Dumb question

DiggerUK

Generali wrote: »

.....I've had half a dozen or more come up to me this week saying something along the lines of, "They're not actually going to leave are they"?

You can give them Digger's personal guarantee that it will be 55%+ to remain. You can also assure them that it won't make any difference to bond yields, equity yields, CB interest rates, or the outcome of the EuroCup..._

buglawton wrote: »

.......economists at JP Morgan are among those forecasting a cut to zero in August from the historic low of 0.5%."

May not be August, but it's the only way that Carney can go; and that will not be changed by Brexit or Bremaning..._

mwpt

tincans6 wrote: »

Its a lot easier and less painful in the short run to devalue.

The fixed currency route means the only short to medium term solution is to reduce wages / public spending and go through a whole lot of deflationary pain.

My inclination is to agree with this, I'm just challenging myself, only because I don't have an understanding of the full picture.

Devaluing means your exports can be more competitive for a while. This is what you refer to as the short term. But ultimately the cost of living must rise as it is more expensive to import everything else. This is the same thing as reducing wages but obviously a lot easier to get past your voters.

I ask myself the question, would Greece, for example, have been better off now if they had the Drachma instead of Euro? I now can't 100% say yes, though I previously was convinced of it.

Perhaps the main issue that would have been different is they would not have had the "growth" they had by borrowing so cheaply in Euros, if they had retained the Drachma.

CLAPTON

Generali wrote: »

Because that is the fundamental limitation of most economics: you can't run a study where one UK joins the Euro and another doesn't. It's not a secret.

If you simply dismiss all economics then fair enough but you can't start making claims about what might happen to house prices in London if 3 million migrants had or hadn't arrived or claim to understand how the price of Ferraris is set if you don't believe economics.

It would seem that you are very confused

Generali

Greek Governments have made some poor decisions but Greek GDP per capita in PPP USD is well over twice what it was in 1990 as is comfortably more than triple what China's is.

CLAPTON

Generali wrote: »

Greek Governments have made some poor decisions but Greek GDP per capita in PPP USD is well over twice what it was in 1990 as is comfortably more than triple what China's is.

what does that say about how 'well off' the people of greece are now compare to 1990?

CLAPTON

mwpt wrote: »

My inclination is to agree with this, I'm just challenging myself, only because I don't have an understanding of the full picture.

Devaluing means your exports can be more competitive for a while. This is what you refer to as the short term. But ultimately the cost of living must rise as it is more expensive to import everything else. This is the same thing as reducing wages but obviously a lot easier to get past your voters.

I ask myself the question, would Greece, for example, have been better off now if they had the Drachma instead of Euro? I now can't 100% say yes, though I previously was convinced of it.

Perhaps the main issue that would have been different is they would not have had the "growth" they had by borrowing so cheaply in Euros, if they had retained the Drachma.

in making the comparison between devaluing and slashing wages one must always consider debts, debt repayments and and savings

if wages rare slashed but debts and debt repayment aren't, can be different from
devaluing the currency and both debts, savings and wages staying relatively the same proportionally

mwpt

CLAPTON wrote: »

in making the comparison between devaluing and slashing wages one must always consider debts, debt repayments and and savings

if wages rare slashed but debts and debt repayment aren't, can be different from
devaluing the currency and both debts, savings and wages staying relatively the same proportionally

You have the option of (partially) defaulting on the debt.

CLAPTON

mwpt wrote: »

You have the option of (partially) defaulting on the debt.

I am merely pointing out a significant matter.
If most greeks defulted on their debts, the banks would become bankrupt , peoples saving would disappear, no-one in the right mind would lend etc etc.
I'm not close enough to know about the details of the Greek situation as most coverage is about government and not private debt.
Personally I think they should have left the euro and suffered a massive bit on exchange rates and rebuild their country over the last 9 years.

mwpt

CLAPTON wrote: »

I am merely pointing out a significant matter.
If most greeks defulted on their debts, the banks would become bankrupt , peoples saving would disappear, no-one in the right mind would lend etc etc.
I'm not close enough to know about the details of the Greek situation as most coverage is about government and not private debt.
Personally I think they should have left the euro and suffered a massive bit on exchange rates and rebuild their country over the last 9 years.

Yes, after I posted I realised there was the issue of private debt to consider.

I guess we'll see in the longer term. My inclination was to agree with you that Greece should have left the Euro but the problem is, their debts were denominated in Euros so they would have had no option but to default at that point. You can't force people to accept your new devalued currency.

It was clear that the Greek people did not want austerity, but austerity is not optional when you don't have any money.

I really do think that the average Greek person is better off in the current situation than an exit of EU, exit Euro and default, at least in the medium term. Purely from an annoyance of the system of extend and pretend, I wish Greece had chosen your suggested path.

Generali

mwpt wrote: »

Yes, after I posted I realised there was the issue of private debt to consider.

I guess we'll see in the longer term. My inclination was to agree with you that Greece should have left the Euro but the problem is, their debts were denominated in Euros so they would have had no option but to default at that point. You can't force people to accept your new devalued currency.

It was clear that the Greek people did not want austerity, but austerity is not optional when you don't have any money.

I really do think that the average Greek person is better off in the current situation than an exit of EU, exit Euro and default, at least in the medium term. Purely from an annoyance of the system of extend and pretend, I wish Greece had chosen your suggested path.

There are plenty of ways to skin the default cat.

Despite the twaddle being peddled by the Leave campaign, individual EU states remain sovereign. There would be nothing to prevent Greece passing a law in their national Parliament to leave the Euro and put in its place a new currency: the New Drachma. The Euro and Drachma could then be swapped on a 1:1 basis on adoption and then the Drachma could be allowed to float freely against the Euro. The Greek Government could allow for all debts owed by Greek people (corporations are people in law don't forget) to be redenominated into New Drachma.

As long as pari passu is respected (all debtors are treated on an equal footing) then it should wash out okay.