Is the euro likely to break up?

Mad Finn

I'm no economist, but I have a layman's understanding of the basic terms when somebody knowledgeable tries to explain things to me. Maybe somebody here can.

Yesterday on Newstalk I listened to Ivan Yates (George Hook's sub) interview a guy from I think the London School of Economics. I think his name was Prince or Prinz. He was very English.

Anyway, he was talking about the economic summit and one of the things he said was that one of the big issues this year will be whether or not the euro survives as a separate currency spanning several countries. His feeling was that it would not and we would be back to the good old punt.

He tried to imply that this would be good for Ireland, in that we can adjust our currency exchange rate to counteract a slowdown. But then, if we have to borrow loads to fund the government deficit, a weak currency just increases the debt burden.

So my question is: is the future of the euro under serious threat? And what are the implications?

Any clever people out there able to explain to me in relatively simple language?

getz

Mad Finn wrote: »

I'm no economist, but I have a layman's understanding of the basic terms when somebody knowledgeable tries to explain things to me. Maybe somebody here can.

Yesterday on Newstalk I listened to Ivan Yates (George Hook's sub) interview a guy from I think the London School of Economics. I think his name was Prince or Prinz. He was very English.

Anyway, he was talking about the economic summit and one of the things he said was that one of the big issues this year will be whether or not the euro survives as a separate currency spanning several countries. His feeling was that it would not and we would be back to the good old punt.

He tried to imply that this would be good for Ireland, in that we can adjust our currency exchange rate to counteract a slowdown. But then, if we have to borrow loads to fund the government deficit, a weak currency just increases the debt burden.

So my question is: is the future of the euro under serious threat? And what are the implications?

Any clever people out there able to explain to me in relatively simple language?

yes the euro may well be under threat-the reason that going back to the irish punt may be good for ireland is because most of irelands income comes from farming exports to the uk ,and tourism , ie weak punt means booming exports and tourism

meditraitor

I too now f all about economics but from what I gather lately in the media its actually sterling thats under pressure and maybe the anti euro lobby in britain are just trying muddy the waters with propoganda.

Sam the Sham

There's no way we're going back to the punt. Not a chance. Think of what would have to happen. It would have to be announced and prepared in advance, since you can't change a currency overnight. The minute it was announced, the giant sucking sound you would hear would be all of the capital in the country rushing out.

To announce we were dropping the euro would be like declaring we want to be Iceland.

uncle_sam_ie

meditraitor wrote: »

I too now f all about economics but from what I gather lately in the media its actually sterling thats under pressure and maybe the anti euro lobby in britain are just trying muddy the waters with propoganda.

This article by a European think tank, backs this claim.
http://www.leap2020.eu/GEAB-N-33-is-available!-Growing-Transatlantic-tensions-on-the-eve-of-the-G20-summit-An-illustration-of-Wall-Street-s-and_a2940.html

"If we found this a relevant theme, it is because it represents in our opinion a deliberate attempt on the part of Wall Street and the City (2) to make the world believe in some rupture within the EU and to instil the idea that some « deadly » risk is weighing on the Eurozone, by endlessly conveying phony news on a “banking risk coming from Eastern Europe” and by stigmatizing a “cold-feeted” Eurozone as opposed to the “voluntarist” actions initiated by the Americans and the Bristish. One aim is also to divert the attention from the increasing financial problems encountered in New York and London, and to weaken the Europe position on the eve of the G20 summit. "

Dob74

Mad Finn wrote: »

I'm no economist, but I have a layman's understanding of the basic terms when somebody knowledgeable tries to explain things to me. Maybe somebody here can.

Yesterday on Newstalk I listened to Ivan Yates (George Hook's sub) interview a guy from I think the London School of Economics. I think his name was Prince or Prinz. He was very English.

Anyway, he was talking about the economic summit and one of the things he said was that one of the big issues this year will be whether or not the euro survives as a separate currency spanning several countries. His feeling was that it would not and we would be back to the good old punt.

He tried to imply that this would be good for Ireland, in that we can adjust our currency exchange rate to counteract a slowdown. But then, if we have to borrow loads to fund the government deficit, a weak currency just increases the debt burden.

So my question is: is the future of the euro under serious threat? And what are the implications?

Any clever people out there able to explain to me in relatively simple language?

We may have been better off staying out of the euro.
There are pro's and con's to everything. The media in this country is almost afraid to question us going into the euro.
Since we lost control of our interest rates, they have been set to favour Germany&France.
We also can't de-value, to make us more price competitive.
Sterling has de-valued and that is killing irish imports to the UK.

Fratton Fred

uncle_sam_ie wrote: »

This article by a European think tank, backs this claim.
http://www.leap2020.eu/GEAB-N-33-is-available!-Growing-Transatlantic-tensions-on-the-eve-of-the-G20-summit-An-illustration-of-Wall-Street-s-and_a2940.html

"If we found this a relevant theme, it is because it represents in our opinion a deliberate attempt on the part of Wall Street and the City (2) to make the world believe in some rupture within the EU and to instil the idea that some « deadly » risk is weighing on the Eurozone, by endlessly conveying phony news on a “banking risk coming from Eastern Europe” and by stigmatizing a “cold-feeted” Eurozone as opposed to the “voluntarist” actions initiated by the Americans and the Bristish. One aim is also to divert the attention from the increasing financial problems encountered in New York and London, and to weaken the Europe position on the eve of the G20 summit. "

Or, alternatively, the Eurozone is in trouble and articles like distract attention away from it by claiming it is an "Anglo-Saxon" conspiracy.

Who the **** knows anymore.

meditraitor

Fratton Fred wrote: »

Or, alternatively, the Eurozone is in trouble and articles like distract attention away from it by claiming it is an "Anglo-Saxon" conspiracy.

Who the **** knows anymore.

I thought about that as well.............. jasus I have a headache now

uncle_sam_ie

Fratton Fred wrote: »

Or, alternatively, the Eurozone is in trouble and articles like distract attention away from it by claiming it is an "Anglo-Saxon" conspiracy.

Who the **** knows anymore.

I don't know why I bother. Did you read the article?

Fratton Fred

uncle_sam_ie wrote: »

I don't know why I bother. Did you read the article?

Yes I did. It did come accross as a bit conspiracy theorist to me.

I don't understand the world of global economics. Why would the US and UK benefit from the break up of the euro?

jester77

Looks like the Germans are pulling out of the Euro

Mad Finn

getz wrote: »

most of irelands income comes from farming exports to the uk ,and tourism , ie weak punt means booming exports and tourism

I think that statement is about 30 years out of date, no?

Mad Finn

jester77 wrote: »

Looks like the Germans are pulling out of the Euro

Wow!!

Google's language tools translate that headline as "Federal government decides re-introduction of the D-Mark"

Phew!!!

That's a historic announcement. Take note of the date. April 1st 2009. The day the great experiment of the euro died.

Hey, wait a minute..........:o

Inquitus

Hes rabidly anti Euro that guy, not sure what the bee in his bonnet is but he has been trashing the Euro on Newstalk for a couple of years.

uncle_sam_ie

Fratton Fred wrote: »

Yes I did. It did come accross as a bit conspiracy theorist to me.

I don't understand the world of global economics. Why would the US and UK benefit from the break up of the euro?

So you completely disagree with this bit?

"For those who are not familiar with EU geography, a headline like « Hungary in bankruptcy » or « Latvia defaults on its debt » can compare to one like « California goes bankrupt ». For those who lose their jobs as a consequence, the problem is indeed similar. However, in terms of impact on a larger-scale, they have nothing in common. California, severely affected by the subprime crisis, is the most populated and richest state of the United States, while Latvia is a poor country with a population corresponding to 1 percent of the EU population (versus California’s 12 percent of the US population (11)). Hungary’s GDP represents less than 1.1 percent of the Eurozone’s GDP (in the case of Latvia, this figure is 0.2 percent) (12), that is to say the equivalent of Oklahoma (1% of US GDP (13)) rather than Florida. Eastern Europe is far from being able to bring problems of a similar magnitude to the subprime crisis. All the new Member-States put together comprise less than 10 percent of the EU GDP (among them, the biggest and richest ones, such as Poland and the Czech Republic, are hardly affected at all). As a worst-case scenario, the amounts at stake for the European financial system, are around EUR 100-billion (USD 130-billion) (14), that is to say a very modest sum on the scale of the EU financial system (15). In fact, the EU has taken the lead of a consortium which has already injected EUR 25-billion (i.e. 20 percent of the worst-case scenario) to stabilize the situation (16), and whose severity has already been diminished by the recent fall in value of the Swiss Franc.


Last but not least, the value of new houses in Eastern Europe will not fall dramatically (even if the value will be less than in 2007/08) because, after 50 years of communism, there is a shortage of modern buildings. In the US on the contrary, an excessive number of houses were built during the last housing bubble, of variable quality and already depreciating in value in the most affected states. There, there is a real destruction of wealth for landowners, creditors, banks and the economy altogether. "

uncle_sam_ie

Fratton Fred wrote: »

I don't understand the world of global economics. Why would the US and UK benefit from the break up of the euro?

Probably because the US desperately wants maintain the Bretton Woods system and a strong EU is seen as a threat.

Fratton Fred

uncle_sam_ie wrote: »

So you completely disagree with this bit?

"For those who are not familiar with EU geography, a headline like « Hungary in bankruptcy » or « Latvia defaults on its debt » can compare to one like « California goes bankrupt ». For those who lose their jobs as a consequence, the problem is indeed similar. However, in terms of impact on a larger-scale, they have nothing in common. California, severely affected by the subprime crisis, is the most populated and richest state of the United States, while Latvia is a poor country with a population corresponding to 1 percent of the EU population (versus California’s 12 percent of the US population (11)). Hungary’s GDP represents less than 1.1 percent of the Eurozone’s GDP (in the case of Latvia, this figure is 0.2 percent) (12), that is to say the equivalent of Oklahoma (1% of US GDP (13)) rather than Florida. Eastern Europe is far from being able to bring problems of a similar magnitude to the subprime crisis. All the new Member-States put together comprise less than 10 percent of the EU GDP (among them, the biggest and richest ones, such as Poland and the Czech Republic, are hardly affected at all). As a worst-case scenario, the amounts at stake for the European financial system, are around EUR 100-billion (USD 130-billion) (14), that is to say a very modest sum on the scale of the EU financial system (15). In fact, the EU has taken the lead of a consortium which has already injected EUR 25-billion (i.e. 20 percent of the worst-case scenario) to stabilize the situation (16), and whose severity has already been diminished by the recent fall in value of the Swiss Franc.


Last but not least, the value of new houses in Eastern Europe will not fall dramatically (even if the value will be less than in 2007/08) because, after 50 years of communism, there is a shortage of modern buildings. In the US on the contrary, an excessive number of houses were built during the last housing bubble, of variable quality and already depreciating in value in the most affected states. There, there is a real destruction of wealth for landowners, creditors, banks and the economy altogether. "

No, that all makes perfect sense.

a lot of those countries are in trouble though, like it or not. Surely this adds to the UK's reason's for not joining the euro in the first place.

Other than bragging rights at the G20, what is the benefit to the UK or US of the Euro breaking up though, i don't get it.

Purple Gorilla

Of course the English would be anti-Euro. It's apart of their whole "lets ignore our own problems" attitude.

The sterling is more likely to collapse than the euro. They are the ones resorting to Quantative Easing. This is a last ditch attempt for any country. Why is it a last ditch attempt? Because every time it has been used, the country has collapsed.
Met my friend Zimbabwe? My good ole chum The Weimar Republic? They both love(d) printing money and now they have the biggest and best economies in the world...oh wait

Fratton Fred

Purple Gorilla wrote: »

Of course the English would be anti-Euro. It's apart of their whole "lets ignore our own problems" attitude.

The sterling is more likely to collapse than the euro. They are the ones resorting to Quantative Easing. This is a last ditch attempt for any country. Why is it a last ditch attempt? Because every time it has been used, the country has collapsed.
Met my friend Zimbabwe? My good ole chum The Weimar Republic? They both love(d) printing money and now they have the biggest and best economies in the world...oh wait

That's just nationalist bollox to be honest.

Japan has used Quantitive Easing, as has the US. Both of them tend to be fairly big economies.

You might want to read about the ECB's liquidity scheme, which is pretty much the same thing I believe.

silverharp

Purple Gorilla wrote: »

Met my friend Zimbabwe? My good ole chum The Weimar Republic? They both love(d) printing money and now they have the biggest and best economies in the world...oh wait

you need to factor in the bond market which would act as a break on a hyperinflation play. Weimer or Zimbabwe didnt have these

Flamed Diving

What? A British economist attempting to discredit the Euro?

Fratton Fred

Flamed Diving wrote: »

What? A British economist attempting to discredit the Euro?

I think it was the tories shadow chancellor who said Britain should rejoice rejoice rejoice that they weren't in the Euro when it was launched. It has always been claimed it was not right for the UK for pretty much the reasons given earlier in this thread.

thebman

Fratton Fred wrote: »

That's just nationalist bollox to be honest.

Japan has used Quantitive Easing, as has the US. Both of them tend to be fairly big economies.

You might want to read about the ECB's liquidity scheme, which is pretty much the same thing I believe.

Pfft, you could claim the British slating the Euro is just British nationalist bollox too.

Of course the British press wants to bash the Euro. The majority of British people don't want to be in the Euro so it will sell papers if they print stories saying the Euro is in trouble. Makes the people feel smart of being against joining the Euro.

America is just anti-Euro because they fear it. Recently read an article where they were saying that the Euro is safe because it is working as designed to take down the dollar. That was a US article. It seems its America V the EU as far as they are concerned.

I don't see the discussion going anywhere when everyones counter-argument is, well they would say that wouldn't they?

Mad Finn

thebman wrote: »

I don't see the discussion going anywhere when everyones counter-argument is, well they would say that wouldn't they?

That's what I was trying to learn from this. I don't want it to degenerate into a battle of conspiracy theories. But can anybody give an objective reason in a few paragraphs why the euro MIGHT collapse and an objective counter reason why it won't?

I know you will rightly say "Feck off and read a basic economics text book" but I'm too old for that. Anybody smart enough and concise enough to put the arguments into a few paragraphs?

Pretty please.

Reprobate

Fratton Fred wrote: »

Or, alternatively, the Eurozone is in trouble and articles like distract attention away from it by claiming it is an "Anglo-Saxon" conspiracy.

Who the **** knows anymore.

To get to the truth, I suggest comparing the recent rate of GDP contraction in the UK with those of Euro-zone countries. On top of this you could also look at the actual national debt level in the "bankrupt" UK compared to Euro-zone countries. IMO, these figures paint a pretty clear picture of which side is telling porkies.

Reprobate

uncle_sam_ie wrote: »

Probably because the US desperately wants maintain the Bretton Woods system and a strong EU is seen as a threat.

Were you attempting irony here? The Bretton woods institutions may still be around, but the Bretton woods system itself broke down about 35 years ago. It was a system of fixed exchange rates, and if anything it served as an example of why the Euro was a very, very bad idea. Several times during its operation member countries had to devalue to get themselves out of economic trouble. The Euro removed this essential option.

Reprobate

Mad Finn wrote: »

That's what I was trying to learn from this. I don't want it to degenerate into a battle of conspiracy theories. But can anybody give an objective reason in a few paragraphs why the euro MIGHT collapse and an objective counter reason why it won't?

Basically, the latter phase of the "Celtic Tiger" was a debt-fuelled binge, caused partly by inappropriate (for Ireland) interest rates, and partly by irresponsible fiscal policy. There was an illusion of great wealth that became unsustainable as soon as credit ceased to be easily available. Now that the bubble has well and truly burst, it is apparent that wages and prices have grown way out of sync with the rest of the Euro-zone. Tax revenues have also collapsed. The situation is being made worse by the ECB being consistently behind the curve with it's monetary policy, resulting in a strong Euro that is murdering industry.

The only way to solve this within the Euro is to raise taxes, slash spending, cut everyone's wages and undergo a period of deflation. Cowen spoke of five years of austerity. Personally I think you're looking at a decade at the minimum, and it will be a truly miserable period for the people of Ireland. If the Government refuses to grasp the nettle, then the national debt will spiral out of control and a default will become inevitable. If this occurs then Ireland might as well drop out of the Euro, as the damage will be similar. Dropping out of the Euro would at least enable a devaluation that would solve the imbalance and allow the recovery to begin.

The choice is between a short sharp shock or a slow lingering death. I know which one I'd choose. I think that when the extent of the real sacrifices people are going to have to make becomes apparent, the pendulum of public opinion may swing against the Euro.

Flamed Diving

Reprobate wrote: »

Basically, the latter phase of the "Celtic Tiger" was a debt-fuelled binge, caused partly by inappropriate (for Ireland) interest rates, and partly by irresponsible fiscal policy. There was an illusion of great wealth that became unsustainable as soon as credit ceased to be easily available. Now that the bubble has well and truly burst, it is apparent that wages and prices have grown way out of sync with the rest of the Euro-zone. Tax revenues have also collapsed. The situation is being made worse by the ECB being consistently behind the curve with it's monetary policy, resulting in a strong Euro that is murdering industry.

The only way to solve this within the Euro is to raise taxes, slash spending, cut everyone's wages and undergo a period of deflation. Cowen spoke of five years of austerity. Personally I think you're looking at a decade at the minimum, and it will be a truly miserable period for the people of Ireland. If the Government refuses to grasp the nettle, then the national debt with spiral out of control and a default will become inevitable. If this occurs then Ireland might as well drop out of the Euro, as the damage will be similar. Dropping out of the Euro would at least enable a devaluation that would solve the imbalance and allow the recovery to begin.

The choice is between a short sharp shock or a slow lingering death. I know which one I'd choose. I think that when the extent of the real sacrifices people are going to have to make becomes apparent, the pendulum of public opinion may swing against the Euro.

At least a decade. Apart from guessing, what do you base this on?

Blackjack

Fratton Fred wrote: »

I think it was the tories shadow chancellor who said Britain should rejoice rejoice rejoice that they weren't in the Euro when it was launched. It has always been claimed it was not right for the UK for pretty much the reasons given earlier in this thread.

Probably just as well for the rest of the participants in the Euro that the UK didn't Join, dragging the rest of us down with it.

Interesting Article here, albeit from January.

Reprobate

Flamed Diving wrote: »

At least a decade. Apart from guessing, what do you base this on?

The Japanese experience.

Reprobate

Blackjack wrote: »

Probably just as well for the rest of the participants in the Euro that the UK didn't Join, dragging the rest of us down with it.

Interesting Article here, albeit from January.

Considering it was "finished" three months ago, Sterling seems to be holding it's own remarkably well. Currently three cents higher than when Jim Rogers declared it "finished".

Anyway, that was just another article promoting the persistent myth that a highly valued "strong" currency is a good thing, when at times like these it's the last thing you want. As I said above, look at the GDP figures. Sterling finished? Nope, it's saving Britain's arse.

Flamed Diving

Reprobate wrote: »

The Japanese experience.

Excellent. Tell me why this is relevant?

Reprobate

Flamed Diving wrote: »

Excellent. Tell me why this is relevant?

It's a classic example of a credit bubble bursting, with associated bank insolvency and debt deflation. In Japan's case, it was conservative central bankers that prevented them from debasing their currency, untill they finally gave in and started QE after a decade. In Ireland's case, Euro-zone membership completely removes the option. The ECB is also being similarly conservative in its monetary policy for the Euro-zone as Japan's central bank was.

Flamed Diving

Reprobate wrote: »

It's a classic example of a credit bubble bursting, with associated bank insolvency and debt deflation. In Japan's case, it was conservative central bankers that prevented them from debasing their currency, untill they finally gave in and started QE after a decade. In Ireland's case, Euro-zone membership completely removes the option. The ECB is also being similarly conservative in its monetary policy for the Euro-zone as Japan's central bank was.

Sorry, I seemed to have missed that part of Japan's semi-recovery. Could you provide some evidence of how this 'debasement' led to the recovery?

Reprobate

Flamed Diving wrote: »

Sorry, I seemed to have missed that part of Japan's semi-recovery. Could you provide some evidence of how this 'debasement' led to the recovery?

Do your own research, there's plenty of material to read about it. I'm not getting drawn into having to explain everything from first principles, I have better ways to spend my time.

There is plenty of research and many historical examples of how strong currency at the wrong time can be disasterous for national economies. If you believe in the "hard money" counter-argument, I'm happy for you to disagree - how about you provide evidence to support that?

And again, don't take my word for it, look at the UK GDP compared to Euro-zone countries.

silverharp

Reprobate wrote: »

In Japan's case, it was conservative central bankers that prevented them from debasing their currency, untill they finally gave in and started QE after a decade. In Ireland's case, Euro-zone membership completely removes the option. The ECB is also being similarly conservative in its monetary policy for the Euro-zone as Japan's central bank was.

ahh , the old Zimbabwe central bank theory of money supply and economic growth

Flamed Diving

Reprobate wrote: »

Do your own research, there's plenty of material to read about it. I'm not getting drawn into having to explain everything from first principles, I have better ways to spend my time.

There is plenty of research and many historical examples of how strong currency at the wrong time can be disasterous for national economies. If you believe in the "hard money" counter-argument, I'm happy for you to disagree - how about you provide evidence to support that?

And again, don't take my word for it, look at the UK GDP compared to Euro-zone countries.

Talking out your arse then...

You are the one making these statements, remember? The onus is on you to provide evidence.

Reprobate

silverharp wrote: »

ahh , the old Zimbabwe central bank theory of money supply and economic growth

Hard-money purists alway raise the spectre of Weimar/Zimbabwe style hyper-inflation. It's a false comparison. In the Weimar/Zimbabwe scenario the Governments basically gave up any attempt to ever balance the budget again and engaged in a unlimited printing operation, just adding on the zeros as they went. When you end up with individual banknotes with nominal face values exceeding the previous century's GDP, it's pretty clear you've gone too far.

On the other hand, taking the UK as an example, pretty much every major economic recovery of the 20th century began with a big fall in the value of the pound, including when they dropped off the Gold Standard during the Great Depression. For comparison, the US pursued very ECB-like hard money policies in the early 30s and consequently suffered a much, much deeper and longer depression.

Reprobate

Flamed Diving wrote: »

Talking out your arse then...

You are the one making these statements, remember? The onus is on you to provide evidence.

You really don't want to tackle what I've been saying about the UK's GDP, do you? The proof is in the pudding right there.

Flamed Diving

Reprobate wrote: »

You really don't want to tackle what I've been saying about the UK's GDP, do you? The proof is in the pudding right there.

It's: 'The proof of the pudding, is in the eating.'

And I really don't see the point in engaging in debate with someone who is so unwilling to back up his claims.

In my opinion, you are most likely regurgitating something you read in a newspaper/website/blog, without fully understanding it. Hence, you simply cannot back it up, when asked. That's why I kept probing with questions.

Flamed Diving

Reprobate wrote: »

Hard-money purists alway raise the spectre of Weimar/Zimbabwe style hyper-inflation. It's a false comparison. In the Weimar/Zimbabwe scenario the Governments basically gave up any attempt to ever balance the budget again and engaged in a unlimited printing operation, just adding on the zeros as they went. When you end up with individual banknotes with nominal face values exceeding the previous century's GDP, it's pretty clear you've gone too far.

On the other hand, taking the UK as an example, pretty much every major economic recovery of the 20th century began with a big fall in the value of the pound, including when they dropped off the Gold Standard during the Great Depression. For comparison, the US pursued very ECB-like hard money policies in the early 30s and consequently suffered a much, much deeper and longer depression.

Hard-money purists...

You know, the least you could do is provide a link to the article you are plagiarising this nonsense from.

Reprobate

Flamed Diving wrote: »

It's: 'The proof of the pudding, is in the eating.'

And I really don't see the point in engaging in debate with someone who is so unwilling to back up his claims.

In my opinion, you are most likely regurgitating something you read in a newspaper/website/blog, without fully understanding it. Hence, you simply cannot back it up, when asked. That's why I kept probing with questions.

Rather than nit-pick my expressions, how about you address the fact that after a significant depreciation in Sterling, the UK economy is contracting at a slower rate than Ireland, Germany, and many other Euro-zone states?

Flamed Diving

Reprobate wrote: »

Rather than nit-pick my expressions, how about you address the fact that after a significant depreciation in Sterling, the UK economy is contracting at a slower rate than Ireland, Germany, and many other Euro-zone states?

I'm still waiting for you to back up your previous statements. Let's leave the goalposts where they were for now, shall we?

Reprobate

Flamed Diving wrote: »

I'm still waiting for you to back up your previous statements. Let's leave the goalposts where they were for now, shall we?

Ha Ha Ha Ha Ha Ha

I am backing up my statements, by pointing you towards the evidence from the most recent, relevant example of currency devaluation. Do you need me to actually dig out the GDP figures for you? I had assumed you would be aware of them to be engaging in such debate.

Flamed Diving

Reprobate wrote: »

Ha Ha Ha Ha Ha Ha

I am backing up my statements, by pointing you towards the evidence from the most recent, relevant example of currency devaluation. Do you need me to actually dig out the GDP figures for you? I had assumed you would be aware of them to be engaging in such debate.

We were discussing the Japanese scenario. It seems you need reminding:

Reprobate wrote: »

Basically, the latter phase of the "Celtic Tiger" was a debt-fuelled binge, caused partly by inappropriate (for Ireland) interest rates, and partly by irresponsible fiscal policy. There was an illusion of great wealth that became unsustainable as soon as credit ceased to be easily available. Now that the bubble has well and truly burst, it is apparent that wages and prices have grown way out of sync with the rest of the Euro-zone. Tax revenues have also collapsed. The situation is being made worse by the ECB being consistently behind the curve with it's monetary policy, resulting in a strong Euro that is murdering industry.

The only way to solve this within the Euro is to raise taxes, slash spending, cut everyone's wages and undergo a period of deflation. Cowen spoke of five years of austerity. Personally I think you're looking at a decade at the minimum, and it will be a truly miserable period for the people of Ireland. If the Government refuses to grasp the nettle, then the national debt will spiral out of control and a default will become inevitable. If this occurs then Ireland might as well drop out of the Euro, as the damage will be similar. Dropping out of the Euro would at least enable a devaluation that would solve the imbalance and allow the recovery to begin.

The choice is between a short sharp shock or a slow lingering death. I know which one I'd choose. I think that when the extent of the real sacrifices people are going to have to make becomes apparent, the pendulum of public opinion may swing against the Euro.

Flamed Diving wrote: »

At least a decade. Apart from guessing, what do you base this on?

Reprobate wrote: »

The Japanese experience.

Flamed Diving wrote: »

Excellent. Tell me why this is relevant?

Reprobate wrote: »

It's a classic example of a credit bubble bursting, with associated bank insolvency and debt deflation. In Japan's case, it was conservative central bankers that prevented them from debasing their currency, untill they finally gave in and started QE after a decade. In Ireland's case, Euro-zone membership completely removes the option. The ECB is also being similarly conservative in its monetary policy for the Euro-zone as Japan's central bank was.

Flamed Diving wrote: »

Sorry, I seemed to have missed that part of Japan's semi-recovery. Could you provide some evidence of how this 'debasement' led to the recovery?

Reprobate wrote: »

Do your own research, there's plenty of material to read about it. I'm not getting drawn into having to explain everything from first principles, I have better ways to spend my time.

There is plenty of research and many historical examples of how strong currency at the wrong time can be disasterous for national economies. If you believe in the "hard money" counter-argument, I'm happy for you to disagree - how about you provide evidence to support that?

And again, don't take my word for it, look at the UK GDP compared to Euro-zone countries.

Right. All that we have so far are uncorroborated claims about Japan's recovery coupled with spurious links to the current crisis using the UK/Eurozone contrast. You haven't even backed up your premise, and you are already jumping to your conclusion.

So, I ask again...

Flamed Diving wrote: »

Sorry, I seemed to have missed that part of Japan's semi-recovery. Could you provide some evidence of how this 'debasement' led to the recovery?

Once we have established why you think that this policy directly led to recovery can we hope to apply your analysis to the UK/Eurozone example.

Get it?

Good.

Reprobate

Flamed Diving wrote: »

We were discussing the Japanese scenario. It seems you need reminding:

No, actually look up the thread and you will see my contribution began with an argument in favour of devaluation as the best way out of the present situation, and the problem that the Euro prevents this. You are the one that has moved the goalposts by zeroing in on one specific example I gave and insisting I back it up to some arbitrary standard that will satisfy you.

I believe failure to devalue will result in the Japanese scenario and that QE helped the Japanese economy significantly. You are free to disagree. Look around and you will find respected sources voicing opiniions on both sides of that one. Sorry, you do not get to set the course of discussion exclusively to suit you, and I'm not going to write a thesis just because you demand it. It's beyond the scope of a casual exchange on an internet message board, and I seem to recall the OP was looking for a layman's explanation of things. That's why I have fallen back to the recent Sterling/Euro exchange rate depreciation and its effect on GDPs as the most straightforward example, but you don't seem to like that because it doesn't support the hard-money case. Who's being evasive here?

Flamed Diving

Reprobate wrote: »

No, actually look up the thread and you will see my contribution began with an argument in favour of devaluation as the best way out of the present situation, and the problem that the Euro prevents this. You are the one that has moved the goalposts by zeroing in on one specific example I gave and insisting I back it up to some arbitrary standard that will satisfy you.

I believe failure to devalue will result in the Japanese scenario and that QE helped the Japanese economy significantly. You are free to disagree. Look around and you will find respected sources voicing opiniions on both sides of that one. Sorry, you do not get to set the course of discussion exclusively to suit you, and I'm not going to write a thesis just because you demand it. It's beyond the scope of a casual exchange on an internet message board, and I seem to recall the OP was looking for a layman's explanation of things. That's why I have fallen back to the recent Sterling/Euro exchange rate depreciation and its effect on GDPs as the most straightforward example, but you don't seem to like that because it doesn't support the hard-money case. Who's being evasive here?

That should be obvious to anyone reading.

Reprobate

Flamed Diving wrote: »

That should be obvious to anyone reading.

Yep, your failure to address the GDP figures is pretty telling.

Flamed Diving

Reprobate wrote: »

Yep, your failure to address the GDP figures is pretty telling.

1) How are the figures relevant when we do not have your (or your sources) explanation of how the Japanese case and the current scenario are even comparable? Remember, you just saying so is not sufficient.

2) You have yet to provide a source for your data re: the GDP figures.

3) Without answering 1) sufficiently, 2) is spurious. I may as well take whatever data you are referring to and say that it is caused by Jensen Button's back-to-back GP victories. If people ask me to explain myself, I will simply tell them to go do their own research and that I don't feel I have to be dictated in a casual internet conversation. What do you want, a thesis?

:rolleyes:


I am not going to respond any further posts of your until these questions are addressed, because as far as I can tell, you are a complete bluffer.

Blackjack

Reprobate wrote: »

Considering it was "finished" three months ago, Sterling seems to be holding it's own remarkably well. Currently three cents higher than when Jim Rogers declared it "finished".

Anyway, that was just another article promoting the persistent myth that a highly valued "strong" currency is a good thing, when at times like these it's the last thing you want. As I said above, look at the GDP figures. Sterling finished? Nope, it's saving Britain's arse.

Yes, not finished yet, as long as it keeps printing money, which is the only policy option left to the UK as per an article in todays FT - needs registration, with the permission of the mods I can cut and paste it here if needed.

thebman

You don't need to register to read that article.

Extract From Link In Above Post From FT.com wrote:

Mike Platt, co-founder and chief executive of BlueCrest, Europe’s fifth-largest hedge fund, had been predicting quantitative easing in the UK for six months before it was adopted by the Bank of England last month.

But the bond trader said the government, facing plunging tax revenues, now had little choice but to move to “heavy” quantitative easing, printing money to buy new gilts to support public spending. Last month the Bank began buying up £75bn of outstanding gilts and corporate bonds in an effort to support spending by boosting the money supply.

Mr Platt said “significantly” more quantitative easing was needed. “The easiest way for the system to be saved is to print money,” he told the Financial Times. “It is the only policy option left.

Worrying if it is the last option and if they are going to be printing heavily :-/