Ray Kinsella - Leave the Euro

astrofool · 08-08-2011 10:13PM

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 · 08-08-2011 10:31PM

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 · 08-08-2011 10:36PM

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 · 08-08-2011 11:20PM

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 · 09-08-2011 12:40AM

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 · 09-08-2011 08:39AM

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 · 09-08-2011 08:42AM

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 · 09-08-2011 09:06AM

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 · 09-08-2011 09:21AM

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 · 09-08-2011 12:42PM

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 · 09-08-2011 12:46PM

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 · 09-08-2011 12:53PM

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 · 09-08-2011 01:01PM

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 · 09-08-2011 01:12PM

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 · 09-08-2011 01:12PM

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 · 09-08-2011 01:16PM

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 · 09-08-2011 01:45PM

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 · 09-08-2011 02:01PM

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 · 09-08-2011 02:01PM

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 · 09-08-2011 02:07PM

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

SupaNova · 09-08-2011 02:10PM

beeftotheheels wrote: »

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.

Don't forget rather than face a mild recession after the tech bubble and September 11 attacks, it was the Keynesian policy to take interest rates to 1% to stimulate the economy that blew up the biggest housing bubble of all time that lead to this financial crisis. Rather than face a deeper recession this time round Keynesian policy is to print and some who saw the housing bubble see these policies causing a bigger currency crisis down the road.

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.

Things are a lot different now but this is an interesting watch. :
http://www.youtube.com/watch?v=czcUmnsprQI

beeftotheheels · 09-08-2011 02:51PM

ei.sdraob wrote: »

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

You are insisting on divorcing public debt from other debt which makes absolutely no sense at the moment. Government spending, whether prudent, affordable or otherwise will always have to be repaid using taxes levied on the private sector so the affordability of government spending relates directly to the strength of the underlying economy.

To pretend that government expenditure can be slashed across the board without that having hugely negative consequences for the underlying economy and thus creating a tailspin is just wrong.

Take Morgan Kelly's numbers of a 30% cut across the board to balance our budget. It would hurt like hell and personally I agree with Inda that it would be a lethal injection to the domestic economy. But ignoring that, imagine the cuts necessary for the US and Germany and the UK etc to balance their budgets? Knock on effect on our "export driven" economy? Monu f***in' mental so now 30% is not enough, what is? 50%? 60%? Because this is the scale of the problem right now, 10% belt tightening is no where near enough so to try and make adjustments over time is the only thing which governments can do, can kicking has a purpose here, it is not just a substitute for "decisive" government action.

Lost decades like Japan has had are infinitely preferable in my opinion to living through The Grapes of Wrath and that is where Argentina went, only they have now inflated another bubble with inflation running in double figures so before they get back into the bond markets from the last bubble they'll be bursting the next one.

Finance as we know it is changing, the rules are changing and Government behavior is and will continue to change. But this needs to be done over time to avoid the sights of hungry children on the streets because there are not all that many examples in recent history where hungry children on the streets in large numbers have not led to much, much larger problems, in fact the great depression in the US almost stands out in this regard, or would were it not for the consequences of depression in Europe at that time.

ei.sdraob · 09-08-2011 02:54PM

beeftotheheels wrote: »

Lost decades like Japan has had are infinitely preferable in my opinion to living through The Grapes of Wrath and that is where Argentina went

Careful what you wish for,

anyways both countries are very different to Ireland and their crisis's also had different causes and histories leading up

but yeh theres nothing like a good dose of scaremongering to justify policies that are chocking the economy

beeftotheheels · 09-08-2011 03:06PM

SupaNova wrote: »

Don't forget rather than face a mild recession after the tech bubble and September 11 attacks, it was the Keynesian policy to take interest rates to 1% to stimulate the economy that blew up the biggest housing bubble of all time that lead to this financial crisis. Rather than face a deeper recession this time round Keynesian policy is to print and some who saw the housing bubble see these policies causing a bigger currency crisis down the road.

You're calling Alan Greenspan a Keynesian? Be careful he doesn't read boards or he might try to sue you for defamation!

Low interest rates and a government deficit in the US in 2007 was not in any sense Keynesian economics!

Counter cyclical is the phrase to remember so cutting rates in 2001 was that, keeping them cut during a boom was the polar opposite!

beeftotheheels · 09-08-2011 03:18PM

ei.sdraob wrote: »

but yeh theres nothing like a good dose of scaremongering to justify policies that are chocking the economy

Well, can you please set out the likely consequences of "setting the markets free" backed up with some evidence?

Because it is now clear that the size of the adjustment required in 2008 was not comparable to 1987 or 2001 and is comparable to 1929 given its global nature (and thus not comparable to Japan or any other localized bubble implosions) so how on earth do you conclude that by following the policies of 1930s governments we would reach a different conclusion this time around?

It is not scare mongering, it is identifying the correct historical comparable and if you don't understand the size of the problem that we are facing then that would explain your position.

I recall engaging in arguments on threads a couple of months back with "free market" thinkers who believed that saying in May then that we were in 2007 all over again was scare mongering. Not looking so much like it now, is it?

SupaNova · 09-08-2011 03:26PM

beeftotheheels wrote: »

You're calling Alan Greenspan a Keynesian? Be careful he doesn't read boards or he might try to sue you for defamation!

I'm referring to the policy not the individual who enacted the policy. God knows what Greenspan would call himself.

Low interest rates and a government deficit in the US in 2007 was not in any sense Keynesian economics!

Counter cyclical is the phrase to remember so cutting rates in 2001 was that, keeping them cut during a boom was the polar opposite!

Modern Keynesian's like Krugman who you linked to don't have time for counter cyclical. He agrees that the FED is doing the right things now and did then, and that stimulus is the way to go, only so far it hasn't been big enough for him.

beeftotheheels · 09-08-2011 03:46PM

SupaNova wrote: »

Modern Keynesian's like Krugman who you linked to don't have time for counter cyclical. He agrees that the FED is doing the right things now and did then, and that stimulus is the way to go, only so far it hasn't been big enough for him.

Counter cyclical. Good grief, did people really buy into the notion that we'd seen the end of the credit crunch? Spending now is counter cyclical. Spending in 2003, 2004, 2005, 2006 was not.

So, here is Krugman not supporting Bush tax cuts

http://economistsview.typepad.com/economistsview/2005/10/paul_krugman_th_1.html

and supporting removing them to deal with the deficit back in 2005 for example.

Counter cyclical, the US should not have been running a deficit in 2005, they should have been running a surplus.

Duke Leonal Felmet · 09-08-2011 04:03PM

beeftotheheels wrote: »

Counter cyclical. Good grief, did people really buy into the notion that we'd seen the end of the credit crunch? Spending now is counter cyclical. Spending in 2003, 2004, 2005, 2006 was not.

So, here is Krugman not supporting Bush tax cuts

http://economistsview.typepad.com/economistsview/2005/10/paul_krugman_th_1.html

and supporting removing them to deal with the deficit back in 2005 for example.

Counter cyclical, the US should not have been running a deficit in 2005, they should have been running a surplus.

Maybe its just the way you wrote it, but it seems like you have it backwards. To run a deficit during a boom is pro-cyclical, not counter-cyclical. To make budgets cuts during a recession is pro-cyclical.

Maybe I misread you.

beeftotheheels · 09-08-2011 04:18PM

Duke Leonal Felmet wrote: »

Maybe its just the way you wrote it, but it seems like you have it backwards. To run a deficit during a boom is pro-cyclical, not counter-cyclical. To make budgets cuts during a recession is pro-cyclical.

Maybe I misread you.

Thanks - badly written so thank you for clarifying.

My point was that if the US had been counter cyclical they ought to have been running a surplus in 2005 rather than the deficit which they actually ran.

Hence to accuse the boom bust as resting on Keynesian economics, which the previous poster did, is mistaken. Keynesian economics were out of vogue in 2005 and remained so until the bust.

Duke Leonal Felmet · 09-08-2011 04:24PM

beeftotheheels wrote: »

Thanks - badly written so thank you for clarifying.

My point was that if the US had been counter cyclical they ought to have been running a surplus in 2005 rather than the deficit which they actually ran.

Hence to accuse the boom bust as resting on Keynesian economics, which the previous poster did, is mistaken. Keynesian economics were out of vogue in 2005 and remained so until the bust.

Yeah, people get Keynesian mixed up with all sorts of things. Simply but, it is carefully controlled anti-cyclical policy, i.e. it is anti-populist and hence anti-politician.

Chile is a great modern example of how it can work, when implemented correctly.

For example their public debt is just 6.1% of gdp, they have $28bn of foreign reserves (14% of gdp) and posted 5.2% gdp growth last year.

Not bad for a failed economic system.

Ray Kinsella - Leave the Euro

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