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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.

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SupaNova

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.

We are obviously coming at this with different views and understandings of boom bust. Best not to derail this thread. Slightly amused though that those pro Keynesian will be using the same excuse as those pro free market years from now looking back at this crisis.

Duke Leonal Felmet

SupaNova wrote: »

We are obviously coming at this with different views and understandings of boom bust. Best not to derail this thread. Slightly amused though that those pro Keynesian will be using the same excuse as those pro free market years from now looking back at this crisis.

I wish I had clarvoyance...

SupaNova

Duke Leonal Felmet wrote: »

I wish I had clarvoyance...

Lol..... had to look that one up:pac:

Duke Leonal Felmet

So, next weeks lotto numbers... :-)

damino

If we were to leave the Euro the first people to feel pain would be mortgage holders and the business community. Look at Iceland and Hungary, when the IMF came in first, they had to put up their interest rates beyond a level where the vast majority could not afford to repay their mortgage for those on trackers and variable rates. Most folks in Ireland are either on variable or tracker. Then businesses would cease trading because they could not afford to borrow or afford to pay overdrafts. Being in the Euro affords businesses to avoid costly transactions costs in the Eurozone. Also multinationals would not like to based in a country where a new currency would inevitably plunge in value best conservative figure say 40%-50%. The cost of living would increase overnight, yet the majority of workers would receive no pay rises.

The folks who are calling for us to leave the Euro have ulterior motives, most have moved their money abroad and placed their money in the likes of the French Franc or Dollar in the hope that if Ireland were to leave the Euro, they would wait for the currency to fall dramatically best guess conservative figure 40%/50% minimum and transfer their money back to speculate on various businesses and peoples livelihoods.

ei.sdraob

beeftotheheels wrote: »

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?

When one is in deep debt the last thing one does is get more debt at high interest from the local knee-caping loanshark, one instead cuts out wasteful spending and tries to work more

I never said anything about "doing nothing" so stop claiming i said something i havent, you are jumping to conclusions for whatever reason

OMD

Can we leave the Euro without a national referendum?

View

OMD wrote: »

Can we leave the Euro without a national referendum?

I would doubt it. The Euro is one of the 5 clearly stated tasks of the EU - it is in something like Article 3 of the TEU so it is way up front, not buried in small print where some one might claim they missed it.

Both EU directives and Irish law (implementing the EU directives) say the Euro is the currency of Ireland. These are backed up respectively by the EU Treaties (for the EU directives) and Bunreacht na hEireann (for the Irish laws implementing the EU directives).

Even setting aside the "small matter" of the EU Treaties for the moment, BnahE in Article 29.4.6 states (with abbreviated form shown in italics):

6. No provision of this Constitution .... prevents laws enacted, acts done or measures adopted by— (the EU or EAEC) from having the force of law in the State.

In other words, as I understand it - even if the Oireachtas wants to - it has no power to override EU laws as a result of the people's decision to approve that clause in BnahE.

In addition, I suspect that were the Oireachtas to try to use the provision on referenda to invalidate EU laws they'd be wide open to legal challenge as they would clearly be trying to use a provision of the Constitution - namely, the referendum provision - to prevent EU laws from having the force of law in the State (in direct contradiction to the people's decision).

Needless to say, the proponents of "Leave the Euro" tend to ignore the clearly expressed decision of the people when making their pronouncements.

Is there anywhere an outline of what a change back to a punt would look like (as outlined by someone who thinks it's a good idea)?

From speaking recently to a financial reporter, his understanding is that the new currency would devalue quickly - this would have 2 immediate effects - cash assets in the new currency would lose value and commitments on people's salaries in the new currency would also now cost less.

On the other hand - very few would want their bank balances (positive ones - the debts converted to the new punt would be good) and there would be a rush to keep cash assets as euro balances (or even euro banknotes).

Also our debt would still be in euro - in theory we'd need to borrow less in euro in the future to pay people in punts in the public sector, but all our earnings and tax collection are in punts so it's much harder to pay off existing debt.

The other thing would be what would stop a catastrophic Zimbabwe style collapse of the currency if as it was being devalued there was a large scale speculative attack as it was devalued.

So is there any sensible writer (on the web) who describes what leaving the euro would entail so I can have a read?

Duke Leonal Felmet

pH wrote: »

Is there anywhere an outline of what a change back to a punt would look like (as outlined by someone who thinks it's a good idea)?

From speaking recently to a financial reporter, his understanding is that the new currency would devalue quickly - this would have 2 immediate effects - cash assets in the new currency would lose value and commitments on people's salaries in the new currency would also now cost less.

On the other hand - very few would want their bank balances (positive ones - the debts converted to the new punt would be good) and there would be a rush to keep cash assets as euro balances (or even euro banknotes).

Also our debt would still be in euro - in theory we'd need to borrow less in euro in the future to pay people in punts in the public sector, but all our earnings and tax collection are in punts so it's much harder to pay off existing debt.

The other thing would be what would stop a catastrophic Zimbabwe style collapse of the currency if as it was being devalued there was a large scale speculative attack as it was devalued.

So is there any sensible writer (on the web) who describes what leaving the euro would entail so I can have a read?

If our currency devalues against the Euro, that means our debt increases by that % and borrowing becomes more expensive. For this reason alone, reverting to a floating punt is suicidal. Not forgetting that the ECB has our financial system on life support, so we would lose that. The benefits such as competitiveness would not be felt immediately, but rather would take many months to materialise, but the negatives would be instant.

That timing is what most people fail to recognise, even supposed experts.

Taxi Drivers

Is there any business person who has come out and said that Ireland would benefit from leaving the euro?

supermonkey

Leaving the Euro the path to profit.
Part in bold is profit.

Step 01 Leave the Euro at 1-1 Punt Nua
Step 02 Punt Nua goes to 3-1
Step 03 Average Irish wage is €8000 per annum and we are in EU
Step 04 All euro denominated costs collapse as wealth is destroyed
Step 05 Ireland becomes a very attractive location for FDI
Step 06 Punt Nua Stabilises as unemployment rate falls to 4%
Step 07 Punt Nua reaches 1-1 Euro
Step 09 Irish government relaxes credit restrictions
Step 10 Irish toadstool boom begins and those with lots of toadstools make out like gangbusters
Step 11 Irish people panic to get on Toadstool ladder
Step 12 All the newly created Irish capital is misallocated to toadstool production
Step 13 Irish people richest in world and government flush with TTT [Toadstool transaction tax] revenue
Step 14 Maybe toadstools aren't such a sure bet ...

beeftotheheels

pH wrote: »

So is there any sensible writer (on the web) who describes what leaving the euro would entail so I can have a read?

Nope, because any one advocating it leaves out most of the horror story back drop of chaos and devaluation (mostly chaos, bank runs etc in the time necessary to hold the referendum) which is why we won't do it. They thus cannot be viewed as sensible.

That said toadstool transaction tax... great idea!

martin8591

I was listening to french tv last night and what was salient was the realisation by the french commentators that they are broke as well as the "PIGS" and the posturing by Sarkosy was a sham.
The final decision on wheather we stay or go will be a German one. The other thing was a graph of the worlds banks exposure to debt in the distressed states in he Eurozoe which totals about 3 trillion euros. US exposure is about 40% with Chinese about 25% and German and French banks the rest.
To answer the question I think we should wait and see but if you look at the geopolitical ramifications I could see the odds of serious disputes even unrest between countries in the next decade if this is not resolved decisively

_Kaiser_

View wrote: »

Needless to say, the proponents of "Leave the Euro" tend to ignore the clearly expressed decision of the people when making their pronouncements.

Well as has been proven by Lisbon 2 (or the "you did it wrong so go back and do it again and give us the RIGHT answer" campaign), the "clearly expressed decision of the people" can easily be ignored for the right agenda, so I wouldn't discount the possibility just yet.

Good loser

Kaiser2000 wrote: »

Well as has been proven by Lisbon 2 (or the "you did it wrong so go back and do it again and give us the RIGHT answer" campaign), the "clearly expressed decision of the people" can easily be ignored for the right agenda, so I wouldn't discount the possibility just yet.

It's a good job we did get a second go at Lisbon as we made such a mess of it the first time.

Nothing to stop us having Lisbon's 3,4 and 5!

meglome

Kaiser2000 wrote: »

Well as has been proven by Lisbon 2 (or the "you did it wrong so go back and do it again and give us the RIGHT answer" campaign), the "clearly expressed decision of the people" can easily be ignored for the right agenda, so I wouldn't discount the possibility just yet.

I'm very confused. How are more democratic votes not still the "clearly expressed decision of the people"? The people decided by a sizable majority, by democratic vote, to vote yes - what was ignored again?

irishh_bob

Good loser wrote: »

It's a good job we did get a second go at Lisbon as we made such a mess of it the first time.

Nothing to stop us having Lisbon's 3,4 and 5!

how did we make a mess of if the first time and how was it a good job we got a second bite at the cherry

Duke Leonal Felmet

meglome wrote: »

I'm very confused. How are more democratic votes not still the "clearly expressed decision of the people"? The people decided by a sizable majority, by democratic vote, to vote yes - what was ignored again?

Stop using reason and logic, will you? This is a political discussion!

thebman

I think I smell a profile raising exercise. Say something controversial and get your name in the papers.

Maybe he is annoyed that some other economists have been getting the limelight. It is great to say this because he knows no government would leave the Euro and there are no plans to currently do so.

That makes it the perfect thing to say since you can never be found out to be wrong on the issue. I'd love to see the argument he made for why we should do so though.

Idbatterim

surely its has been proven that we cant actually manage our own affairs and having a prudent country or countries calling the shots would be a good thing?

irishh_bob

Idbatterim wrote: »

surely its has been proven that we cant actually manage our own affairs and having a prudent country or countries calling the shots would be a good thing?

yes because those countries want only whats best for ireland :rolleyes:

Icepick

Cui bono, Kinsella?

Does he just want to see this economic experiment in practice?

Good loser

Icepick wrote: »

Cui bono, Kinsella?

Does he just want to see this economic experiment in practice?

It's irresponsible for Kinsella (and McWilliams) to call for leaving the euro.

It's a diversion from the serious issues all around us. Attention seeking drivel.

It will be hugely difficult for the euro to survive intact for the next six to twelve months.

I notice neither of them ever have much to say about how the budget deficit should be tackled.

irishh_bob

Good loser wrote: »

It's irresponsible for Kinsella (and McWilliams) to call for leaving the euro.

It's a diversion from the serious issues all around us. Attention seeking drivel.

It will be hugely difficult for the euro to survive intact for the next six to twelve months.

I notice neither of them ever have much to say about how the budget deficit should be tackled.

why is it irresponsible , nothing will ever be the same again when it comes to the euro and what is to come will not in anyway shape or form help ireland , the germans will not agree to QE and the price they will extract for bailing out italy , spain , greece and ireland is complete economic ( and in many ways political ) union , this will inevitabley lead to ireland loosing our export advantage through our corporation tax , with effectivley one european finance minister setting spending and taxation policy , it will see wellfare and public sector pay slashed in this country and most likely , a loss of multinational investment and jobs , kinsella can see this and is brave and honest enough to point it out , were we to leave the euro , our new currency would devalue , our deficit would need to be cut almost overnight and this would require massive cuts in expenditure , however , we would not only retain our corporation tax rate , our wage competitivness would be increased dramatically which would bolster multinational investment due to our low wage enviroment by way of a weakended currency , as for our bailout debts , we simply default on them and say very politley , thanks but no thanks to the EU , serious hardship would be endured for a few years but ultimatley , our future would be in our own hands as a fully indepdendant soverign nation

liammur

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.

It strikes me this punter kinsella knows nothing more than the punter in the pub. Worrying times indeed.

FreudianSlippers

Kaiser2000 wrote: »

Well as has been proven by Lisbon 2 (or the "you did it wrong so go back and do it again and give us the RIGHT answer" campaign), the "clearly expressed decision of the people" can easily be ignored for the right agenda, so I wouldn't discount the possibility just yet.

Sigh.

I'm getting really sick of this, it's getting so old now.

It's our decision to allow a second referendum where it is felt that the first was not properly put to the people. It cannot happen more than a second time and it can happen for any referendum, full stop.

It's OUR fecking decision. Get over it.

_Kaiser_

FreudianSlippers wrote: »

Sigh.

I'm getting really sick of this, it's getting so old now.

It's our decision to allow a second referendum where it is felt that the first was not properly put to the people. It cannot happen more than a second time and it can happen for any referendum, full stop.

It's OUR fecking decision. Get over it.

Whether or not you're tired of hearing it is irrelevant to be frank, it doesn't change the fact that the decision that was made by the people was ignored and they were forced to do it again (I certainly don't remember being asked if I wanted a second referendum, do you?) by a somewhat more scared/alert government who were perhaps terrified that the sheep didn't just do what they were told first time round - albeit this time with slogans like "yes for Jobs" (by our own Enda Kenny no less) to scare people into giving them the answer they wanted.

Ironic really that only a few years later that same Enda Kenny is getting to preside over the potential economic demise of the country, jobs and all!

damino

Well the current governement are lying to people deying the fact that currently the Irish Mint is printing Irish Punts and minting Irish pence coins. Where have this information come from, well from everybody who works in the Irish Mint. They have been telling all their family and friends they have been working flat out printing Irish Punts and minting Irish pence. The reason being, PLAN B; ITS A CONTINGENCY BACKUP PLAN; IF THE THE EURO WERE TO FALL APART.

Idbatterim

yes because those countries want only whats best for ireland

so you are implying our own politicians do? any they dont only care about staying in power?