Is it time to join the euro?

pickles110564

ninky wrote: »

With the pound in such a weak position, would now be a better or worse time to join the euro?

It was bad enough when they joined us up to the frogs, be even worse if we shared their currency as well.

Reaper

I've never understood the flag waving nationalism that makes people oppose the Euro on ideological grounds. Surely the decision ought to be based purely on whether it will benefits or harms our economy?

My view is that although there may be a time to join it is certainly not now, and it surprises me that some Euorpean politicians suggested it is.

We could only enter in times of stability when our economy is as close as possible to our neighbours. There should also economic mechanisms to prevent individual countries doing their own thing (such as racking up debts) because it has an effect on their neighbours. Neither of these is true at present so it would be a disaster to join. Besides they wouldn't want us if we are doing QE!

chopperharris

If I remember rightly labour talked about joining it when it hit a ceratin target , that target has long gone and its well under it...which is the bad direction , not the good one.

The right time was when the rate was nearest 1.50 per quid.

Given that the other joiners old money was effectively overvalued and the same applied then we would have been approaching maybe doubling our money for signing up .....

However we would have had no controls of monentary policy and the like.Vat would have been increased , and deficits would have to have been on par with the rest.

So even if there was a short term benefit the long term picture would have been bad , especially given the global financial lox.You just have to look at ireland that looked well off up until recently and now like the rest of the PIIGS group look on shaky ground.

I would have loved to have my money converted to euros 4 years ago or so , then I could have sold up and !!!!!!ed off out of the eurozone.Nearly doubling my cash for the australian dream , eating skippy burgers for breakfast , quaffing draincleaner disguised as wine and watching the 3rd european war from the comfort of the planets buttocks....but then again foriegn tv I cant understand a bloody word that comes out of that kangaroos mouth and its too late to learn another language now , its took me 40 years to reach mediocre levels in english as it is.

Degenerate

Generali wrote: »

Could you give an example rather than an assertion?

Christ, this is basic stuff.

- Mortgage rates have dropped, leaving more money in people's pockets.
- The pound has dropped, helping exports, and encouraging local demand to be satisfied internally where possible, rather than by imports. (Before anyone trots out the "we don't make anything any more" line, yes we do, not as much as we used to, but we also export services.)

Just because the severity of the problem is beyond that which conventional monetary policy alone can cure, does not mean that it didn't help. It's the same as when people say the VAT cut did nothing. Let's put interest rates and VAT up to 50% then, after all it makes no difference.

Generali

Degenerate wrote: »

Christ, this is basic stuff.

Generali, not Christ.

Degenerate wrote: »

- Mortgage rates have dropped, leaving more money in people's pockets.
- The pound has dropped, helping exports, and encouraging local demand to be satisfied internally where possible, rather than by imports. (Before anyone trots out the "we don't make anything any more" line, yes we do, not as much as we used to, but we also export services.)

The pound has dropped which will help exports. Which country do you think will be importing more in the second half of 2009 than in the second half of 2008? Do you think that country will be receptive to UK exports? How do you think they can import given that credit markets have dried up and trade is done on tick?

Degenerate wrote: »

Just because the severity of the problem is beyond that which conventional monetary policy alone can cure, does not mean that it didn't help. It's the same as when people say the VAT cut did nothing. Let's put interest rates and VAT up to 50% then, after all it makes no difference.

The in extremis argument doesn't show that Government action has been effective. GDP is falling, unemployment is rising. The outcome has been horrible.

;-)

SGE1

Degenerate wrote: »

Christ, this is basic stuff.

- Mortgage rates have dropped, leaving more money in people's pockets.
- The pound has dropped, helping exports, and encouraging local demand to be satisfied internally where possible, rather than by imports. (Before anyone trots out the "we don't make anything any more" line, yes we do, not as much as we used to, but we also export services.)

Just because the severity of the problem is beyond that which conventional monetary policy alone can cure, does not mean that it didn't help. It's the same as when people say the VAT cut did nothing. Let's put interest rates and VAT up to 50% then, after all it makes no difference.

Sorry, but it's not "basic". If it were "basic", the answer would be clear, and we wouldn't be having this conversation.

You've listed the positive of being able to control our monetary policy, but you don't mention the other side of the coin - disincentives to save, etc; what's more, the evidence re exports is mixed, to say the least. Either way, the idea was to prove that the value of the benefits is greater than the impact of the negatives, which you've not done, you've simply listed two alleged benefits (and I say alleged because the second one isn't much to brag about).

Controlling monetary policy does have some benefits, but so does membership of the Euro. It's just a question of weighing up which of these benefits is more important to us, at each moment in time, and looking to the future. So again, it's not "basic."

purch

I've never understood the flag waving nationalism that makes people oppose the Euro on ideological grounds

Perfectly true, opposing a currency system that is economically sound and that would be an economic benefit to our economy, is nutzzz.

Personally I always thought the ERM was a nonsensical idea in the first place on economic grounds even if it sounded a good idea to the Politicians and penpushers in Brussels, and it's ultimate 'morphing' into the Euro created an unsustainable situation for those countries that were it's members, and a dangerous economic timebomb both for the members and the rest of the developed World.

Plus the notes look like Monopoly money, which has never helped !!!!

Degenerate

Generali wrote: »

The pound has dropped which will help exports. Which country do you think will be importing more in the second half of 2009 than in the second half of 2008? Do you think that country will be receptive to UK exports? How do you think they can import given that credit markets have dried up and trade is done on tick?

Even when trade is declining, the competitive advantage of a weak pound remains. You can be sure that if the pound was at say, 2 Euros, our exports would decline at a much faster rate.

The in extremis argument doesn't show that Government action has been effective. GDP is falling, unemployment is rising. The outcome has been horrible.

Monetary freedom makes it less horrible than having your hands tied.

Again, this is the same as the VAT argument. People apply the faulty logic that any measure that didn't completely solve the problem was totally ineffective, and ignore the possibility that things could have been even worse.

Generali

Degenerate wrote: »

Even when trade is declining, the competitive advantage of a weak pound remains. You can be sure that if the pound was at say, 2 Euros, our exports would decline at a much faster rate.

It's a competitive advantage if you're exporting. Less so if you're importing things like fuel, food or clothing (things that the UK imports a lot of).

Monetary freedom makes it less horrible than having your hands tied.

Degenerate wrote: »

Again, this is the same as the VAT argument. People apply the faulty logic that any measure that didn't completely solve the problem was totally ineffective, and ignore the possibility that things could have been even worse.

So your argument is that a poor solution is better than an awful one? I guess that has a certain logic although I'd hope for better from the finest minds that Socialism has to offer.

baileysbattlebus

Generali wrote: »

Bond prices/repos.

You can buy (for example) Irish Government bonds, post them with the ECB and borrow cash against them and buy (again for example) German Government bonds with that cash.

If there is a belief in the market that Irish Government debt is riskier than German (which it probably is) then Irish bonds should fall in price relative to German debt. Under the current rules, everyone in the Euro will be compelled to pay to prop up risky Government debt.

In the end either the better regarded countries will get fed up supporting the worst or it'll simply become too expensive. I don't know which will happen first although I suspect the former.

My outside bet is that Italy's economy is so ruined by not being able to devalue her currency any more that her citizens vote for a party committed to quitting the Euro - Italy has a long history of continual competitive devaluations. That would raise risk premiums on Euro debt (presumably) which could make other large countries feel it's not worth remaining as members.

The big outsider is that countries (France, Italy, Spain?) run bigger and bigger deficits. The European Commission has already shown that it isn't going to intervene to ensure that the Maastricht(?) Treaty conditions are met (deficits must be < 3% GDP). Eventually Germany gets the jitters about inflation and pulls out. Without Germany the Euro is stone cold dead.

Just a few thoughts. The Euro is a riskier proposition than many imagine as there is a big political risk which doesn't exist with other currencies by and large.

there were those who said the Euro wouldn't last 10 years / or survive it's first economic crisis. I guess this is the economic crisis.

The PIGS couldn't afford to leave the Euro - as you say Italy has a large national debt and a history of devaluing the Lira.

If it left the Euro it's borrowing costs would be horrendous, potentially bond investors would want double digit returns due to the risk of devaluing the Lira. Italy are better off where they are.

IMHO being in the Euro has saved the likes of Ireland already. And I would think after this crisis the new member states will be lining up to join the Euro - but will they be allowed to? They will have plenty of baggage.

I agree that only countries who are in a position of strength can afford to leave the Euro at the moment, and that would be Germany.

The weaker countries have been able to manage upto now because of a strong global economy, but with everything stripped away how will they manage.

Will a Euro country default on it's debt obligations - and if they did what would happen ? Would the defaulting member come under Euro administration?