the need for secrecy.

    What effect do you believe removing the banking system from the economy would have?
    SkepticOne wrote: »
    By relatively quickly I would think a matter of months. There is a lot of uncertainty involved but equally so in staying in the union.

    Months? You believe the effects of shutting down an economy, while you replace the currency, along with a massive default on over 1.5 trillion Euro in public an private debt will last for months? I respectfully disagree.

    What uncertainty is there involved with us staying in the union? The consequences of staying in the union are quantifiable, they may not be nice, but it is not a leap in the dark as leaving is.
    SkepticOne wrote: »
    One thing to take note of is that the health of the banks are more tied in with the health of the general economy due to the government guarantee which is already in place to protect against runs.

    I'm not sure what point you are trying to make here, could you elaborate?

    At the moment the health of the banks are tied into the taxpayers pocket, the only thing that can save the banks is more capital, which the taxpayer will provide.

    The guarantee protects against nothing, it is simply a measure in bolstering confidence. When you realise that it in effect has the taxpayer guaranteeing €400bn, you, me, and certainly the markets, know it can never be invoked.

    Nate


  • Registered Users Posts: 7,476 ✭✭✭ardmacha


    So you manage to leave the Euro after months of turmoil when there are limits on how much you can withdraw from cash machines and shopkeepers from Cork try to avoid the Customs when driving to Newry to lodge their takings.

    Then what? Yes, your devalued punt nua makes exporters more competitive. But what about the government and the banks? Government debt is in Euros, do they redenominate this in Punt Nua and piss off the markets or do they leave it in Euro making the debt and interest payments bigger. Likewise with the banks, are all of their bonds to be redenominated? If so why don't they simply just agree to pay less than the full value of these things in the first place and stay in the Euro.


  • Registered Users Posts: 23,283 ✭✭✭✭Scofflaw


    SkepticOne wrote: »
    By relatively quickly I would think a matter of months. There is a lot of uncertainty involved but equally so in staying in the union.

    I don't really see the uncertainty in staying in the union. At the moment our uncertainty boils down pretty much to wondering whether we can borrow the necessary money, make the necessary cuts without general strikes, and how much of a haircut we get on NAMA. There's speculation about the "breakup of the eurozone", but nothing more than that.

    Why would we want to add a huge amount of uncertainty in how our currency would hold up on the international market, how the rest of the EU would react to our departure, how a currency changeover would pan out for businesses and families, how foreign companies would react...the list goes on, and each one involves a level of unknown unknowns larger than anything currently facing us.

    It's a bit like saying "I'm afraid this ship might fail to ride out these rough seas, so I'm going to bail out into a dinghy right now, because that way I have more control over my destiny".

    cordially,
    Scofflaw


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    i will inject some more reality into this thread

    to follow on from this post


    why is it that after devaluing their currency by 20-30% UKs balance of trade is still going down the drain?

    2djuh09.png

    source for data


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ardmacha wrote: »
    Yes, your devalued punt nua makes exporters more competitive. But what about the government and the banks? Government debt is in Euros, do they redenominate this in Punt Nua and piss off the markets or do they leave it in Euro making the debt and interest payments bigger. Likewise with the banks, are all of their bonds to be redenominated? If so why don't they simply just agree to pay less than the full value of these things in the first place and stay in the Euro.
    I think your reasoning here is directly analogous to a business owner refusing to lower his prices because his outgoings will still be at a certain level or a commercial landlord not lowering rents because his outstanding debt and repayments will still be at the same level. I think there's a lot of this thinking going on within the economy itself.

    However, sometimes lowering prices is what you need to do to increase revenue.


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    I think your reasoning here is directly analogous to a business owner refusing to lower his prices because his outgoings will still be at a certain level or a commercial landlord not lowering rents because his outstanding debt and repayments will still be at the same level. I think there's a lot of this thinking going on within the economy itself.

    However, sometimes lowering prices is what you need to do to increase revenue.

    Hang on, you are proposing now to keep Irelands external debt in Euro while introducing An Punt Nua? Are you insane?

    Nate


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Hang on, you are proposing now to keep Irelands external debt in Euro while introducing An Punt Nua? Are you insane?

    Nate
    I think the point raised was specifically about government debt rather than external debt in general. What I'm doing is refuting the idea that having a currency that devalues necessarily makes it harder to service national debt. It is true that on paper the national debt figure goes up when viewed in the new currency.

    If you are a landlord and your rents are too high then lowering them will make your outstanding loan increase when measured in terms of your asking rent. So you have an outstanding loan of x times your monthly rent.

    But raising your rent does not improve your ability to pay back that rent. Lowering the rent maybe the thing to even though that means that your outstanding loan in terms of your asking rent goes up.


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    I think the point raised was specifically about government debt rather than external debt in general.

    That's almost worse, That's about 70bn government debt or so, so what about the rest of the 1.5 trillion. Leaving everybody else paying off Euro debts with monopoly money. Would you like to be paying your mortgage in Euro while earning Na Punt Nua?

    Nate


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  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    That's almost worse, That's about 70bn government debt or so, so what about the rest of the 1.5 trillion. Leaving everybody else paying off Euro debts with monopoly money. Would you like to be paying your mortgage in Euro while earning Na Punt Nua?

    Nate
    Sorry I subsequently edited my post to explain the reasoning.

    This is the bit I added.

    If you are a landlord and your rents are too high then lowering them will make your outstanding loan increase when measured in terms of your asking rent. So you have an outstanding loan of x times your monthly rent.

    But raising your rent does not improve your ability to pay back that rent. Lowering the rent maybe the thing to even though that means that your outstanding loan in terms of your asking rent goes up.


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