Discussion - If Ireland left the Euro

happyman81

So, we keep hearing of dire consequence if this occured. What is your opinion? Choose any post-Euro scenario you wish (pegged to Sterling, floating Punt, etc) and outline what you think the most likely outcome would be. Given that this forum is in the Science branch, I hope for something more than a Politics/AH forum style mess of a thread.

I will leave this as the OP, and post my views when a lull in my work appears. :-)

_Gawd_

happyman81 wrote: »

So, we keep hearing of dire consequence if this occured. What is your opinion? Choose any post-Euro scenario you wish (pegged to Sterling, floating Punt, etc) and outline what you think the most likely outcome would be. Given that this forum is in the Science branch, I hope for something more than a Politics/AH forum style mess of a thread.

I will leave this as the OP, and post my views when a lull in my work appears. :-)

Contrary to the scare-mongering, the Euro is not the be-all-and-end-all.

There was life before the Euro and there will be life after it. My criticism of the currency is that we have granted authority to the European Central Bank to legally counterfeit money we are legally demanded to use trapping people in an economic prison. This is dangerous for several reasons not least that the Euro is undefinable - it's a paper fiat money with no standard bearing. Meaning, it's open to manipulation, and manipulated it is.

So how is it manipulated and what impact does this have on our everyday lives? Firstly, when we're all locked in a cell and our property is documented in Euro's, the central bank has a massive impact on every fabric of our lives. How? Because when they print more Euros (counterfeit) via quantitative easing, the value of the Euro drops causing inflation and raises prices. Therefore, a central bank is not compatible with the principles of capitalism. But it's even more worrying than that because when the ECB debase the currency, the middle class and the people on the ground get wiped out while the government, quangos, programmes and wealthy elite (the banks) get to use the money first so by the time it filters through to us at the bottom, it's worth less than it was at the time of printing.

This causes a massive transfer of wealth form the poor to the rich, a scam in every sense of the word. That's why you have more billionaires today than ever before while others are losing their homes. It really is the 1% vs. the 99%. With the expansion of this credit in the eurozone, people save less real capital and malinvest in projects that go nowhere. A lot of the money ended up in the real estate bubble that burst. The booms and busts we experience is a cause of the failed monetary system Europe is operating under. But banks have been granted a monopoly and there is literally no competition in the banking industry. The government have allowed them to participate in an activity known as fractional reserve banking and the monetising of debt. The banks wealth is effectively nothing more than IOU's, not real wealth. It's clear to see that the banks are very much in bed with the government because one scratches the others back.

When someone lodges a deposit into a bank, the bank immediately loans the money back out. If we had a free market banking system, we would see new banks that hold 100% reserves. What does this mean? It means that the banks will hold all the savings of the people 100% of the time so if there was a run on the banks, your money would actually be there. But the current establishment of banking cartels don't like this idea and neither does the government. The government don't like this idea because they benefit from easy credit to expand their programmes and promises because their main goal is re-election. It funds big government.

So what is the alternative? Instead of having the people use one currency, allow the use of all currencies not only between countries, but within them also. Allow the Euro to compete in Ireland with the Yen, Dollar, Gold and Silver. Why Gold and Silver? Because Gold and Silver is not easily manipulated because it can't be created at the touch of a button like paper money can. Governments and banking cartels don't like these metals which is why Nixon took America off the Gold Standard in the 70's. In addition, Hayek advocated the use of private currencies. That is, a business can create or rather act like a central bank and compete with other private currencies on the market. When there are several currencies at war with each other in a given country, the central banks controlling these currencies will not do anything that could potentially harm their value. We need to give the central banks competition.

The Federal Reserve (much like our ECB) in the US came into being in 1913. At the same time the Income Tax was brought in also. This income tax is unconstitutional and the IRS cannot even pin-point a law on the books stating that you must legally pay it. But why was it brought in? The income tax is money owed to the banks that every American must work to pay because their government borrow money from a private corporation, i.e - the Federal Reserve, the central bank. When governments borrow money, they borrow it from the central banks and the central banks are private unaccountable institutions. The whole ordeal is perpetual debt because these banks have a monopoly on the issuance of the currency and to pay them back their interest rates, the government need to go back to the banks and ask them to print up more which in turn, causes even a greater debt because now we have a further interest rate to contend with!

Could anything be more ridiculous? I'm with the Ludwig von Mises on this issue when he stated that we wouldn't accept central planning in agriculture (the USSR tried it, millions died) but why do we accept central planning in money? God only knows...whichever you think, one fact remains...the gap between rich and poor is growing and we're in the 21st century. Since the Fed was created, the purchasing power of the dollar has slipped down 99%. How much will the Euro fall before people educate themselves about this scam?

later12

Lets start with the man on the number 16 bus.

Lets say he has a mortgage, some credit card debt, and a job paying the average industrial wage. He doesn't have any savings, but his elderly parents have their life savings in AIB and the Credit Union. These activities all involve private contracts.

Under the Lex Monetae principle, such private contracts could be re-denominated in An Punt Nua. It is difficult to imagine any successful legal challenge to such a re-denomination. Re-denomination (or cross border) risk here is signficant.

However, the same risk is lower on securities under foreign contract law. For example, the bank from which this man receives his mortgage, and where his elderly parents hold their life savings, owe significant amounts of money to international creditors (including the ECB) in Euros and which (it is overwhelmingly likely) must be repaid in Euros. The same can be said for the National Debt of the country. This cannot simply be re-denominated.

Paying back these loans in euros would be likely to result in catastrophic levels of default on both private and sovereign debt, or absurd levels of inflation.

Of course, all of this is based on Ireland unilaterally defaulting on its debts in a process whereby the Euro survives. That is pretty unlikely.

There are two more likely adverse outcomes:
(i)the entire Euro fails
(ii)a multilaterally agreed exit for states such as Ireland and the other peripherals.

In both of the above situations, we could reasonably expect an orderly exit, which might even avoid a hard default on Irish debt. Ongoing support systems and EU economic co-operation could remain in place in the absence of monetary union.

The man on the #16 bus would still have his mortgage, his salary and his parents' savings converted into An Punt Nua, but the financial machinery of the state would be better able to cope with the process in light of ongoing support and a mulilaterally agreed re-denomination and repayment framework with the country's EU partners.

Of course, a more likely outcome yet again is that the Euro survives along with Irish membership of the Euro, but perhaps without Greek or Portuguese memberships.

andrew

This report by UBS provides a very comprehensive overview of the implications of leaving the Euro.

It's difficult to ascertain the kind of regime which would follow. On the one hand, Ireland has traditionally had a fixed exchange rate regime of some sort; either a currency board with Sterling, or a peg to some sort of band within the ERM. So it seems like that'd be the most likely outcome. But on the other hand, there are small countries like New Zealand who manage to have a floating regime, though admittedly they're quite marginal. So purely on the basis that it's what we've always done, a subsequent punt would be pegged or otherwise linked to another currency.