Only solution is for Ireland to leave the euro

Nate--IRL-- · 14-02-2010 6:45pm

SkepticOne wrote: »

This could also be seen as an argument in favour of defaulting and leaving the Euro.

What happens to your credit rating (and cost of borrowing) if you default on a loan? What are we currently borrowing now today? What happens when we can no longer borrow?

Nate

SkepticOne · 14-02-2010 6:51pm

Nate--IRL-- wrote: »

What happens to your credit rating (and cost of borrowing) if you default on a loan? What are we currently borrowing now today? What happens when we can no longer borrow?

Likewise what happens if you can't continue to pay a loan? I'm not saying it is the case at present but a time may come when the burden of paying off a loan becomes greater than the burden of defaulting (inability to borrow) etc. An argument based on the fact that our debts are huge can be used both ways.

But the other point is that if we've such huge debts shouldn't we be paying them off, not looking for new ways to borrow?

kaymin · 14-02-2010 6:59pm

PeakOutput wrote: »

i can say the exact same thing about the other 85% of the workforce

is your only argument competitiveness? because that can be achieved in far far far better ways

edit; the quality of employment and pay of the job creation after the devaluing is not important? in that case we can just get rid of the minimum wage and a few employment rights laws, keep our strong currency and have the same affect, if that is having any sort of job is the only thing that matters

Fair enough re: the percentages although I think many people have given up seeking work / entered into further studies and consequently are not included on the live register.

Yes, competitiveness is my primary concern. The only way we'll emerge from this slump is if we become more competitive.

I agree, I think we should get rid of the minimum wage. There's been plenty of studies that have shown it prevents unskilled workers obtaining employment (because companies are better off investing in automation than employing people).

I don't see how keeping a strong currency will assist our export driven recovery (that's the whole point of my argument). Domestic demand is not going to spur a recovery given our high indebtedness / unemployment.

kaymin · 14-02-2010 7:04pm

Flamed Diving wrote: »

That's good, not forgetting that you must include the figures for all your trading partners as well. You still don't have a model, but lets just shelve that. Now, consider the many countries (I'm assuming you have read about past currency crises, if you haven't, then you should probably drop this idea and start reading) that thought they did know the correct figure using such data and got it wrong. They knew a hell of a lot more about economics than you clearly do. They had access to much more data than you do. What makes you so confident that you know better than all of these countries?

Did I say that?

All the experts got it wrong when Argentina experienced growth after their devaluation and default. It's good to have an open mind.

imitation · 14-02-2010 7:14pm

kaymin wrote: »

Yes, competitiveness is my primary concern. The only way we'll emerge from this slump is if we become more competitive.

The slump is the natural response to the original problem, we`ll have to ride it out if we leave the euro or not. Odds are if we leave the euro now we`ll just get the worst of both worlds, 14% of the population aren`t going to get instantly re-employed just because of devaluation.

SkepticOne · 14-02-2010 7:30pm

imitation wrote: »

The slump is the natural response to the original problem, we`ll have to ride it out if we leave the euro or not. Odds are if we leave the euro now we`ll just get the worst of both worlds, 14% of the population aren`t going to get instantly re-employed just because of devaluation.

I think a lot depends on your view of the how much further pain there's going to be. If like Lenihan you believe "we've turned a corner" and unemployment is not going to rise much further then leaving the Euro now would not bring us much advantage since we would already have made the adjustments that are necessary.

kaymin · 14-02-2010 7:31pm

Flamed Diving wrote: »

Here is an instructive and easy to read paper by the current Central Bank Governor, Patrick Honohan. It gives a brief overview of Ireland's currency history and the section on the 1955 crisis is especially important as it shows what happens when Small Open Economies such as Ireland decide to piss against the wind.

http://homepage.eircom.net/~phonohan/BNL.pdf

We did manage to cope well enough for the 20 years before the euro was introduced. Realignments in the EMS were fairly frequent, averaging about one a year in the 1980s, and the Irish pound depreciated steadily against the Deutsche Mark. These depreciations reflected wider weaknesses in the Irish economy in those years and prevented a loss of competitiveness from compounding those weaknesses.

cson · 14-02-2010 7:32pm

Competitiveness doesn't happen overnight OP. It's not some switch you can just flick on - I'm sure other countries would have copped it at this stage if it was that simple. Ireland is slowly beginning to bottom out with regard to the general cost of things here, it's a slow process but there is a foundation for competitiveness to grow out of.

SkepticOne · 14-02-2010 7:37pm

cson wrote: »

Competitiveness doesn't happen overnight OP. It's not some switch you can just flick on - I'm sure other countries would have copped it at this stage if it was that simple. Ireland is slowly beginning to bottom out with regard to the general cost of things here, it's a slow process but there is a foundation for competitiveness to grow out of.

Would your view change if it turned out that we're due another, say, three years economic difficulty with unemployment rising to about 22%?

kaymin · 14-02-2010 7:41pm

cson wrote: »

Competitiveness doesn't happen overnight OP. It's not some switch you can just flick on - I'm sure other countries would have copped it at this stage if it was that simple. Ireland is slowly beginning to bottom out with regard to the general cost of things here, it's a slow process but there is a foundation for competitiveness to grow out of.

But if your product costs €1 to make one day and the equivalent of 80c to make the next day (due to a 20% devaluation) then you are more competitive immediately. I'm not as optimistic as you regarding our cost base though. In my view there will be alot more pain to come before we become competitive and I'm not sure we will ever achieve competitiveness given the route we have to take while still using the euro (i.e. no devaluation option).

kaymin · 14-02-2010 7:54pm

From todays Sunday Business Post:
http://www.sbpost.ie/news/ireland-named-in-group-posing-real-risk-to-euro-future-47418.html

In its 2010 report on the European economy, to be published on February 23, CESifo singles out Ireland as one of just two eurozone members, along with Finland, for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

It said that the ‘‘very large’’ fall in the value of sterling against the euro, and a similar problem faced by Finland - which exports heavily to Sweden, whose currency has also declined against the euro - ‘‘certainly plays some role in the fact that Finland and Ireland are the two euro area countries where the recession has been most severe’’.

The report says that, while eurozone membership helped to maintain financial stability in Ireland, it also made the recession worse than it would otherwise have been.

‘‘While membership of the euro area is favourable for financial stability . . . it may make the actual contractionary impact of the crisis more severe by preventing a quick adjustment of the exchange rate," according to CESifo.

The group also names Ireland and Greece as the two ‘‘most exposed countries’’ that markets have identified as being most likely to suffer a sovereign default - when a country is unable to raise borrowings - or to leave the euro.

‘‘While euro membership provides an insurance against currency and financial crises, its real effects on peripheral countries may lead to such large imbalances that they may end up in crisis despite the safe haven effect," it said.

ei.sdraob · 14-02-2010 8:08pm

kaymin wrote: »

, for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

for the second time in this thread i will post this link
http://www.cso.ie/statistics/botmaintrpartners.htm
UK is in 4th largest destination for our exports
will people stop call it "the largest" that just has no grounding in reality

also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
http://www.cso.ie/releasespublications/documents/external_trade/current/extrade.pdf
our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled

as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
theres no way in hell that an event of such scale could be kept secret

hiorta · 14-02-2010 8:20pm

Wouldn't other countries be ultra wary of accepting your money and avoid any credit transactions with Ireland.
Your current situation is self-inflicted, so who would trust you?

kaymin · 14-02-2010 8:21pm

ei.sdraob wrote: »

for the second time in this thread i will post this link

http://www.cso.ie/statistics/botmaintrpartners.htm

UK is in 4th largest destination for our exports

also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
http://www.cso.ie/releasespublications/documents/external_trade/current/extrade.pdf
our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled

as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
theres no way in hell that an event of such scale could be kept secret

Yes, I read it the first time - 56% of our exports go to non-Euro countries.

I expect that imports from the UK are down is more a symptom of lower spending by Irish people.

Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals? Is it at prices that are making Irish companies loss making? If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

Out of interest what countries do you export to?

ei.sdraob · 14-02-2010 8:25pm

i posted this in recent thread
thanks to Greece the euro lost between 8% and 2% of its value against major currencies

according to your logic @kaymin the exporters here should be better off (hey and we didn't even have to leave the euro)
and we will see if that was the case in few months once we have data to check

kaymin wrote: »

But if your product costs €1 to make one day and the equivalent of 80c to make the next day (due to a 20% devaluation) then you are more competitive immediately

theres a hole in your reasoning, almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

you quoted China earlier but you forgot to mention that China manages to keep its import costs down (raw materials) by either having the resources within its borders (quite a bit of oil) or by securing lucrative contracts

we have none of that

ei.sdraob · 14-02-2010 8:30pm

kaymin wrote: »

Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals?

yes its driven by multinationals, devaluing wont help them, since most of these have to import most of their materials that go into the products being made (medical devices lets say)

the only people who could profit from devaluation is any new business starting up once the dust has settled, but remember they will have a terrible time accessing credit (no one will lend to this country if it defaults) so that would make it hard to start up

kaymin wrote: »

If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

a huge amount of money was mis-allocated into property and construction

kaymin wrote: »

Out of interest what countries do you export to?

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter

@kaymin

one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?

real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another

/

kaymin · 14-02-2010 8:38pm

ei.sdraob wrote: »

tho your missing one huge hole in your thinking almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

Depends on what industry of course - if we focus on the knowledge economy and export financial services then all of the costs are 'in-house'.

Perhaps there are substitute inputs available from Irish producers which will cost lower than the imported inputs following a devaluation thereby boosting the sales of other Irish companies.

If you are referring to the multi-nationals - one of the biggest contributors to Irish exports - I don't think your argument is valid since most multi-nationals will incur the same input costs (based on transfer pricing rules - i.e. sales and purchases between subsidiaries of the multinational group) and sell for the same prices no matter where they are located. Input costs which arise in Ireland only - labour, electricity, water, taxes etc should be low if the multi-national is to remain in Ireland longterm.

Devaluation worked for us before - I don't see why it won't work for us again.

ei.sdraob · 14-02-2010 8:43pm

kaymin wrote: »

Devaluation worked for us before - I don't see why it won't work for us again.

as many have pointed out

this time any attempt at devaluation would mean all money and credit draining out of economy, theres already little confidence in the economy of this country, any move to devalue (and default) would cause panic

that act alone would cause a total meltdown which would affect and hurt healthy companies, wiping out any potential gains to be made by devaluing

businesses need stability not a meltdown

anyways once again let me point at UK where devaluation has worked out "great" for them

kaymin · 14-02-2010 8:52pm

ei.sdraob wrote: »

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter
/

So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.

ei.sdraob wrote: »

@kaymin

one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?/

Unemployment is at only 8% - that's a good result in my view. Okay they've devalued peoples savings but maybe that's a price worth paying.

ei.sdraob wrote: »

real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another
/

And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.

ei.sdraob · 14-02-2010 9:01pm

kaymin wrote: »

So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.

over the last few years i have gained and lost equal amounts due to currency fluctuations, the end result is more or less the same, for me to make more money i have to become more productive

you missed the part about savings being in euro, if Ireland leaves the euro i can kiss goodbye to savings and reserves, thats money that can be used to invest or/and survive another bad patch of trading

kaymin wrote: »

Unemployment is at only 8% - that's a good result in my view.

they didn't have a quarter of their economy & large chunk of workforce tied directly or indirectly to construction

kaymin wrote: »

Okay they've devalued peoples savings but maybe that's a price worth paying.

thats money gone that could be used for savings (banks surely need them now) and investments (in business ventures or stocks)

kaymin wrote: »

And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.

as i said before in a recent thread, devaluation makes everyone poorer by an equal amount

that hits the poorer harder, theres a reason why we have a progressive taxation system

devaluation is akin to the taxman sticking a hand into everyones pockets and stealing an equal percentage out of their wallets (and the value of everything they own)

needless to say people are not stupid and will try to avoid the above if they hear about devaluation, possibly triggering bank collapses,

the very thing we were trying to avoid last 2 years

SkepticOne · 14-02-2010 9:08pm

ei.sdraob wrote: »

right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter.

So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.

ei.sdraob · 14-02-2010 9:15pm

SkepticOne wrote: »

So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.

yes i see it now

sarcasm

lets wipe out the savers, investors and businesses that survived the recession
in order to recover from an economic recession caused by excessive debt and mis-allocation of money by gamblers
no moral hazard at all and it has worked out great before in other places

/sarcasm

as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into

.

SkepticOne · 14-02-2010 9:22pm

ei.sdraob wrote: »

as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into
anyways i wont be sticking around to see such an event i tell you if it happens

But all you are doing is storing money you have made in other countries the form of Euros. Maybe you employ a load of people in Ireland in which case my apologies.

View · 14-02-2010 9:28pm

Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

As a non-EU member state we would then be liable to Import Tariffs on all our exports to the EU. In other words, the 62% of our exports that are now tariff-free would become liable to tariffs. Offhand, I doubt that would benefit our export industries.

In addition, even if we were to decide to leave the Euro, we would need to replace all banknotes and coins in circulation. There is no way this could be done overnight and word would (almost definitely) get out about it. At which point, financial traders would send our bonds interest rates through the roof and anyone with a brain would drive for the border and either put their Euro into a newly-opened Euro account or sell it for Sterling and lodge it into a Sterling account. And there would be nothing the Government could do to stop this...

Nate--IRL-- · 14-02-2010 9:32pm

View wrote: »

Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

As a non-EU member state we would then be liable to Import Tariffs on all our exports to the EU. In other words, the 62% of our exports that are now tariff-free would become liable to tariffs. Offhand, I doubt that would benefit our export industries.

In addition, even if we were to decide to leave the Euro, we would need to replace all banknotes and coins in circulation. There is no way this could be done overnight and word would (almost definitely) get out about it. At which point, financial traders would send our bonds interest rates through the roof and anyone with a brain would drive for the border and either put their Euro into a newly-opened Euro account or sell it for Sterling and lodge it into a Sterling account. And there would be nothing the Government could do to stop this...

No, no, no! You don't get it. You can't let facts get in the way of competitiveness.

Nate

ei.sdraob · 14-02-2010 9:36pm

SkepticOne wrote: »

But all you are doing is storing money you have made in other countries the form of Euros. Maybe you employ a load of people in Ireland in which case my apologies.

theres a difference of storing money, and keeping a reserve for a bad day.
this practice allowed to survive thru few few very bad months, otherwise the company would have had to go under since the banks wouldn't lend back then
alot of businesses are learning the above lesson the hard way now

by wiping out savings your wiping out money that can be used to help survive bad patches and/or be invested elsewhere, in this manner you will endup killing more companies, just what need now
anyways once the dust has settled from any devaluation you would quickly realize that many of the issues that caused such a deep recession here are still there and have little to do with the currency being used

SkepticOne · 14-02-2010 9:36pm

View wrote: »

Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

There was no mechanism for the bailout that Greece is now getting until recently.

SkepticOne · 14-02-2010 9:46pm

ei.sdraob wrote: »

theres a difference of storing money, and keeping a reserve for a bad day.
this practice allowed to survive thru few few very bad months, otherwise the company would have had to go under since the banks wouldn't lend back then

There is the problem of wealth preservation and there is the problem of competitiveness. The problem facing Ireland right now as opposed to, say, Germany is competitiveness. Yes, there may be a disincentive to operate a business if the money you then store is eroded by devaluation but this needs to be balanced by the problem of businesses going under because they can't compete. For these businesses preserving wealth that they make is not an immediate concern since they aren't making any! They are merely trying to stay afloat.

alot of businesses are learning the above lesson the hard way now

Again I think the problem is not that their wealth is being eroded (if they have any) but that they can't compete due to costs generated in Ireland.

by wiping out savings your wiping out money that can be used to help survive bad patches and/or be invested elsewhere

But merely holding your money in a bank in Ireland in Euros doesn't guarantee it will be lent to businesses in Ireland. Even if the bank was willing to lend it can only do so to businesses that are competitive.

once the dust has settled from any devaluation you would quickly realize that many of the issues that caused such a deep recession here are still there and have little to do with the currency being used

I don't think devaluation solves all problems either. The only thing it really solves is that it brings about a competitive situation with less social disruption than the alternative.

ei.sdraob · 14-02-2010 9:59pm

SkepticOne wrote: »

The only thing it really solves is that it brings about a competitive situation with less social disruption than the alternative.

less social disruption? that what the meltdown that would happen here be called?

i fail to see how causing banks to fail and have people and companies get out of the country with suitcases full of money (or electronic transfers) would not cause any social destruction

or for that matter how would welfare and public services be paid for? you honestly think the public sector unions would take it lying down being paid in zimdollars?

SkepticOne · 14-02-2010 10:13pm

ei.sdraob wrote: »

less social disruption? that what the meltdown that would happen here be called?

i fail to see how causing banks to fail and have people and companies get out of the country with suitcases full of money (or electronic transfers) would not cause any social destruction

or for that matter how would welfare and public services be paid for? you honestly think the public sector unions would take it lying down being paid in zimdollars?

Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.

Nate--IRL-- · 14-02-2010 10:25pm

SkepticOne wrote: »

Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.

But were are not just talking about de-valuation. What is proposed is...

-Creating a new currency.
-Doing so in compete secrecy.
-Locking down the financial system to partially prevent Capital flight.
-Devaluing An Punt Nua with respect to the Euro
-Defaulting on current debts (Public and Private)

Nate

ei.sdraob · 14-02-2010 10:30pm

SkepticOne wrote: »

Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.

yes its all my imagination :rolleyes:

you should checkout what socially happened in Russia and Argentina when they defaulted, keep in mind that both countries weren't part of currency union and have large natural resources to fall back on

Ireland leaving euro would be akin to one of the US states leaving the dollar (lets say Louisiana or South Carolina, both having similar sized populations) and the Union

if you think people & businesses would be stupid enough to not realize what is happening or think that any capital flight can be prevented then your mistaken

K-9 · 14-02-2010 10:35pm

Nate--IRL-- wrote: »

But were are not just talking about de-valuation. What is proposed is...

-Creating a new currency.
-Doing so in compete secrecy.
-Locking down the financial system to partially prevent Capital flight.
-Devaluing An Punt Nua with respect to the Euro
-Defaulting on current debts (Public and Private)

Nate

Indeed, has this ever been done?

While it pains me that we are so reliant on MNC's, what would they make of it?

View · 14-02-2010 11:00pm

SkepticOne wrote: »

There was no mechanism for the bailout that Greece is now getting until recently.

There still is no mechanism for any bailout. None whatsoever - that doesn't mean that the Member States are prohibited from creating (a) new mechanism(s) to do so on an ad-hoc basis. Such (a) mechanism(s) could be incorporated into the EU Treaties at a later date (much like many of the changes in Lisbon fell into that category).

Theoretically, we could change the EU Treaties to allow a member state to "unadopt" the Euro while remaining a member of the EU. The problem with that though is: a) it would be contrary to the stated aims of the EU Treaties, b) the member states do not want to do this, and, c) it would take so long to do that the financial crisis would be long over by the time it was done.

Flamed Diving · 14-02-2010 11:55pm

kaymin wrote: »

All the experts got it wrong when Argentina experienced growth after their devaluation and default.

That's nice, would those be the same experts who said that Argentina's Peso was overvalued throughout the nineties? "All" the experts got it right! Or do you simply pay attention to the experts that verify your already chosen conclusions? But if that was the case then "all" wouldn't be "all" now, would it? The point about Argentina was that they simply had no choice in devaluing because they let the currency float. A floating currency is something only larger nations can afford to do, it is not an option for Small Open Economies. Also, Argentina only enjoyed a return to growth because of major debt restructuring. You are simply assuming that Ireland will be gifted the same package. In fact, you are assuming a lot of things. Ireland and Argentina are not comparable cases.

Having an open mind is all well and good, but knowing that square pegs don't fit round holes is important.

SkepticOne · 15-02-2010 12:23am

Flamed Diving wrote: »

A floating currency is something only larger nations can afford to do, it is not an option for Small Open Economies.

New Zealand.

Scofflaw · 15-02-2010 1:05am

SkepticOne wrote: »

New Zealand.

I think he means "sensible option":

The New Zealand dollar's value is often strongly affected by currency trading,[citation needed] and is among the 12 most-traded currencies.

On 11 June 2007 the Reserve Bank sold an unknown amount of New Zealand dollars in an attempt to drive down its value. This is the first intervention in the markets by the Bank since the float in 1985.

Two suspected interventions followed, but they were not as successful as the first: the first appeared to be initially effective, with the dollar dropping to approximately US$0.7490 from near US$0.7620. However, within little more than a month it had risen to new post-float highs, reaching US$0.8103 on 23 July 2007.

After reaching its post-float record high in early 2008, the value of the NZD plummeted throughout much of the 2nd half of 2008 and the first quarter of 2009 as a response to the global economic downturn and flight by investors away from 'riskier' currencies such as the NZD. The NZD bottomed out at approximately US$0.50 on March 6, 2009. However, it rebounded strongly as the year progressed, reaching the US$0.75 range by November 2009.

New Zealand doesn't come across there as in control of its currency - which is what the discussion is about.

cordially,
Scofflaw

SkepticOne · 15-02-2010 1:28am

Scofflaw wrote: »

New Zealand doesn't come across there as in control of its currency - which is what the discussion is about.

No, he said floating currency. What this means is that the market is the primary determinant of the value of the currency.

Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

I don't think the New Zealanders will be pressing for a currency union with a larger country based on Ireland's great success in the Euro.

Flamed Diving · 15-02-2010 1:36am

SkepticOne wrote: »

Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

Look, if you want me to engage in discussion you are going to have to make less obtuse comments than that.

SkepticOne · 15-02-2010 1:38am

Flamed Diving wrote: »

Look, if you want me to engage in discussion you are going to have to make less obtuse comments than that.

You say that a floating currency is not an option for a small country.

Go to New Zealand. Tell them you are from Ireland and that they have it all wrong with regard to how they operate their currency.

Flamed Diving · 15-02-2010 1:39am

kaymin wrote: »

From todays Sunday Business Post:
http://www.sbpost.ie/news/ireland-named-in-group-posing-real-risk-to-euro-future-47418.html

This is interesting, but without the full report I am going to withhold judgement. Relying on the correct interpretation of an economic paper by a journalist would be foolish. Especially when I have seen so many deliberate misquotes and manipulations over the years.

Still, it never ceases to amaze me how people will simply quote such newspaper reports as fact, without ever having seen the source material...

Flamed Diving · 15-02-2010 1:41am

SkepticOne wrote: »

You say that a floating currency is not an option for a small country.

Go to New Zealand. Tell them you are from Ireland and that they have it all wrong with regard to how they operate their currency.

See post #90.

Scofflaw · 15-02-2010 1:48am

SkepticOne wrote: »

No, he said floating currency. What this means is that the market is the primary determinant of the value of the currency.

Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

I don't think the New Zealanders will be pressing for a currency union with a larger country based on Ireland's great success in the Euro.

The market is the primary determinant of the value of the NZ dollar. Their government has tried to intervene in the market, but that doesn't mean it's not a floating currency:

Floating exchange rate: in which a currency's value is determined solely by the interplay of the market forces of demand and supply (which, in turn, is determined by the soundness of a country's basic economic position), instead of by government intervention. However, all central banks do try to defend these rates within a certain range by buying or selling their country's currency as the situation warrants.

Pick any real-world definition you like.

cordially,
Scofflaw

SkepticOne · 15-02-2010 1:49am

Flamed Diving wrote: »

See post #90.

Sorry to have had to prove you wrong there. I know you are studying for a masters degree in economics.

SkepticOne · 15-02-2010 1:52am

Scofflaw wrote: »

The market is the primary determinant of the value of the NZ dollar. Their government has tried to intervene in the market, but that doesn't mean it's not a floating currency:

Pick any real-world definition you like.

cordially,
Scofflaw

Not sure what point you are trying to make there. The assertion was that a floating currency is not an option for a small country. I provided an example of a small country (New Zealand) with one (which you seem to accept is a floating currency) thereby proving the assertion wrong.

Flamed Diving · 15-02-2010 1:54am

SkepticOne wrote: »

Sorry to have had to prove you wrong there. I know you are studying for a masters degree in economics.

How childish of you. As I said, if you are willing to engage in a reasonable discussion, I'm all ears.

View · 15-02-2010 1:55am

SkepticOne wrote: »

Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

That doesn't prove anything much. Greece's unemployment rate is 9.7% (Oct 09). That doesn't mean they are star economic perfomers.

For the record, as of Dec 09, Austria, Cyprus, Luxembourg, Slovenia, Malta, Finland (, Greece) and Portugal all are smaller Euro member states and all have lower unemployment rates than Ireland (And that is ignoring "big" Euro states such as The Netherlands, Germany, Italy and France).

Maybe, they didn't follow our "If you build it, they will come" economic strategies?

SkepticOne · 15-02-2010 2:01am

View wrote: »

That doesn't prove anything much. Greece's unemployment rate is 9.7% (Oct 09). That doesn't mean they are star economic perfomers.

For the record, as of Dec 09, Austria, Cyprus, Luxembourg, Slovenia, Malta, Finland (, Greece) and Portugal all are smaller Euro member states and all have lower unemployment rates than Ireland (And that is ignoring "big" Euro states such as The Netherlands, Germany, Italy and France).

Maybe, they didn't follow our "If you build it, they will come" economic strategies?

I think a common currency may well be good for some countries if their business cycle is reasonably in sync with their neighbours. What I'm not sure of is whether it suits every country. Not all countries respond to changes in interest rates the same way for example.

However the point with New Zealand is that it doesn't mean disaster. It is possible for a small country to exist with an independent currency. Of course they will still have their ups and downs.

To say that it is "not an option" is simply wrong.

Flamed Diving · 15-02-2010 2:05am

Jesus, I'm actually embarrassed for you here.

As I said, the offer of reasonable discussion is on offer.

Nate--IRL-- · 15-02-2010 2:07am

SkepticOne wrote: »

To say that it is "not an option" is simply wrong.

To say that it is the solution to all our woes is simply wrong also.

It does have benefits, it also has drawbacks. For Ireland, right now in our position, politically and economically, it is not possible without massive economic and political upheaval.

Nate

Only solution is for Ireland to leave the euro

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