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The dangers of a strong currency
HAMISH_MCTAVISH
Posts: 28,592 Forumite
http://www.bbc.co.uk/news/business-22634653US car giant Ford Motor will shut all its Australian manufacturing plants by October 2016, after more than 85 years of making vehicles in the country.
About 1,200 workers are expected to lose their jobs from the Broadmeadows and Geelong plants, in Victoria state.
Ford said its Australian operations had lost A$600m ($580m; £385m) over the last five years.
The strength of the Australian dollar has made manufacturing more expensive, while sales have been under pressure.
"Our costs are double that of Europe and nearly four times Ford in Asia," Bob Graziano, the chief executive of Ford Australia, said. "The business case simply did not stack up."
He added that "manufacturing is not viable for Ford in Australia in the long-term".
Perhaps now the RBA will wake up to the tremendous damage that is being done to the real Australian economy by their high interest rate/high dollar policy.
Tourism, agriculture, manufacturing, services, etc, have all been suffering badly.
Time to devalue and make australian products/services competitive again.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
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Comments
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HAMISH_MCTAVISH wrote: »http://www.bbc.co.uk/news/business-22634653
Perhaps now the RBA will wake up to the tremendous damage that is being done to the real Australian economy by their high interest rate/high dollar policy.
Tourism, agriculture, manufacturing, services, etc, have all been suffering badly.
Time to devalue and make australian products/services competitive again.
This, of course, is exactly the problem faced by Spain, Italy, Portugal etc.
The Australians can remedy the problem by devaluing their currency. The PIIGS are tied in to the Euro so don't have this option available to them."When the people fear the government there is tyranny, when the government fears the people there is liberty." - Thomas Jefferson0 -
MacMickster wrote: »This, of course, is exactly the problem faced by Spain, Italy, Portugal etc.
Agreed.The Australians can remedy the problem by devaluing their currency.
The Australians should have prevented the problem occurring by refusing to allow their currency to rise like it did.
The damage is done now.The PIIGS are tied in to the Euro so don't have this option available to them.
The PIIGS are being held hostage by monetary and financial policy set to favour Germany rather than the rest of the zone.
Although that will almost certainly change, now that the German economy is failing as well.
Germany is about to learn a painful lesson in why it's not a good idea to destroy your neighbours economies.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Maybe the PIIGS should have figured it was not a good idea to have a common currency amongst nations with totally different economies. And then in effect use Germany's credit rating to go on a credit binge.HAMISH_MCTAVISH wrote: »Agreed.
The Australians should have prevented the problem occurring by refusing to allow their currency to rise like it did.
The damage is done now.
The PIIGS are being held hostage by monetary and financial policy set to favour Germany rather than the rest of the zone.
Although that will almost certainly change, now that the German economy is failing as well.
Germany is about to learn a painful lesson in why it's not a good idea to destroy your neighbours economies.0 -
Maybe the PIIGS should have figured it was not a good idea to have a common currency amongst nations with totally different economies.
Or just expected the compromises to be more equal, instead of being totally skewed by Germany.
Germany has abused it's neighbours for a decade through application of totally one-sided monetary policy, and German economic prosperity is a mirage.
If the rest of Europe had any sense, they'd kick Germany out.
Although having said that, if they did Germany would be economically crushed, something like a 20% fall in GDP if the Euro disintegrates and they had to take on their own currency again which wouldn't be artificially devalued.
And German economic pain isn't something that has historically ended well in Europe....
So perhaps the price being paid by the PIIGS is the lesser of two evils.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
It's a bit simplistic to say that the high AUD has forced Ford and GM to close their factories. Wages here are incredibly high in a region with generally very low wages. Industry is very highly regulated too.
Clearly the high AUD doesn't help but TBH I don't imagine that large multinationals base where a factory goes on short term FX rates.0 -
HAMISH_MCTAVISH wrote: »Or just expected the compromises to be more equal, instead of being totally skewed by Germany.
Germany has abused it's neighbours for a decade through application of totally one-sided monetary policy, and German economic prosperity is a mirage.
If the rest of Europe had any sense, they'd kick Germany out.
Although having said that, if they did Germany would be economically crushed, something like a 20% fall in GDP if the Euro disintegrates and they had to take on their own currency again which wouldn't be artificially devalued.
And German economic pain isn't something that has historically ended well in Europe....
So perhaps the price being paid by the PIIGS is the lesser of two evils.
Nobody forced them to borrow the money.0 -
Nobody forced them to borrow the money.
And if they hadn't, where do you think the German economy would be today?
Being a nation generating a surplus is no more sustainable than being a nation generating a deficit in the long run.
So called German economic success is a mirage.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
So idiotic behaviour all round then.HAMISH_MCTAVISH wrote: »And if they hadn't, where do you think the German economy would be today?
Being a nation generating a surplus is no more sustainable than being a nation generating a deficit in the long run.
So called German economic success is a mirage.
Just goes to show that a single currency is an unworkable idea without total fiscal and economic union.0 -
I don't imagine that large multinationals base where a factory goes on short term FX rates.
Six or seven years is no longer short term.
There is a limit to how long even large multinationals will carry on making huge losses.
And those high wages and regulatory costs are magnified greatly by the currency problem.
The AUS$ really needs to devalue by something close to 40%, so back to where it was before the mining boom, if Australia is to regain lost competitiveness.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »
Germany has abused it's neighbours for a decade....
And German economic pain isn't something that has historically ended well in Europe....
You're beginning to sound like Nigel Farage.
If I don't reply to your post,
you're probably on my ignore list.0
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