Leaving the Euro - what is wrong with these people....

[bodyofevidence]

George Lee is now at it.
independent.ie/national-news … 62794.html
What is it with these people - do they WANT a massive capital flight?

[RomanticIreland]

Lee phoned into one of the morning radio shows on Radio One this morning denying he said Ireland should leave the euro.

[bodyofevidence]

@RomanticIreland

Lee phoned into one of the morning radio shows on Radio One this morning denying he said Ireland should leave the euro.

good. Now for Maccer to come to his senses

[Larry]

GL has a 21 year old daughter?? Wow. He must have started young.

[BoyRacer]

@bodyofevidence

George Lee is now at it.
independent.ie/national-news … 62794.html
What is it with these people - do they WANT a massive capital flight?

That’s why capital controls are there to prevent such movement.

Anyway the day of reckoning is here for the Euro project, the PIIGS crisis is still escalating. But, because our monetary policy is controlled by the ECB and various treaty arrangements, we’re not able to easily inflate their way out of the fiscal crisis by devaluing the Punt like we did many decades ago. This leaves us the following options:

1. Raise taxes till the pips squeak.
2. Cut spending to a balanced budget.
3. Pay higher interest rates.
4. Suspend payments or outright default on some or all of our debts.
5. Hang around for a bailout by the ECB.
6. Withdraw from the Euro (an Punt Nua)
7. Exit the European Union (and settle for an agreement like Norway and Switzerland), but there will be sanctions for this.
8. A combination of any or all of the above.

Now that we have surrendered our national sovereignty to the new Europe (Lisbon treaty). Are we really going to push for another referendum to take us out? Didn’t think so, we are run by politicians who cooperatively sold Irelands’ sovereignty for a ‘mess of pottage’, i.e. access to Europe’s capital and markets. They are highly unlikely to secede.
Remember the stability and growth pact (fiscal deficit less than 3% GDP, debt less than 60% of GDP), that was broken from the start by France and Germany.

Public Finances in EMU 2009 → ec.europa.eu/economy_finance/pub … 390_en.pdf

Of course the problem with all this is the threat of a national debt default by any one of the PIIGS. Greece insists that it will do no such thing. But the rates on insurance against Greece’s national default have been rising, so the market believes otherwise.

We’re caught in a trap of our own making. We won’t secede. We can’t inflate. So, we have to decide: default, higher interest rates, or run a budget surplus. The latter is out of the question in any European country. So, it is down to default or raise interest rates.

Or we can stall and see if the ECB comes through with the NAMA bailout initially and then NAMA II . If the ECB does bail us out, this will send a clear signal: the end of any pretence of need for fiscal responsibility by the PIIGS. It will also end any legitimate hope that the Euro will become a stable, reliable fiat currency (is there ever such a thing as a stable fiat currency?)

The politicians have no ability politically to cut the costs of national government. The welfare state mentality is universal. Politicians refuse to slow the rate of spending and I’ve said before raising taxes will further impact the economy. Politicians are still trying to raise taxes though, and there are already painful economic repercussions. Rising interest rates alone will tank the economy.

This leaves only one possible solution: kick the can. Promise stability and growth. Promise that we will get our finance in order, however, the welfare state is based on promises. All over the world, it is facing bankruptcy. But the voters believe in the promises, and politicians dare not tell the truth.

Of course we could balance the books, but we know that won’t happen any time soon, so rising rates and continued recession look likely for some time to come.

[BoyRacer]

Ireland named in group posing ‘real risk’ to euro future → sbpost.ie/news/ireland-named … 47418.html

Ireland is one of a small number of countries that pose ‘‘a real risk’’ to the future of the euro, according to a major report by an influential German research group.
The report, to be published later this month by the CESifo group, names Ireland - along with Greece - as a country where international money markets see a significant risk of a sovereign default or an exit from the eurozone.
While the research group says that such events are not on the political agenda, it says that the pr ices demanded by investors to buy debt from countries such as Ireland and Greece reflect real fears.
As EU leaders react to the unfolding crisis by promising support to Greece, the report says a ‘‘wave of bailouts’’ of weaker member states must be avoided to maintain the euro as a stable currency.

there is more

[BoyRacer]

Dangers of the domino effect → sbpost.ie/commentandanalysis … 47369.html

Over the past few years this column has been making the point intermittently that the euro is the wrong currency for Ireland.

In many official quarters this assertion is met with derision. Might this be because the ‘‘official mind’’ can’t deal with uncertainty? Or is it that the ‘‘official mind’’ is not able to do what we all should do at times, which is to ‘‘think the unthinkable’’. So the next issue is whether the Greek bailout is good news for Ireland?

I know it sounds parochial, but let’s deal with our own backyard first. Does the bailout of Greece, whatever form it takes, mean that the bigger, older countries in the EU now realise that there is a fault-line at the heart of the euro project?

As long as Germany chooses to run huge current account surpluses, this money will be borrowed either in the eurozone or outside it. If it is spent within the eurozone in countries that want to grow but haven’t the domestic savings to do so, there will always be regional booms and busts, as there are now in Ireland, Spain and - ironically, despite its bad press - to a lesser extent Greece.

On the other hand, if the German savings are borrowed outside the eurozone - in the US or Britain, for example - there will be a tendency for the euro to rise against these major currencies. Given that Ireland does far more trade with Britain and the US than it does with Germany and France - and Irish shoppers shop in Newry, not Nuremberg - this creates a tendency for Ireland to boom unsustainably and then fall back suddenly.

This means that the Irish boom/bust cycle is excessively amplified by our membership of the euro. Booms are longer and more effervescent and busts too are longer and more painful.

there is more

[bodyofevidence]

@BoyRacer

Dangers of the domino effect → sbpost.ie/commentandanalysis … 47369.html

Over the past few years this column has been making the point intermittently that the euro is the wrong currency for Ireland.

In many official quarters this assertion is met with derision. Might this be because the ‘‘official mind’’ can’t deal with uncertainty? Or is it that the ‘‘official mind’’ is not able to do what we all should do at times, which is to ‘‘think the unthinkable’’. So the next issue is whether the Greek bailout is good news for Ireland?

I know it sounds parochial, but let’s deal with our own backyard first. Does the bailout of Greece, whatever form it takes, mean that the bigger, older countries in the EU now realise that there is a fault-line at the heart of the euro project?

As long as Germany chooses to run huge current account surpluses, this money will be borrowed either in the eurozone or outside it. If it is spent within the eurozone in countries that want to grow but haven’t the domestic savings to do so, there will always be regional booms and busts, as there are now in Ireland, Spain and - ironically, despite its bad press - to a lesser extent Greece.

On the other hand, if the German savings are borrowed outside the eurozone - in the US or Britain, for example - there will be a tendency for the euro to rise against these major currencies.e - and Irish shoppers shop in Newry, not Nuremberg - this creates a tendency for Ireland to boom unsustainably and then fall back suddenly.

This means that the Irish boom/bust cycle is excessively amplified by our membership of the euro. Booms are longer and more effervescent and busts too are longer and more painful.

there is more

fine Dathai…HOW, exactly, do we leave. HOW…
Oh, and David…
" Given that Ireland does far more trade with Britain and the US than it does with Germany and Franc"
Bollix
2008 figures

Uk / Rest of EU
Imports 19.2 / 17.3
Exports 15.8 / 37.9

Far more me anus. 35 vs 54.3 ; now we will get the “ah shure he mean we import more” apologists.

[bodyofevidence]

@BoyRacer

That’s why capital controls are there to prevent such movement.

Really? Which ones do we have now in place?

[johnnyskeleton]

The idea that if we had not joined the euro, at a time when the Fed, BOJ, BOE and ECB were all slashing rates and the soverign wealth funds of the Middle East and the Trade surpluses of developing nations such as China were all being made available globally at very low interest rates, we would have been able to control our own interest rates thereby preventing the bubble is a nonsense.

Suggesting that by leaving the Euro now - at a time when interest rates are at rock bottom and any increase will be met by severe political pressure - we will be able to fix our economy is equally nonsensical.

Not surprized that the Indo falsely reported what Lee said, but wouldn’t mind if he did come out with a few policy points, perhaps with a view to running as an independent in the next election.

[BoyRacer]

@bodyofevidence

@BoyRacer

That’s why capital controls are there to prevent such movement.

Really? Which ones do we have now in place?

None, but, the shutters will be pulled down quickly in the event of emergency. I believe a lock down scenario has been discussed by the banks and the government in the event of a bank run. Then take for example Iceland in September 2008 as an example how quickly this can be done.

The return of capital controls → blogs.ft.com/maverecon/2009/02/t … -controls/

When Iceland’s banking system and currency collapsed last September, a key component of the emergency package that was introduced under the auspices of the IMF were controls on capital outflows, implemented through rigorous foreign exchange controls.

Of course, I may be crediting the Department of Finance with imagination and foresight that they don’t posses.

[laughinglawyer]

As the late Neil Blaney might have said I never left the Euro, the Euro left me. Seems to me that ultimately that might be our fate for good or ill.

[grumpy]

@johnnyskeleton

The idea that if we had not joined the euro, at a time when the Fed, BOJ, BOE and ECB were all slashing rates and the soverign wealth funds of the Middle East and the Trade surpluses of developing nations such as China were all being made available globally at very low interest rates, we would have been able to control our own interest rates thereby preventing the bubble is a nonsense.

Why? We always kept our rates at a level that prohibited a lot of speculative lending before the euro.

Suggesting that by leaving the Euro now - at a time when interest rates are at rock bottom and any increase will be met by severe political pressure - we will be able to fix our economy is equally nonsensical.

Agreed. My view is that while we would be better not to be members (ie we could devalue and I read a report by McKInsey recently that suggested deflating a currency in response to a bubble led to a quicker recovery) as we are in we cant leave.

Huge mistake to join. Bigger one to leave.

[BoyRacer]

@grumpy

Why? We always kept our rates at a level that prohibited a lot of speculative lending before the euro.

Remember the bubble in agricultural land prices in the 70’s?

[Rialtas]

There is a simple solution to this crisis: Germany leaves the Euro, preserving its surplus and meeting its public’s desire for a strong currency, while also weakening the rump-euro and restoring the competitiveness of the PIIGS economies.

It is suggested in the Lex column in the FT this week, the PIIGS economies lost some 20% of their competitiveness with respect to the German economy with the advent of the Euro.

A German exit would allow Club Med to uphold contracts in euros and devalue with least havoc to internal debt markets. The German bloc would enjoy a windfall gain. The D-Mark II would be stronger. Borrowing costs would fall. The North-South gap in competitiveness could be bridged with less disruption for both sides.

nakedcapitalism.com/2010/02/should-germany-quit-the-eu-rather-than-rescue-greece.html

Germany is in a similar position to China: a manufacturing powerhouse that sees it as to its advantage to have its currency “peg” result in its labor being underpriced. But the result, that its economy saves, means another economy much consume more than it produces. Keep that up for long enough, and the underproducing country starts to look like a deadbeat. So the surplus country needs to be prepared to accept either a revaluation or deadweight losses. But neither China nor Germany seem ready to hear that.

It could be done, and the German exit option was explored in this 2000 paper jdawiseman.com/papers/finmkts/deutsche-zentralbank.html

[yoganmahew]

@grumpy

@johnnyskeleton

The idea that if we had not joined the euro, at a time when the Fed, BOJ, BOE and ECB were all slashing rates and the soverign wealth funds of the Middle East and the Trade surpluses of developing nations such as China were all being made available globally at very low interest rates, we would have been able to control our own interest rates thereby preventing the bubble is a nonsense.

Why? We always kept our rates at a level that prohibited a lot of speculative lending before the euro.

Because that’s what Iceland tried to do. They kept interest rates high to prevent the domestic economy overheating - sadly all this did was encourage a massive carry trade to flood their banking system with money. Money it couldn’t do anything productive with. And the natives all went off and got low interest loans in other currencies with no protection against currency movements…

We would be in no better position. Come 2002 with low global interest rates, we would have either had to follow them down to maintain the competitiveness of our exports or kept them elevated and watched our exports disappear as a carry-trade bubble expanded. Bother would have ended in successful speculations against our currencies. That is what small currencies are for. Sovereign-risk speculation is a much tamer business since the IMF is on hand to bridge the gap.

@grumpy

My view is that while we would be better not to be members (ie we could devalue and I read a report by McKInsey recently that suggested deflating a currency in response to a bubble led to a quicker recovery) as we are in we cant leave.

Huge mistake to join. Bigger one to leave.

I don’t even think it was a big mistake to join, to be honest. The problem, as I see it, is that ZIRP in Japan has destroyed the world economy. The idea that a rich country can have zero interest rate on its own without that causing huge problems everywhere else is nonsense. Mrs. Watanabe’s savings have flowed around the world like lava, hot and liquid, leaving burning husks in their wake. You simply cannot give money away, no matter on the scale, and expect it to not have bad effects. That this was further compounded by US monetary policy was an even bigger disaster for the few places left untouched by the Japan virus.

Monetary policy is no substitute for fiscal policy. You can avoid a fiscal-policy recession by making money cheap. You can do this a few times. But each time you build up more debt…

What was our big mistake was to not be Finland and live within the constraints of the single currency. Instead we had our gombeens not only promising jam today and jam tomorrow, but delivering huge truckloads of jam.

[kerrynorth]

@RomanticIreland

Lee phoned into one of the morning radio shows on Radio One this morning denying he said Ireland should leave the euro.

Maybe there is something wrong with me but the article and the quotes scream ‘leave the Euro’ at me.

We should take the fight to Europe and claw back our economic-control instruments – which include our own currency, the deficit, the ability to print our own money and setting our own interest rates.

[johnnyskeleton]

@grumpy

@johnnyskeleton

The idea that if we had not joined the euro, at a time when the Fed, BOJ, BOE and ECB were all slashing rates and the soverign wealth funds of the Middle East and the Trade surpluses of developing nations such as China were all being made available globally at very low interest rates, we would have been able to control our own interest rates thereby preventing the bubble is a nonsense.

Why? We always kept our rates at a level that prohibited a lot of speculative lending before the euro.

Because if the irish central bank had high rates, that would not stop irish banks sourcing funds on the international markets at a much cheaper rate. Plus, it is certainly possible that the Irish Central Bank would have reduced rates in line with our UK and Eurozone neighbours. At the upper levels, our state is not particularly good at original thought.

Suggesting that by leaving the Euro now - at a time when interest rates are at rock bottom and any increase will be met by severe political pressure - we will be able to fix our economy is equally nonsensical.

Agreed. My view is that while we would be better not to be members (ie we could devalue and I read a report by McKInsey recently that suggested deflating a currency in response to a bubble led to a quicker recovery) as we are in we cant leave.

I wonder about that. It reminds me of a rich, self-made man, who gives away his entire fortune and when asked why he says that it is so he can start again and make an even bigger fortune for himself. A competitive devaluation is really just giving away the stored wealth so that we’re all a lot poorer and the only way is up. This is fine on a macro-economic level, but it’s a bit shit for people who have savings. I can see how it works in reality, but I just wish it didn’t. Why should citizens be at the mercy of a politicians decision to wipe the slate clean and start again? Then of course, there’s always gold…

H

[johnnyskeleton]

@Rialtas

There is a simple solution to this crisis: Germany leaves the Euro, preserving its surplus and meeting its public’s desire for a strong currency, while also weakening the rump-euro and restoring the competitiveness of the PIIGS economies.

Just so long as everyone in the Eurozone can choose to keep their yos or exchange them for marks then I’m happy.

[FAUGH45568]

Are we going to be able to sort out our own problems?
If we are then we wont leave the Euro…

If we are not, is Germany able to bail us out and the rest of the pigs out?

More importantly are the PIIGS to be able to sort out their own problems?

What Assets do we have that those in Europe want?

What conditions come if Germany bail us out…

Leaving the Euro and having to pay back the debt through another currency (not Euro) is slavery for its people…

That does not mean it wont happen!!!

But saying that, the europeans will do everythign to ensure that the Euro will survive…

Too early in the cycle yet, but the warnings are getting louder even if I dont like them…

Remember one morning (retail) woke up and house prices were going down, but many here and were shouting for 3-4 yrs that they were overpriced…bubbles never make sense just like leaving the euro now doesnt (as we are gettign our hosue in order in the eyes of the mkts)