Ray Kinsella - Leave the Euro

Duke Leonal Felmet

Or so he said in the news recently. I would be inclined to agree except for two crucial points.

If we leave:

1) How do we replace the liquidity that the ECB has been providing to our crippled banks?

2) How do we pay our Euro-denominated debt, even if we apply a restructuring of, say, 30%?

and more loosely:

3) Should we peg to/join the sterling?

Answers on a SAE.

irishh_bob

Duke Leonal Felmet wrote: »

Or so he said in the news recently. I would be inclined to agree except for two crucial points.

If we leave:

1) How do we replace the liquidity that the ECB has been providing to our crippled banks?

2) How do we pay our Euro-denominated debt, even if we apply a restructuring of, say, 30%?

and more loosely:

3) Should we peg to/join the sterling?

Answers on a SAE.

the man is dead right in saying we should leave the euro , its speeding quicker towards a fiscal union by the day , the crisis is now so serious that in order to bail out italy , spain and the already existing bankrupt countrys , germany will demand on having a direct say in the econmys of theese countrys , if we leave the euro or if we dont leave the euro , we are facing a whole lot of austerity , stay in the euro and have the germans set our tax code and budget , goodbye corporation tax ( multinationals ) and public sector wages and wellfare which is miles ahead of germany etc , we might aswell be poor with our future in our own hands + a return to the punt will give us a huge boost competitivley

Duke Leonal Felmet

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

Manach

Unfortunately, the Punt-nua would be backed by .... ? And also administered by the same state that was behind the decisions to leave the euro and also to cease pegging the Irish punt to sterling in the 70s. We've already lost our future.

grumpymunster

I would have thought anything along the lines of a fiscal union would require a referendum here in Ireland. After the way the French have been going on and the whole way the bail out has worked I dont know if ever there will be a referendum on Europe ever passed again in this country.

Duke Leonal Felmet

Manach wrote: »

Unfortunately, the Punt-nua would be backed by .... ? And also administered by the same state that was behind the decisions to leave the euro and also to cease pegging the Irish punt to sterling in the 70s. We've already lost our future.

With the exception of the 1955 currency crisis, the Irish punt was successfully pegged to the Sterling for most of its existence, with something like a 95% correlation. My only concern would be a lack of currency reserves required to regulate the value of a pegged currency, does anyone know the state of foreign reserves at the Central Bank?

How about simply joining the sterling?

Debtocracy

Duke Leonal Felmet wrote: »

How about simply joining the sterling?

"Permit me to control the currency of a nation and I care not who makes its laws"

It would be difficult to maintain sovereignty if we became dependent on the Bank of England for liquidity.

irishh_bob

grumpymunster wrote: »

I would have thought anything along the lines of a fiscal union would require a referendum here in Ireland. After the way the French have been going on and the whole way the bail out has worked I dont know if ever there will be a referendum on Europe ever passed again in this country.

i suspect germany and france would engage in a spot of revisionism in terms of what the lisbon and niece treatys entailed , runty sarkozy would be the man for that :mad:

Duke Leonal Felmet

Debtocracy wrote: »

"Permit me to control the currency of a nation and I care not who makes its laws"

It would be difficult to maintain sovereignty if we became dependent on the Bank of England for liquidity.

It would also be difficult to maintain a pegged currency with low foreign reserves (if this is the case). Floating the currency would leave us at the mercy of international markets, which again leaves us with no 'sovereignty' and finally pegging to a precious metal will, again, leave us at the mercy of markets.

Is there another route?

View

Manach wrote: »

Unfortunately, the Punt-nua would be backed by .... ?

... hot air, at a guess.

Chucky the tree

When you look at the mess Ireland and Greece have made of cutting their deficit and getting there finances in order it's not surprising Germany aren't happy giving money to Italy and Spain without having a direct say in their finances.

SupaNova

Chucky the tree wrote: »

When you look at the mess Ireland and Greece have made of cutting their deficit and getting there finances in order it's not surprising Germany aren't happy giving money to Italy and Spain without having a direct say in their finances.

And on that point, if our politicians struggle reducing our deficit under severe pressure from the EU, what on earth would make anyone think we could do it in an over night fashion, whilst setting up and managing our own currency.

RichardAnd

SupaNova wrote: »

And on that point, if our politicians struggle reducing our deficit under severe pressure from the EU, what on earth would make anyone think we could do it in an over night fashion, whilst setting up and managing our own currency.

Without the EU, we wouldn't have a choice about closing the gaps in our spending, the money simply wouldn't be there to keep it open.

Of course, whether or not the whole thing could be managed without the country blowing up is another matter...

meglome

Duke Leonal Felmet wrote: »

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

We did some incredibly stupid things fiscally and ended up begging the EU and IMF for help.

I'm really tired of hearing how a new currency would fix anything, a new currency backed by nothing and managed by a country that have proven they can't run a sweetie shop. Personally given the Germans know how to run a country I'm all for losing some of this magically 'sovereignty'.

Scofflaw

RichardAnd wrote: »

Without the EU, we wouldn't have a choice about closing the gaps in our spending, the money simply wouldn't be there to keep it open.

Of course, whether or not the whole thing could be managed without the country blowing up is another matter...

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure - and the main differences between us are whether we feel it's best done by cooperation with the other EU members or by making it impossible to do anything else through not cooperating with anyone?

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure - and the main differences between us are whether we feel it's best done by cooperation with the other EU members or by making it impossible to do anything else through not cooperating with anyone?

cordially,
Scofflaw

On the bright side we're not the US so we don't have the option of creating our own internal pressure while actually achieving very little (besides that downgrade).

Chuck Stone

Maybe we could back a new currency with beef?

The beef standard?

No?

No?


*gets coat*

maggy_thatcher

In order for Ireland to leave the euro, it would have to keep it one hell of a secret until changeover day in order to somehow prevent a complete run on the banks! Grab everything you can out of the bank in cash form, so that 3 months after all your internal loans have been converted into punts you can go in and pay them off with the spare €5 that you kept in your wallet.

johnnyskeleton

irishh_bob wrote: »

the man is dead right in saying we should leave the euro , its speeding quicker towards a fiscal union by the day , the crisis is now so serious that in order to bail out italy , spain and the already existing bankrupt countrys , germany will demand on having a direct say in the econmys of theese countrys , if we leave the euro or if we dont leave the euro , we are facing a whole lot of austerity , stay in the euro and have the germans set our tax code and budget , goodbye corporation tax ( multinationals ) and public sector wages and wellfare which is miles ahead of germany etc , we might aswell be poor with our future in our own hands

That's a refreshingly honest answer. So, anyone who would rather be poor and independent should advocate leaving the Euro. Everyone else (i.e. those who wish to retain a basic standard of living, even if it means complying with our treaty obligations) should advocate remaining in the Euro.

Also inconsistent in your argument is that if we are poor outside the Euro, what benefit is it to control our corporation tax rate?

irishh_bob wrote: »

+ a return to the punt will give us a huge boost competitivley

Like it did for Zimbabwae? Seriously though, that would only work if you are a strong exporter of physical goods. If you export money, like we do, an unstable currency is not a good thing.

View

Scofflaw wrote: »

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure...

I wouldn't share that view. My belief is that we will eventually learn to manage our finances in a proper and prudent fashion without blowing them up every couple of years. I do admit that that is a belief I hold despite considerable evidence to the contrary based on past performance.

Sovereignty, after all, is ultimately the right to make a decision. Being in the EU or outside the EU doesn't alter that decisions need to be made and the important point is to try and make smart ones - or, failing that, to avoid making dumb ones.

Scofflaw

beeftotheheels wrote: »

On the bright side we're not the US so we don't have the option of creating our own internal pressure while actually achieving very little (besides that downgrade).

In crude outline, the two crises have similar shapes, though. Both are essentially the result of internal wrangling over the politics of funding deficits internal to the currencies.

cordially,
Scofflaw

Sticky_Fingers

maggy_thatcher wrote: »

In order for Ireland to leave the euro, it would have to keep it one hell of a secret until changeover day in order to somehow prevent a complete run on the banks! Grab everything you can out of the bank in cash form, so that 3 months after all your internal loans have been converted into punts you can go in and pay them off with the spare €5 that you kept in your wallet.

I'd have thought that the ECB would just print up new bank notes with a different design if some country was kicked out of the Euro. I'd also suspect that the government would try and pull some stroke where any old Euro notes you have would only be converted at the rate the Punt Nua was floated at.

You should never underestimate the slyness of the government, they'll no doubt find some way to shaft the people who decided that keeping their life savings in a bunch of failed institutions was not such a good idea.

View

Scofflaw wrote: »

In crude outline, the two crises have similar shapes, though. Both are essentially the result of internal wrangling over the politics of funding deficits internal to the currencies.

cordially,
Scofflaw

That's true but in the case of the US it should also be mentioned that the individual states have also faced budget deficits (of varying severity) in many cases. I believe that something like 47 out of the 50 have had to have cut-backs in public services, (mandatory) lay-offs of state employees, higher state taxes etc. etc. - all the stuff that sounds familiar here at this stage.

Oddly enough though, I don't think any of those 47 states have concluded that the best thing for them to do is to abandon the US Dollar and launch (or re-launch in some cases) their own currency. Perhaps, it is because the 47 states realise that financial crisis come and go and that balancing your budget is a fundamental task of government irrespective of what currency you choose to use?

irishh_bob

johnnyskeleton wrote: »

That's a refreshingly honest answer. So, anyone who would rather be poor and independent should advocate leaving the Euro. Everyone else (i.e. those who wish to retain a basic standard of living, even if it means complying with our treaty obligations) should advocate remaining in the Euro.

Also inconsistent in your argument is that if we are poor outside the Euro, what benefit is it to control our corporation tax rate?



Like it did for Zimbabwae? Seriously though, that would only work if you are a strong exporter of physical goods. If you export money, like we do, an unstable currency is not a good thing.

your comparing ireland to a third world country led by a despot who has starved half his population into relying on foreign aid

FreudianSlippers

Sigh. The major problem I see on boards threads regarding leaving the Euro is simply that the logic is this:

Step 1: Leave the Euro
Step 2: ???
Step 3: Profit

Scofflaw

View wrote: »

I wouldn't share that view. My belief is that we will eventually learn to manage our finances in a proper and prudent fashion without blowing them up every couple of years. I do admit that that is a belief I hold despite considerable evidence to the contrary based on past performance.

I respect your optimism, but I admit I don't really share it.

View wrote: »

Sovereignty, after all, is ultimately the right to make a decision. Being in the EU or outside the EU doesn't alter that decisions need to be made and the important point is to try and make smart ones - or, failing that, to avoid making dumb ones.

Or at least not spectacularly dumb ones. You're right about sovereignty, though - much of the "we're losing our sovereignty" arguments rely on equating sovereignty with "freedom of action without consequences", which is why none of them would stand up in a constitutional court.

cordially,
Scofflaw

Tora Bora

Thing I notice is, that the only sector of Irish society, which advocates leaving the euro as a good option for Ireland, is the academic sector.
These guys live in a cosseted world, far removed from the reality of the real world.
Havent yet heard a senior business executive, in the internationally traded sector, mention the possibility.
I would tend to give mote credence to guys from the real world.

PhatPiggins

Duke Leonal Felmet wrote: »

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

All thoughts of sovereignty and nationalism aside, would that be so terrible? Yes I know Germany will do whats best for Germany but we haven't exactly covered ourselves in glory setting our own budgets the past 80 years.

astrofool

I don't get all the love some people seem to have for leaving the euro. We either take a 30% cut to our spending/raise our taxes by a few % over 4 years and stay in, or we take an immediate 90% cut in our purchasing power, and cripple our banks and economy by going out.

irishh_bob

astrofool wrote: »

I don't get all the love some people seem to have for leaving the euro. We either take a 30% cut to our spending/raise our taxes by a few % over 4 years and stay in, or we take an immediate 90% cut in our purchasing power, and cripple our banks and economy by going out.

you think the punt would devalue by 90 % , nonesense

Voltex

If one State leaves the €, wouldnt it stand to reason that the markets would use that single incident to percipitate a full break up..with a collapse of the FX market and a mass dumping of euro reserves held by Central Banks which would feed into every other market?

We're talking about a currency that is considered the Worlds second reserve currency...it would be like the State of Arizona deciding to leave the US dollar and go it alone.

I think we are going to go through a significant period of debt reduction programs, a long, long period where we aim to create a fiscal union with further centralisation of decision making to Europe, balanced budgets will be legal requirements (which will give confidence to populations), eurobonds for states that can-not meet immediate budget corrections, german will be taught instead of Irish to school children and we all wear blue armbands with stars on it.

astrofool

irishh_bob wrote: »

you think the punt would devalue by 90 % , nonesense

You're right, I'm probably overestimating the value of a currency backed by a banana republic.

irishh_bob

Voltex wrote: »

If one State leaves the €, wouldnt it stand to reason that the markets would use that single incident to percipitate a full break up..with a collapse of the FX market and a mass dumping of euro reserves held by Central Banks which would feed into every other market?

We're talking about a currency that is considered the Worlds second reserve currency...it would be like the State of Arizona deciding to leave the US dollar and go it alone.

I think we are going to go through a significant period of debt reduction programs, a long, long period where we aim to create a fiscal union with further centralisation of decision making to Europe, balanced budgets will be legal requirements (which will give confidence to populations), eurobonds for states that can-not meet immediate budget corrections, german will be taught instead of Irish to school children and we all wear blue armbands with stars on it.

whats not to like

Scholesy1981

Damned if you do, damned if you dont, that seems to be the predicament of the government going by the general consensus out there about what to do.

If we leave the Euro, then that would spell catastrophic consequences for those with mortgages, particularly where unemployment has also struck the household, and lets not forget just how much of a wedge the mortgages - vast amounts of which are over inflated - in this country are lodged in our fundamental problems. Fair enough, it could mean doing the David McWilliams on it and defaulting, start printing our own money, default to rock bottom and try make this country seem like a cheap place to invest and work our way up.

Problem # 2: Then if we stay in the Euro we're gonna have to face the ongoing worry bout keeping our corporation tax nailed down otherwise if that goes up then multinational allegiances in this country would be under severe threat, and if they pull out then it does'nt bear thinking about the rate of unemployment there either, so if you like, its coming at the unemployment, and ultimately, dreadful economic/social threat from another angle, and yes I think we all know the vicious circle that goes with that.

Best of a whole load of bad scenarios may well be raise some taxes for a few years, dont touch the corporation, stay in the euro, and continue to tell the french and germans where to go, well, its not as simple as that, but along them lines!

Right im off to watch some Father Ted now.......

beeftotheheels

View wrote: »

That's true but in the case of the US it should also be mentioned that the individual states have also faced budget deficits (of varying severity) in many cases. I believe that something like 47 out of the 50 have had to have cut-backs in public services, (mandatory) lay-offs of state employees, higher state taxes etc. etc. - all the stuff that sounds familiar here at this stage.

Oddly enough though, I don't think any of those 47 states have concluded that the best thing for them to do is to abandon the US Dollar and launch (or re-launch in some cases) their own currency. Perhaps, it is because the 47 states realise that financial crisis come and go and that balancing your budget is a fundamental task of government irrespective of what currency you choose to use?

Ah yes, but the joy of being a federal whole is that I don't believe that they have the equivalent of Art 125 to contend with (or bypass relying on the ECB using its powers under Art 127 and at best creating a "conflict of articles" situation).

That said, I'm all for a purposive, and indeed pragmatic, interpretation of the Treaty at this stage in the game because I agree with you on this. However, while I sit here pondering how Art 126 can be used to create Trichet's Finance Ministry I wonder at the backlash that we "must" maintain our ability to set our corporation tax rate. We must retain the right to set our "State" tax rate, but the arguments in favor of a federal tax (or rather a federal surcharge) seem to be getting stronger and stronger yet no more popular despite the fact that right now, at current interest rates, we are benefiting from the Eurozone back stop.

View

beeftotheheels wrote: »

Ah yes, but the joy of being a federal whole is that I don't believe that they have the equivalent of Art 125 to contend with (or bypass relying on the ECB using its powers under Art 127 and at best creating a "conflict of articles" situation).

That said, I'm all for a purposive, and indeed pragmatic, interpretation of the Treaty at this stage in the game because I agree with you on this. However, while I sit here pondering how Art 126 can be used to create Trichet's Finance Ministry I wonder at the backlash that we "must" maintain our ability to set our corporation tax rate. We must retain the right to set our "State" tax rate, but the arguments in favor of a federal tax (or rather a federal surcharge) seem to be getting stronger and stronger yet no more popular despite the fact that right now, at current interest rates, we are benefiting from the Eurozone back stop.

I forgot to mention that California did ask Obama for help with their budget mess (California's budget politics are a nightmare from hell) and his response was essentially "I'd like to help but I legally can't". That was a lot kinder than the response that NYC got in the '70's which was summarised with the headline:

Ford to NYC - Drop Dead.

You can just imagine how posters here would have responded had the EU adopted that attitude to Ireland.

Duke Leonal Felmet

irishh_bob wrote: »

you think the punt would devalue by 90 % , nonesense

There is no telling what the figure would be. Predicting forex fluctuations has to be the most difficult task in finance. So you must be basing your incredulity on, well, incredulity. And that is never an argument.

Duke Leonal Felmet

PhatPiggins wrote: »

All thoughts of sovereignty and nationalism aside, would that be so terrible? Yes I know Germany will do whats best for Germany but we haven't exactly covered ourselves in glory setting our own budgets the past 80 years.

Yeah, that is a decent point. But we would lose the corp tax rate. Without it, we would be in a fairly dire scenario and I would be taking German classes.

Tora Bora

irishh_bob wrote: »

you think the punt would devalue by 90 % , nonesense

40% minimum. Who would want to hold the toilet paper currency, of the Croke Park agreement country?

RichardAnd

Tora Bora wrote: »

40% minimum. Who would want to hold the toilet paper currency, of the Croke Park agreement country?

How do you know what it will be?

I could say 60%, I just pulled that off the top of my head because I've no idea what the punt would de-value by and I would wager very few could know.

beeftotheheels

Oops - the markets have cottoned on to the fact that Trichet is creating a transfer union so French (and German) CDSs are on the move.

http://ftalphaville.ft.com/blog/2011/08/09/647656/the-distressed-euro-via-french-and-german-cds/

http://ftalphaville.ft.com/blog/2011/08/09/648021/grosdeutschland-cds-edition/

Will this be enough to spur Angela into talking sensibly to the German people?

ei.sdraob

beeftotheheels wrote: »

On the bright side we're not the US so we don't have the option of creating our own internal pressure while actually achieving very little (besides that downgrade).

Whats that I hear? realisation that Keynesian policies are a failure?

FreudianSlippers

beeftotheheels wrote: »

Oops - the markets have cottoned on to the fact that Trichet is creating a transfer union so French (and German) CDSs are on the move.

http://ftalphaville.ft.com/blog/2011/08/09/647656/the-distressed-euro-via-french-and-german-cds/

http://ftalphaville.ft.com/blog/2011/08/09/648021/grosdeutschland-cds-edition/

Will this be enough to spur Angela into talking sensibly to the German people?

If it isn't I don't know what is.

beeftotheheels

ei.sdraob wrote: »

Whats that I hear? realisation that Keynesian policies are a failure?

Huh? Because of the tensions raised by the London rioting thread I'm not going to go into detail on my views on the tea party, suffice to say that I have never believed that the Financial crisis ended in 2009, we're in the same credit crunch and probably the greatest threat to the global economy since 1929 and I think that the current market conditions evidence that Keynsian intervention did protect us from the worst of the crisis.

http://www.businessweek.com/magazine/content/10_28/b4186004424615.htm

However, the lunatics now have control of the asylum (kind of, actually the downgrade might help here along with the knife hanging over military spending, the only spending which can have a multiplier effect apparently http://mobile.salon.com/tech/htww/2011/08/05/the_rise_of_tea_party_keynesianism/)

http://krugman.blogs.nytimes.com/2011/08/08/the-downgrade-doom-loop/

Just look at those equity markets go - miners etc some of the biggest fallers in the week because of recession fears because of reduced government spending to pick up the shortfall.

ei.sdraob

beeftotheheels wrote: »

I'm not going to go into detail on my views on the tea party

Its ok I've no love for the nutters in the teaparty either

beeftotheheels wrote: »

I think that the current market conditions evidence that Keynsian intervention did protect us from the worst of the crisis.

I think its evidence that the can was kicked down the road too many times and chickens are coming home to roost again

beeftotheheels wrote: »

Just look at those equity markets go - miners etc some of the biggest fallers in the week because of recession fears because of reduced government spending to pick up the shortfall.

Where you see disaster I see opportunities in equities

beeftotheheels

FreudianSlippers wrote: »

If it isn't I don't know what is.

I really do wonder if it is because she's an East German.

I mean it is not difficult, it is two phrases "London Banking Accord" and "Marshall Plan" or if you really want to raise the emotion level you could throw in "Versailles reparations" but it has just not happened yet and now France is in play.

I liked the rumor that Kohl said "She's destroying my Europe" but he's denied it since.

beeftotheheels

ei.sdraob wrote: »

I think its evidence that the can was kicked down the road too many times and chickens are coming home to roost again

So you think that we shouldn't even try to prevent a melt down? We should just accept it as inevitable and let it happen? Really didn't play out so well in the '30s.

ei.sdraob wrote: »

Where you see disaster I see opportunities in equities

If you really think that this is chickens coming home to roost then I would like to point out that equity markets are not at their 2009 trough which was "artificially" caused by QE so if you wanted to be consistent then you should be shorting equities for another while yet...

ei.sdraob

beeftotheheels wrote: »

So you think that we shouldn't even try to prevent a melt down? We should just accept it as inevitable and let it happen? Really didn't play out so well in the '30s.

Nope I think the root issues of out of control spending need to be addressed, instead of spending more and more and hoping that the problems solve themselves

Duke Leonal Felmet

ei.sdraob wrote: »

Whats that I hear? realisation that Keynesian policies are a failure?

IIRC, Kenyes never said to use borrowed funds for fiscal expansion, but rather the money saved using counter-cyclical policies during the good times.

But, feel free to prove me wrong on that. Until then, you are misplaced calling those policies keynesian. The best modern example of Keynesian policies as I described today is Chile, who have largely avoided the crisis (though experienced some contraction), to date by using fiscal expansion funded by savings accumulated pre-crisis (a policy which almost got the govt ousted).

Again, feel free to point out any inaccuracies there.

beeftotheheels

ei.sdraob wrote: »

Nope I think the root issues of out of control spending need to be addressed, instead of spending more and more and hoping that the problems solve themselves

Might I ask who the arbitrator of spending being "out of control" is? You?

Because if you wish to remove all credit from the world then you'll certainly reign in all "out of control" spending, but you might find a revolution or two along the way including massive hardship and probably loss of life.

If it is something less than "no credit" which I think could be difficult since credit has been around as long as money has, then where would you draw the line?

ei.sdraob

beeftotheheels wrote: »

Might I ask who the arbitrator of spending being "out of control" is? You?

Because if you wish to remove all credit from the world then you'll certainly reign in all "out of control" spending, but you might find a revolution or two along the way including massive hardship and probably loss of life.

If it is something less than "no credit" which I think could be difficult since credit has been around as long as money has, then where would you draw the line?

I am specifically referring to out of control government spending, no need to act now, you know well that government spending in Ireland inflated by leaps and bounds and now not many are willing to lend since we are seen as a drug addict