Starting Again and Dumping the Euro.

fatboypee

Not really sure what I mean by this and feel free to LOL away at my naivety but it occurred to me today that a lot of the issues around Greece are because they are deemed to be de-stabilising the Euro / Euro zone.

What if Europe decided by majority to unilaterally return to using their own currency. That currency set at the current value of the euro (and marked down (yes I don't know how, just shooting the breeze on that) to ensure it would not, overnight go completely nutty in value, i.e. +- current Euro mark by say no more than 20% either way).

All Euros held within that country could return to the native currency overnight without any losses, everyone would continue to be paid +- the same but over time the ability to manage each country's finances would be restored.

Of course, the ECB would need to be treated as a "bad bank" in that scenario and mechanisms worked out for lending etc, yeah, a lot of mechanisms.. but surely it could be considered ? It's gotta be better than the mess we're in right now ?

OK it means destruction of the "Euro" but hey. its pretty much fooked for the next foreseeable whichever way you look at it..

Yeah, i'm probably stupid...

srsly78

The only people in favour of this would be people without euros in the bank.

meglome

srsly78 wrote: »

The only people in favour of this would be people without euros in the bank.

Or without debt which would be denominated in euro.

antoobrien

meglome wrote: »

Or without debt which would be denominated in euro.

Or any other foreign currency were likely to depreciate against.

One thing that OP has missed (on purpose?), if the Euro disintegrates the ECB does a capital call on all capital and loans. If that happens we're royally screwed because the ICB will have no money and the Irish banks are up to their ears in ECB funding.

fatboypee

Or without debt which would be denominated in euro.

Theres the thing. What I'm suggesting is the deprecation of the Euro, at which point, all currencies in the Euro zone would be rated and valued initially at the closing price of the Euro. Any debts in the Euro would be transferred on a 1 to 1 ratio with the new currency, thereby evading any disparity. Over a period agreed each currency could be re-floated to a percentage of the base Euro closing price, easing the re-introduction of the currencies individually and thus averting utter meltdown.

Or any other foreign currency were likely to depreciate against.

One thing that OP has missed (on purpose?), if the Euro disintegrates the ECB does a capital call on all capital and loans. If that happens we're royally screwed because the ICB will have no money and the Irish banks are up to their ears in ECB funding.

The finer details of course I don't know, more vague than on purpose to be honest .., however if the ECB is treated as a "bad bank" and all loans currently held by it are managed at the initial trade position of 1 to 1 with Euro on the conversion it should be business as usual for existing loans. Not sure what would happen with the continual borrowings etc without an ECB but I'm surethe real brain boxes would work something out.. :eek:

All pie in the sky but there is some merit in the approach at least ?

BeeDI

fatboypee wrote: »

Theres the thing. What I'm suggesting is the deprecation of the Euro, at which point, all currencies in the Euro zone would be rated and valued initially at the closing price of the Euro. Any debts in the Euro would be transferred on a 1 to 1 ratio with the new currency, thereby evading any disparity. Over a period agreed each currency could be re-floated to a percentage of the base Euro closing price, easing the re-introduction of the currencies individually and thus averting utter meltdown.


The finer details of course I don't know, more vague than on purpose to be honest .., however if the ECB is treated as a "bad bank" and all loans currently held by it are managed at the initial trade position of 1 to 1 with Euro on the conversion it should be business as usual for existing loans. Not sure what would happen with the continual borrowings etc without an ECB but I'm surethe real brain boxes would work something out.. :eek:

All pie in the sky but there is some merit in the approach at least ?

Move over Drahgi:cool:

antoobrien

fatboypee wrote: »

Theres the thing. What I'm suggesting is the deprecation of the Euro, at which point, all currencies in the Euro zone would be rated and valued initially at the closing price of the Euro. Any debts in the Euro would be transferred on a 1 to 1 ratio with the new currency, thereby evading any disparity. Over a period agreed each currency could be re-floated to a percentage of the base Euro closing price, easing the re-introduction of the currencies individually and thus averting utter meltdown.


The finer details of course I don't know, more vague than on purpose to be honest .., however if the ECB is treated as a "bad bank" and all loans currently held by it are managed at the initial trade position of 1 to 1 with Euro on the conversion it should be business as usual for existing loans. Not sure what would happen with the continual borrowings etc without an ECB but I'm surethe real brain boxes would work something out.. :eek:

All pie in the sky but there is some merit in the approach at least ?

Okay, so debts get converted to their new currencies on a 1:1 basis. When we start trading the punt will depreciate vs all former euro currencies except Portugal & Greece.

Best case scenario we end up owning at least the same amount. But the best case is about as real as Star Wars

Realistically what will happen is the punt will depreciate. Hell we'll want it to against our biggest export markets, which are Germany, UK & US (that the UK & US are also out biggest lenders is a worry to me). When that happens the foreign currency value of any loans will remain the same but the relative punt value will grow (by probably 100% if the people wanting to do an Iceland are to be believed).

fatboypee

antoobrien wrote: »

Okay, so debts get converted to their new currencies on a 1:1 basis. When we start trading the punt will depreciate vs all former euro currencies except Portugal & Greece.

Best case scenario we end up owning at least the same amount. But the best case is about as real as Star Wars

Realistically what will happen is the punt will depreciate. Hell we'll want it to against our biggest export markets, which are Germany, UK & US (that the UK & US are also out biggest lenders is a worry to me). When that happens the foreign currency value of any loans will remain the same but the relative punt value will grow (by probably 100% if the people wanting to do an Iceland are to be believed).

Agreed. If we let trade occur on all currencies un-managed from the start it would be melt down. What I'm proposing is that the value of each currency is pegged +- a percentage of the base price of the Euro on its demise for a set period and managed to freedom. I realise its a crazy idea and I don't have all the answers obviously but its no more crazy than p1ssing away more and more loans in a never ending spiral and crapping ourselves when one country starts to bail....

Added to this, the whole intention is to manage the demise of the Euro sustainably, thus the best case scenario is financial and fiscal independence gained long term by again being able to manage our own economy for the good of Ireland, not Germany, France or anyone else..

antoobrien

fatboypee wrote: »

Agreed. If we let trade occur on all currencies un-managed from the start it would be melt down. What I'm proposing is that the value of each currency is pegged +- a percentage of the base price of the Euro on its demise for a set period

That's the mechanism we were tied into in the mid 90s - when we had to depreciate the punt by 10% because interest rates were 14/15%.

Realistically there's no way you can do what you want because the bond markets and FX markets will still be there to attack countries (if that's what the markets want to do).

fatboypee wrote: »

and managed to freedom.

What are you on about - we haven't lost any more freedom than we had in 2007. What we've lost is access to funds. The Troika aren't telling us that we can't spend money on things (unless it's totally f**king braindead like giving everyone on the dole a bar of gold at christmas) - they're telling us that we have a certain amount of money to spend and that's it!

fatboypee

antoobrien wrote: »

That's the mechanism we were tied into in the mid 90s - when we had to depreciate the punt by 10% because interest rates were 14/15%.

Realistically there's no way you can do what you want because the bond markets and FX markets will still be there to attack countries (if that's what the markets want to do).

Why? How different is doing such a thing as to, errm a single currency ? Don't we have one of those anyway? Surely a mechanism could be worked out and agreed if deemed necessary. Stranger things have happened and continue to do so, most at political whim it seems..

antoobrien wrote: »

What are you on about - we haven't lost any more freedom than we had in 2007. What we've lost is access to funds. The Troika aren't telling us that we can't spend money on things (unless it's totally f**king braindead like giving everyone on the dole a bar of gold at christmas) - they're telling us that we have a certain amount of money to spend and that's it!

Who mentioned 2007 ? Not me.. By freedom, I'm talking specifically about the ability to finally make an arse of our own financial state. The key factor here being we don't (as in the case of Greece, Spain and us) drag everyone else down our particular toilet as well.

In my Naive view the Euro and the European Union, in its current form is clearly unsustainable and it is not so far fetched to attempt or pursue a Europe Wide Extrication. One that does not HAVE to be devastating.

Yes, I'm naive but FWIW I think there is some merit in at least considering such an idea, if not specifically this one.

antoobrien

fatboypee wrote: »

Why? How different is doing such a thing as to, errm a single currency ? Don't we have one of those anyway? Surely a mechanism could be worked out and agreed if deemed necessary. Stranger things have happened and continue to do so, most at political whim it seems..

Start articulating whatever it is you're on about.

fatboypee wrote: »

Who mentioned 2007 ? Not me.. By freedom, I'm talking specifically about the ability to finally make an arse of our own financial state. The key factor here being we don't (as in the case of Greece, Spain and us) drag everyone else down our particular toilet as well.

Freedom in monetary terms around here is equivalent to sovereignty. As the story goes we lost our economic sovereignty when the IMF came in and it was caused by the start of the downturn in ....2007.

We do have the freedom to muck things up - inside or outside the euro. Aren't we proving that right now?

fatboypee wrote: »

In my Naive view the Euro and the European Union, in its current form is clearly unsustainable and it is not so far fetched to attempt or pursue a Europe Wide Extrication. One that does not HAVE to be devastating.

Yes, I'm naive but FWIW I think there is some merit in at least considering such an idea, if not specifically this one.

Granted we should consider the idea - but not just what you perceive to be positives (which I perceive to be the equivalent of playing russian roulette with the economy) but also the negatives.

I'm not asking for all the answers, just trying to get you to articulate the idea that's in your head. We might find merit in it (imo doubtful based on what you've posted) or we might find that the supposed risks outweigh the supposed benefits of your strategy.

fatboypee

Freedom in monetary terms around here is equivalent to sovereignty. As the story goes we lost our economic sovereignty when the IMF came in and it was caused by the start of the downturn in ....2007.

We do have the freedom to muck things up - inside or outside the euro. Aren't we proving that right now?

We have the freedom within the constraints of the single currency mechanism, not only to muck things up for ourselves but also every other country in the Euro. My point is simply that if there were a mechanism by which we could extricate ourselves from the Euro with relative or scaled impunity then for all our sakes we should consider it before trying to remain together as a union that is clearly running on one wheel..

Granted we should consider the idea - but not just what you perceive to be positives (which I perceive to be the equivalent of playing russian roulette with the economy) but also the negatives.

I'm not asking for all the answers, just trying to get you to articulate the idea that's in your head. We might find merit in it (imo doubtful based on what you've posted) or we might find that the supposed risks outweigh the supposed benefits of your strategy.

I put out the question to be shot down. I.e Why is it not possible to unilaterally decide to return to our base currencies.

Extrapolating that further I suggested it may, under serious consideration, be possible to come up with a mechanism that allowed each currency to be re-instantiated with its base value set at the current Euro value with all debts, deposit etc being transferred at 1-1 value at change over.

Further extrapolation could see 'some' protected mechanism of trading currencies limited (no I don't know how, just theorising) for a certain period to +- 20% of Euro ending value.

Why I think its possible to do this is that we already have a Euro that trades at a certain price. It was launched at a certain price and in my naive world I see little difference between 'several' Euro currencies and one Euro currency.

Even, say, we cannot protect the value +-, if we overcame the existing issues of devaluation then yes, economies would sink or swim but again, in my naive world, they are sinking and swimming now but lack the mechanisms to regulate themselves other than through the Euro.

This is merely one possible idea, meritorious or not but the underlying point remains that to continue on with a Euro in such crisis only to be forced into devaluation (as is extremely possible) while racking up debt after debt, to me seems madness.

antoobrien wrote: »

Start articulating whatever it is you're on about.

I'm trying quite hard not to rise to the antagonistic tone of your replies.
If you think me a fool either in the naivety of my point of view or how I'm expressing it then please, for the sake of anyone else reading this,explain why I am a fool and lets be done with it ? There really is no need to be sarcastic, it merely debases your own position.

antoobrien

fatboypee wrote: »

We have the freedom within the constraints of the single currency mechanism, not only to muck things up for ourselves but also every other country in the Euro. My point is simply that if there were a mechanism by which we could extricate ourselves from the Euro with relative or scaled impunity then for all our sakes we should consider it before trying to remain together as a union that is clearly running on one wheel..



I put out the question to be shot down. I.e Why is it not possible to unilaterally decide to return to our base currencies.

Extrapolating that further I suggested it may, under serious consideration, be possible to come up with a mechanism that allowed each currency to be re-instantiated with its base value set at the current Euro value with all debts, deposit etc being transferred at 1-1 value at change over.

Further extrapolation could see 'some' protected mechanism of trading currencies limited (no I don't know how, just theorising) for a certain period to +- 20% of Euro ending value.

Why I think its possible to do this is that we already have a Euro that trades at a certain price. It was launched at a certain price and in my naive world I see little difference between 'several' Euro currencies and one Euro currency.

Even, say, we cannot protect the value +-, if we overcame the existing issues of devaluation then yes, economies would sink or swim but again, in my naive world, they are sinking and swimming now but lack the mechanisms to regulate themselves other than through the Euro.

This is merely one possible idea, meritorious or not but the underlying point remains that to continue on with a Euro in such crisis only to be forced into devaluation (as is extremely possible) while racking up debt after debt, to me seems madness.



I'm trying quite hard not to rise to the antagonistic tone of your replies.
If you think me a fool either in the naivety of my point of view or how I'm expressing it then please, for the sake of anyone else reading this,explain why I am a fool and lets be done with it ? There really is no need to be sarcastic, it merely debases your own position.

It's not antagonism or sarcasim, it's annoyance that won't articulate your pov. You're going round in circles making it hard to figure out why you want it and your perception of sarcasm in genuine questions is a poor attempt to deflect attention from your lack of a point.

BTW your mechanisms are a terrible idea, that are no different in effect from being in the Euro itself. The only reason to leave the Euro is to get immediate control of the currency - which you are proposing negating.

So I'm going to give you a choice - go read the (many) other threads about this or start answering questions.

The first question is: Why do you want to leave the Euro?

fatboypee

antoobrien wrote: »

It's not antagonism or sarcasim, it's annoyance that won't articulate your pov. You're going round in circles making it hard to figure out why you want it and your perception of sarcasm in genuine questions is a poor attempt to deflect attention from your lack of a point.

BTW your mechanisms are a terrible idea, that are no different in effect from being in the Euro itself. The only reason to leave the Euro is to get immediate control of the currency - which you are proposing negating.

So I'm going to give you a choice - go read the (many) other threads about this or start answering questions.

The first question is: Why do you want to leave the Euro?

In my view, the Euro is doomed. I do not personally think it is workable going forward given the desperate financial state of Greece, Spain and others including Ireland. Should Greece leave then fallout will be immense (or so I am led to understand).

Therefore I am suggesting that rather than recover and devise contingency plans to stabilise the Euro in the absence of Greece (and maybe others) we could instead device a plan to unilaterally return to our own domestic currencies.

Am I going in straight line enough for you yet?

BTW your mechanisms are a terrible idea, that are no different in effect from being in the Euro itself. The only reason to leave the Euro is to get immediate control of the currency - which you are proposing negating.

Perhaps its your turn to answer a question or two, declaring my mechanisms as a terrible idea needs a bit more expansion than saying its no different from being in the Euro ?How so ? What do you mean by 'in effect' ?

Surely separate currencies, by their nature are isolated enough as to not bring the whole of Europe down if they get into financial difficulty. Hardly the same as the Euro is it ?

Care to unpack that a bit for me ?

antoobrien

fatboypee wrote: »

In my view, the Euro is doomed. I do not personally think it is workable going forward given the desperate financial state of Greece, Spain and others including Ireland. Should Greece leave then fallout will be immense (or so I am led to understand).

Therefore I am suggesting that rather than recover and devise contingency plans to stabilise the Euro in the absence of Greece (and maybe others) we could instead device a plan to unilaterally return to our own domestic currencies.

A good starting point for an O.P. next time, try starting with that

fatboypee wrote: »

Am I going in straight line enough for you yet?

Now who's being sarcastic and antagonistic:rolleyes:

fatboypee wrote: »

Perhaps its your turn to answer a question or two, declaring my mechanisms as a terrible idea needs a bit more expansion than saying its no different from being in the Euro ?

Maybe it's because I paid attention to the reasons why my father was giving out about having to pay 16% on his mortgage in the mid 90s that I find it such a terrible idea.

I think it's idiotic because I've seen what you're proposing before and it wasn't the panacea that you seem to think it is. You're also trying to enforce a mechanism that will not be allowed to happen.

fatboypee wrote: »

its no different from being in the Euro ?How so ? What do you mean by 'in effect' ?

Surely separate currencies, by their nature are isolated enough as to not bring the whole of Europe down if they get into financial difficulty. Hardly the same as the Euro is it ?

Two aspects of the same question, so I'll answer it as one.


What you're proposing is a reverse of the mechanism that brought is into the Euro after the Maastricht Treaty. The fix rate only lasted a few months - at which stage we had no control over the currency as a monetary tool. While the currencies existed as sperate legal tenders, we were effectively acting under the Euro from the time of the fixing on the exchange rate, so an attack on one currency became an attack on all. (that's the same as being in the euro)

Between 1993 & 1998 the punt was pegged to the pre-euro currencies and had to stay in a certain exchange range. The result, we were (rightly) seen as a week link and attacked mercilessly by the FX markets. We had to increase interest rates to historic highs (iirc the ICB rate was 15%) and devalue the punt by 10%.

This still wasn't enough, so the DM suffered becuase it was linked to the punt (it's a two way street), which affect all the pre-euro linked basket currencies.

So yeah, it's very possible that a peseta or lira run can do the same damage within the Euro as without.

The only way they can't is if they are totally independent - which you don't want to see (we can't make special rules for one party in this) - and if their debts are in their own currencies - which they won't. Debt issued from Ireland under the new system will be in punts, from Spain - peseta etc etc. then the problem becomes how do they pay off debt that has just trebled because value of their currency has fallen through the floor.

Is that straight forward enough for you?

fatboypee

antoobrien wrote: »

A good starting point for an O.P. next time, try starting with that

:rolleyes:

Maybe it's because I paid attention to the reasons why my father was giving out about having to pay 16% on his mortgage in the mid 90s that I find it such a terrible idea.

I think it's idiotic because I've seen what you're proposing before and it wasn't the panacea that you seem to think it is. You're also trying to enforce a mechanism that will not be allowed to happen.

The mechanism, admittedly (throughout my posts) is more than likely unworkable, yet your whole commentary seems to focus upon it.

Two aspects of the same question, so I'll answer it as one.


What you're proposing is a reverse of the mechanism that brought is into the Euro after the Maastricht Treaty. The fix rate only lasted a few months - at which stage we had no control over the currency as a monetary tool. While the currencies existed as sperate legal tenders, we were effectively acting under the Euro from the time of the fixing on the exchange rate, so an attack on one currency became an attack on all. (that's the same as being in the euro)

Between 1993 & 1998 the punt was pegged to the pre-euro currencies and had to stay in a certain exchange range. The result, we were (rightly) seen as a week link and attacked mercilessly by the FX markets. We had to increase interest rates to historic highs (iirc the ICB rate was 15%) and devalue the punt by 10%.

This still wasn't enough, so the DM suffered becuase it was linked to the punt (it's a two way street), which affect all the pre-euro linked basket currencies.

So yeah, it's very possible that a peseta or lira run can do the same damage within the Euro as without.

The only way they can't is if they are totally independent - which you don't want to see (we can't make special rules for one party in this) - and if their debts are in their own currencies - which they won't. Debt issued from Ireland under the new system will be in punts, from Spain - peseta etc etc. then the problem becomes how do they pay off debt that has just trebled because value of their currency has fallen through the floor.

Fair enough. The mechanism won't work, as above and before, I expected so and openly made that point.

Is that straight forward enough for you?

Oh for sure. Very clear. The mechanism won't work. I suggested it as a temporary method and you've pointed out its weaknesses Perhaps if you had explained that in your first rebuttal (I dare not call it a post given the inclination toward irritation you have already pointed out) we would have arrived at this point a little quicker also ? For what it is worth I do actually suggest full independence, total and absolute independence, in my view the quicker the better.

My post suggested more than just a mechanism though, didn't it ? And I have yet to note any commentary upon the larger point of extrication ? Or perhaps I'm confused again..

So back on topic, just for me, write it down big ? If as I assume you are opposed to such a notion can you possibly expand a little on what you think we should do to stop the clear necrosis ? If we have no means of monetary governance at our disposal and the referendum will enforce further that we will not have any means for some considerable time, what should we do ?

srsly78

We could try to raise more taxes, but people go nuts even at the e100 household charge.

We could reduce public sector pay, but unions will go nuts and bring country to standstill.

We could reduce welfare more, obvious problems here - but getting rid of childrens allowance for rich people would be an easy one to start with.

I for one am glad our government can't devalue our currency.

antoobrien

fatboypee wrote: »

The mechanism, admittedly (throughout my posts) is more than likely unworkable

Then why do you keep bringing it back up and trying to justify it. I've shown how I believe it to be unworkable but it's like trying to explain to a child that 6*7=7*6.

fatboypee wrote: »

yet your whole commentary seems to focus upon it.

Not true, I've given you a couple of downsides to being in our own currency, which you're ignoring. Besides, you want out of the Euro and are looking for a mechanism to do so, without giving a realistic reason as for why we would want to do so.

fatboypee wrote: »

Oh for sure. Very clear. The mechanism won't work. I suggested it as a temporary method and you've pointed out its weaknesses Perhaps if you had explained that in your first rebuttal (I dare not call it a post given the inclination toward irritation you have already pointed out)

Stop being childish - you asked for downsides - that you don't like them is irrelevant.

fatboypee wrote: »

we would have arrived at this point a little quicker also ? For what it is worth I do actually suggest full independence, total and absolute independence, in my view the quicker the better.

How & why? I've yet to see a proper explanation of this other than "because I say so". Also, you are refusing to seriously consider the possible consequences of the proposed action.

fatboypee wrote: »

My post suggested more than just a mechanism though, didn't it ? And I have yet to note any commentary upon the larger point of extrication ? Or perhaps I'm confused again..

No, it didn't

fatboypee wrote: »

So back on topic, just for me, write it down big ?

Can't do that as we won't get money again for a long time. See Argentina for an example. Relatively rich country that had a sustainable debt/gdp ratio (50%) which defaulted. It's been suffering ever since because nobody trusts them to pay the money back.

Or to put it another way (based on the assumption that one doesn't have large amounts of money to throw away): You lend a large amount of money, say €10,000 to your neighbor and they don't pay it back. Will you be as quick to lend money again? The same kind of thinking applies to the people that lend money as return is important.

fatboypee wrote: »

If as I assume you are opposed to such a notion can you possibly expand a little on what you think we should do to stop the clear necrosis ? If we have no means of monetary governance at our disposal and the referendum will enforce further that we will not have any means for some considerable time, what should we do ?

If I knew what it was you were trying to achieve - fiscal independence, boosting the value of exports, debt reduction etc it might help.