We're F**ked Are'nt We?

Sea08 wrote: »

Whilst not being an economist, I disagree. The euro has remained stable during this period due to the strength of the other european nations. In iceland their currency has become almost worthless due to the governments need to print mountains of it to bail out their banks. This waters the value down. If we had the pound and had to print the amount of cash needed to provide the bank bailouts etc the currency would be worthless and talk of pensions would the least of our problems.

However it is true the euro has inflated the cost of everything in this country.

Iceland's currency is worthless, to whatever extent you wish to define 'worthless', because there was a currency crisis. They did not engage in monetizing government debt, i.e. "printing money" to pay for bailouts. They nationalized banks (custodianship), placing a large amount of notional liabilities on the sovereign's balance sheet, due to difficulties in those banks refinancing debt. Capital left the country, and people dumped the Icelandic Krona in the face of large external debt. They didn't have enough foreign exchange reserves to intervene against a wave of panic so the fixed exchange rate collapsed. The sovereign debt, effectively, became junk and the IMF had to extend emergency funding.

The Euro is the reason we have not ended up in the same situation. You often hear complaining about the rate at which our government is borrowing on capital/money markets, this would be considerably higher due to exchange rate risk premia (or we may be unable to auction debt at any price). We have an exchange rate problem, but that is a real exchange rate problem, not just a nominal issue. We are uncompetitive in comparison to other Euro member states, and that is enhanced vis-a-vis countries that factor considerably on our real trade-weighted exchange rate index by their depreciation; for example, the Pound Sterling. This an issue for the other Euro members, however, we are relatively worse off because of large scale wage inflation. Consider the two sides: costs and nominal exchange rates.

Abigayle wrote: »

*puts fingers in ears*
Little blue train cannnnt heeearr youuu!


Recessiony / apocolpsy forum ftw. Its not going anywhere in a hurry, worthwhile effort imo.

Combined relevance to train drivers with a hint of can do ......

inspired post

littlebluetrain has just arrived on boards ……..