[kaymin]

Originally Posted by cson

Competitiveness doesn't happen overnight OP. It's not some switch you can just flick on - I'm sure other countries would have copped it at this stage if it was that simple. Ireland is slowly beginning to bottom out with regard to the general cost of things here, it's a slow process but there is a foundation for competitiveness to grow out of.

But if your product costs €1 to make one day and the equivalent of 80c to make the next day (due to a 20% devaluation) then you are more competitive immediately. I'm not as optimistic as you regarding our cost base though. In my view there will be alot more pain to come before we become competitive and I'm not sure we will ever achieve competitiveness given the route we have to take while still using the euro (i.e. no devaluation option).

[kaymin]

From todays Sunday Business Post:
http://www.sbpost.ie/news/ireland-na...ure-47418.html

In its 2010 report on the European economy, to be published on February 23, CESifo singles out Ireland as one of just two eurozone members, along with Finland, for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

It said that the ‘‘very large’’ fall in the value of sterling against the euro, and a similar problem faced by Finland - which exports heavily to Sweden, whose currency has also declined against the euro - ‘‘certainly plays some role in the fact that Finland and Ireland are the two euro area countries where the recession has been most severe’’.

The report says that, while eurozone membership helped to maintain financial stability in Ireland, it also made the recession worse than it would otherwise have been.

‘‘While membership of the euro area is favourable for financial stability . . . it may make the actual contractionary impact of the crisis more severe by preventing a quick adjustment of the exchange rate," according to CESifo.

The group also names Ireland and Greece as the two ‘‘most exposed countries’’ that markets have identified as being most likely to suffer a sovereign default - when a country is unable to raise borrowings - or to leave the euro.

‘‘While euro membership provides an insurance against currency and financial crises, its real effects on peripheral countries may lead to such large imbalances that they may end up in crisis despite the safe haven effect," it said.

[ei.sdraob]

Originally Posted by kaymin

, for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

for the second time in this thread i will post this link
http://www.cso.ie/statistics/botmaintrpartners.htm
UK is in 4th largest destination for our exports
will people stop call it "the largest" that just has no grounding in reality



also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
http://www.cso.ie/releasespublicatio...nt/extrade.pdf
our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled


as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
theres no way in hell that an event of such scale could be kept secret

[hiorta]

Wouldn't other countries be ultra wary of accepting your money and avoid any credit transactions with Ireland.
Your current situation is self-inflicted, so who would trust you?

[kaymin]

Originally Posted by ei.sdraob

for the second time in this thread i will post this link

http://www.cso.ie/statistics/botmaintrpartners.htm

UK is in 4th largest destination for our exports



also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
http://www.cso.ie/releasespublicatio...nt/extrade.pdf
our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled


as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
theres no way in hell that an event of such scale could be kept secret

Yes, I read it the first time - 56% of our exports go to non-Euro countries.

I expect that imports from the UK are down is more a symptom of lower spending by Irish people.

Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals? Is it at prices that are making Irish companies loss making? If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

Out of interest what countries do you export to?

[ei.sdraob]

i posted this in recent thread
thanks to Greece the euro lost between 8% and 2% of its value against major currencies

according to your logic @kaymin the exporters here should be better off (hey and we didn't even have to leave the euro)
and we will see if that was the case in few months once we have data to check

Originally Posted by kaymin

But if your product costs €1 to make one day and the equivalent of 80c to make the next day (due to a 20% devaluation) then you are more competitive immediately

theres a hole in your reasoning, almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

you quoted China earlier but you forgot to mention that China manages to keep its import costs down (raw materials) by either having the resources within its borders (quite a bit of oil) or by securing lucrative contracts

we have none of that

[ei.sdraob]

Originally Posted by kaymin

Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals?

yes its driven by multinationals, devaluing wont help them, since most of these have to import most of their materials that go into the products being made (medical devices lets say)

the only people who could profit from devaluation is any new business starting up once the dust has settled, but remember they will have a terrible time accessing credit (no one will lend to this country if it defaults) so that would make it hard to start up

Originally Posted by kaymin

If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

a huge amount of money was mis-allocated into property and construction

Originally Posted by kaymin

Out of interest what countries do you export to?

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter

---------------

@kaymin

one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?


real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another

/

[kaymin]

Originally Posted by ei.sdraob

tho your missing one huge hole in your thinking almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

Depends on what industry of course - if we focus on the knowledge economy and export financial services then all of the costs are 'in-house'.

Perhaps there are substitute inputs available from Irish producers which will cost lower than the imported inputs following a devaluation thereby boosting the sales of other Irish companies.

If you are referring to the multi-nationals - one of the biggest contributors to Irish exports - I don't think your argument is valid since most multi-nationals will incur the same input costs (based on transfer pricing rules - i.e. sales and purchases between subsidiaries of the multinational group) and sell for the same prices no matter where they are located. Input costs which arise in Ireland only - labour, electricity, water, taxes etc should be low if the multi-national is to remain in Ireland longterm.

Devaluation worked for us before - I don't see why it won't work for us again.

[ei.sdraob]

Originally Posted by kaymin

Devaluation worked for us before - I don't see why it won't work for us again.

as many have pointed out

this time any attempt at devaluation would mean all money and credit draining out of economy, theres already little confidence in the economy of this country, any move to devalue (and default) would cause panic

that act alone would cause a total meltdown which would affect and hurt healthy companies, wiping out any potential gains to be made by devaluing

businesses need stability not a meltdown

anyways once again let me point at UK where devaluation has worked out "great" for them

[kaymin]

Originally Posted by ei.sdraob

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter
/

So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.

Originally Posted by ei.sdraob

@kaymin

one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?/

Unemployment is at only 8% - that's a good result in my view. Okay they've devalued peoples savings but maybe that's a price worth paying.

Originally Posted by ei.sdraob

real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another
/

And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.

[ei.sdraob]

Originally Posted by kaymin

So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.

over the last few years i have gained and lost equal amounts due to currency fluctuations, the end result is more or less the same, for me to make more money i have to become more productive

you missed the part about savings being in euro, if Ireland leaves the euro i can kiss goodbye to savings and reserves, thats money that can be used to invest or/and survive another bad patch of trading

Originally Posted by kaymin

Unemployment is at only 8% - that's a good result in my view.

they didn't have a quarter of their economy & large chunk of workforce tied directly or indirectly to construction

Originally Posted by kaymin

Okay they've devalued peoples savings but maybe that's a price worth paying.

thats money gone that could be used for savings (banks surely need them now) and investments (in business ventures or stocks)

Originally Posted by kaymin

And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.

as i said before in a recent thread, devaluation makes everyone poorer by an equal amount

that hits the poorer harder, theres a reason why we have a progressive taxation system

devaluation is akin to the taxman sticking a hand into everyones pockets and stealing an equal percentage out of their wallets (and the value of everything they own)

needless to say people are not stupid and will try to avoid the above if they hear about devaluation, possibly triggering bank collapses,

the very thing we were trying to avoid last 2 years

[SkepticOne]

Originally Posted by ei.sdraob

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter.

So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.

[ei.sdraob]

Originally Posted by SkepticOne

So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.

yes i see it now


sarcasm

lets wipe out the savers, investors and businesses that survived the recession
in order to recover from an economic recession caused by excessive debt and mis-allocation of money by gamblers
no moral hazard at all and it has worked out great before in other places

/sarcasm


as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into

.

[SkepticOne]

Originally Posted by ei.sdraob

as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into
anyways i wont be sticking around to see such an event i tell you if it happens

But all you are doing is storing money you have made in other countries the form of Euros. Maybe you employ a load of people in Ireland in which case my apologies.

[View]

Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

As a non-EU member state we would then be liable to Import Tariffs on all our exports to the EU. In other words, the 62% of our exports that are now tariff-free would become liable to tariffs. Offhand, I doubt that would benefit our export industries.

In addition, even if we were to decide to leave the Euro, we would need to replace all banknotes and coins in circulation. There is no way this could be done overnight and word would (almost definitely) get out about it. At which point, financial traders would send our bonds interest rates through the roof and anyone with a brain would drive for the border and either put their Euro into a newly-opened Euro account or sell it for Sterling and lodge it into a Sterling account. And there would be nothing the Government could do to stop this...