Ditching the euro could boost our failing economy

professore

ionix5891 wrote: »

well once the debts are paid of, we better make damn sure we don't end up in square one and have government policies in place to encourage savings, things wouldn't be so bad now if people didn't get up to their eyeballs in debt and saved for rainy day.

Yes, but now the last thing we need is people saving. We need the savers to come out of the closet and save the country by spending !!!!

ionix5891

SkepticOne wrote: »

No, I disagree. If you want to avoid riots keep unemployment down and keep paying welfare to those that are unemployed.

Also, make sure that people are able to withdraw money from the ATMs.

I don't think erosion of savings through devaluing has ever caused riots particularly when wages and most prices are not rising relative to the currency.

The Brits moan about the pound not going as far as it did when they are abroad but it is never going to be a cause of riots unlike the other things I mention.

We are much closer to riots in Ireland since our unemployment is shooting up at an absolutely alarming rate and our public finances are in the toilet. Where are we going to get the money to pay the dole?

we're getting the money to pay for the welfare state and the public sector mainly from EU and bond markets (im not 100% sure on the mechanism, economists here can better explain where these billions are coming from) but the interest has to be paid back in euros and dollars

switching currencies would still mean we would have to payback that interest in them pesky euros

so too keep people from rioting you have to borrow externally and pay it back in anything but "punts" same as now

keeping atm's open will only result in people putting money into the currency that they are more confident in (and it sure wont be a local punt if you have large savings)

as for the Brits they are very nationalistic, and are paying dearly for it, their Empire is long gone it just hasn't sunk in yet and recent boom due to financial "services" was a mirage as you said and north sea oil is running dry

erosion of savings wont cause riots (the few people that do save would pour money out of Ireland) its the sharp increases in the price of external goods such as food and fuel (we dont grow wine or have oilfields)

professore wrote: »

Yes, but now the last thing we need is people saving. We need the savers to come out of the closet and save the country by spending !!!!

ah yes we need more of these Homo Consumericus's species of sheep as the existing stock of sheep are up to their balls (the other balls) in debt to savers in Germany, China etc,

spend spend spend > another bubble > back to square one in dozen years

.

SkepticOne

andrewdeerpark wrote: »

We also have one of the highest level of individual house and asset ownership thus increasing the private debt level relative to Germany.

I think one of the areas of denial in Ireland is that we still place ludicrous valuations on our assets. We forget that the price of a house is merely a reflection of our collective opinion. The debt, however, is real.

Nody

SkepticOne wrote: »

Yes they would all be switched to Punt or whatever just like they were switched from Punt to Euro back in 2000. This would piss off foreign lenders, of course.

The chances are that all those loans are sold on are quite high so you may not legally be allowed to change them or if you do the future loans from any Irish bank will have a very very high risk interest attached which will make loans either impossible (i.e. 30%+ interest rate) or simply not available.

ardmacha

A few points. Firstly there are more savers than borrowers. Even for houses more than half of houses have a small or zero mortgage. A smaller proportion of people lost the run of themselves and borrowed to the hilt, but these are not the majority. Savings in the banks keeps them solvent and reduces the need for the government to put money in.

While you might be able to redenominate local savings in deflated punts, the government and the banks have been raising money on international money markets, these contracts are in Euro and cannot be wished away. A devaluation would simply make the markets believe that the government could not service these loans and would make it impossible for them to borrow.

astrofool

SkepticOne wrote: »

I think one of the areas of denial in Ireland is that we still place ludicrous valuations on our assets. We forget that the price of a house is merely a reflection of our collective opinion. The debt, however, is real.

The debt is also a reflection of the world's collective opinion.

That debt is worth nothing if it never gets paid, for example

extragon

re. the mechanics of leaving the Eurozone.

It is perfectly legal to have a foreign currency account managed by your Irish bank, without having to go offshore. So unless the govt. imposed drastic new controls ( which would be against EU law ) most banks would simply offer you the option of keeping your savings in Euros.
All serious savings would remain in Euros. All mortgages ( unless the govt. were to buy them ). Serious salaries would be negotiated and paid in
Euros.
In fact, all serious business would continue to be conducted in Euros. Ireland would end up the equivalent of some of the Caribbean nations where the real currency is the dollar. How could anyone ever again have confidence in the Irish economy after a stunt like this?
Of course, the printing presses would crank out the new pesos-punts to pay the newly empoverished euroless classes creating third world scale class divisions and social instability.

Meanwhile, in our own small way, we'd have damaged the currency of our former partners in the Eurozone who'd be in no mood to help, to say the least.

ionix5891

http://news.bbc.co.uk/2/hi/business/8037523.stm

EUrozone is lowered rates to 1% (making it pointless to save)

and they are also "printing" 60billion yoyos which will devalue the euro somewhat over next while (they better watch that inflation tho as it can whack them in head fast and hard)


UK on the other hand ( http://news.bbc.co.uk/2/hi/business/8037685.stm )

devalued their currency even more by commiting to print another £75bn by June bringing their "quantative easing" printing press production total of £125bn.

this is equivalent of slapping £833 flat tax on everyone in the UK today :eek:


godda love the positive spin BBC are trying to put on this :cool:

NewDubliner

professore wrote: »

Yes, but now the last thing we need is people saving. We need the savers to come out of the closet and save the country by spending !!!!

On foreign-made goods?

Belfast

ionix5891 wrote: »

http://www.independent.ie/opinion/columnists/david-mcwilliams/ditching-the-euro-could-boost-our-failing-economy-1729557.html


whoa is this guy for real? :eek: we don't need any more nails in our coffin right now

It worked to well for the weimar republic


and they could heat their house with it.

Belfast

donegalfella wrote: »

This post has been deleted.

I agree.

hallelujajordan wrote: »

why so ? I'm not pretending I understand the economies of all of this but our biggest trading partner remains the UK and they seem to be able to survive as an integral member of the European Union without being Euro-zone . .

Wouldn't a currency devaluation help to shift the competitive gap that is allowing so much of our hard earned Euros get spent North of the Border. . ?

Why would leaving the Euro send us back to the 3rd world ?

much of the money the bank borrowed was in Euro from German banks.
It would still have to be paid back by in Euro.

storinius

The thing that gets me in this whole debate is Ireland trying to stand alone as a currency. I mean at the start we had to link to the British pound, and we only really got our economic independence from Britain by joining Europe in 1973.

So if we tell Europe exactly where they can stick it by leaving the Euro, and lets be honest, probably lose trading rights, what do we do? Do we link back to Sterling? Do we pull an Argentina and link to the dollar...?

SkepticOne

ardmacha wrote: »

A few points. Firstly there are more savers than borrowers. Even for houses more than half of houses have a small or zero mortgage. A smaller proportion of people lost the run of themselves and borrowed to the hilt, but these are not the majority. Savings in the banks keeps them solvent and reduces the need for the government to put money in.

Overall we have very high levels of private debt. The older generation are the ones with houses largely paid off.

SkepticOne

storinius wrote: »

So if we tell Europe exactly where they can stick it by leaving the Euro, and lets be honest, probably lose trading rights, what do we do? Do we link back to Sterling? Do we pull an Argentina and link to the dollar...?

The point that is being argued here is that the currency would be allowed to devalue so it would not be linked to anything. Someone already raised the problems Argentina had trying to keep its currency linked to the dollar.

ionix5891

SkepticOne wrote: »

The point that is being argued here is that the currency would be allowed to devalue so it would not be linked to anything. Someone already raised the problems Argentina had trying to keep its currency linked to the dollar.

the bigger problem is that it wont devalue it WOULD LOOSE ALL VALUE

paper fiat currency is about confidence, theres a severe lack of that at present (especially when it comes to Ireland)

as i said before to devalue a currency you need a strong economy that wont collapse altogether, i dont think many people here are that blind to see that euro is one of the few things holding our economy from an even bigger meltdown

SkepticOne

ionix5891 wrote: »

the bigger problem is that it wont devalue it WOULD LOOSE ALL VALUE

paper fiat currency is about confidence, theres a severe lack of that at present (especially when it comes to Ireland)

as i said before to devalue a currency you need a strong economy that wont collapse altogether, i dont think many people here are that blind to see that euro is one of the few things holding our economy from an even bigger meltdown

It will certainly lose some value, but then that is probably what we want it to do. Luckily most peoples debts are denominated in Euros and these would be redenominated into the new currency.

Exports will be boosted while the currency is down and this will aid with the recovery. The key thing would be to keep inflation under control.

I understand the point of view of those who subscribe to the Austrian school. A lot of the opposition to the idea of having a national currency seems to be coming from those who fear the erosion of savings. But the erosion of savings is not generally considered to be the problem in Ireland. The problem here is rather one of competitiveness.

pakalasa

WE WILL LEAVE THE EURO !

It's only a matter of time. Any decent economist (doesn't work for a bank) will tell you - the only way we can get out of the current mess is to export our way out. With a cheap currency we can do this. How else can we create wealth.

If the government continues to borrow at the high levels - we will eventually hit a wall. We will have no other choice.

Bring back the PUNT. We can put Bertie on the front.:D:D

astrofool

SkepticOne wrote: »

It will certainly lose some value, but then that is probably what we want it to do. Luckily most peoples debts are denominated in Euros and these would be redenominated into the new currency.

Exports will be boosted while the currency is down and this will aid with the recovery. The key thing would be to keep inflation under control.

I understand the point of view of those who subscribe to the Austrian school. A lot of the opposition to the idea of having a national currency seems to be coming from those who fear the erosion of savings. But the erosion of savings is not generally considered to be the problem in Ireland. The problem here is rather one of competitiveness.

We can return to competitiveness without ditching the euro by aggressively bringing down the cost of living, and reducing benefits where possible to match the reduced living costs.

SkepticOne

astrofool wrote: »

We can return to competitiveness without ditching the euro by aggressively bringing down the cost of living, and reducing benefits where possible to match the reduced living costs.

In theory, possible. In practice, politically unrealistic. It would probably only happen after the IMF or some other body were called in that would force these cuts.

ionix5891

SkepticOne wrote: »

It will certainly lose some value, but then that is probably what we want it to do. Luckily most peoples debts are denominated in Euros and these would be redenominated into the new currency.

Exports will be boosted while the currency is down and this will aid with the recovery. The key thing would be to keep inflation under control.

I understand the point of view of those who subscribe to the Austrian school. A lot of the opposition to the idea of having a national currency seems to be coming from those who fear the erosion of savings. But the erosion of savings is not generally considered to be the problem in Ireland. The problem here is rather one of competitiveness.

Once again you will end up with 2 currencies the existing euro will continue to be used for all serious transactions and the new punt will be worth less than toilet roll, people will not accept it unless you force it on them (such paying welfare and public sector in ZIM punts) and that will only cause a huge uproar

SkepticOne

ionix5891 wrote: »

Once again you will end up with 2 currencies the existing euro will continue to be used for all serious transactions and the new punt will be worth less than toilet roll, people will not accept it unless you force it on them (such paying welfare and public sector in ZIM punts) and that will only cause a huge uproar

We're not talking about a voluntary optional currency here. We're talking about switching over the currency through which official business is conducted, public sector salaries and taxes are paid. The euro would still be used along with the dollar and other foreign currencies the way sterling and the dollar was used when the punt existed.

Who would be happy: those who work for exporting companies and the owners of exporting companies.

Who would be unhappy: those with significan savings in Euro although these are probably not safe anyway. They would be encouraged to take their money out of deposits and invest them in exporting businesses.

Other than that, there would be a bit of moaning, like in the UK, about money not going as far when abroad. But this is surely better than losing your job or your business going under.

We need to face up to the fact that the Euro has been a disaster for Ireland. Just when we should have been shoving up interest rates to six or seven percent to kill the property bubble we get them lowered to 2% to suit a completely different set of economies. The property bubble then goes on to suck the life out of the rest of the economy and we're now faced with calamety.

We have very different economies in Europe but just one monetary policy. It isn't working.

ionix5891

SkepticOne wrote: »

Who would be unhappy: those with significan savings in Euro although these are probably not safe anyway. They would be encouraged to take their money out of deposits and invest them in exporting businesses.

wrong they will just move their money to another euro denominated account or exchange for other assets such as gold, the path of least resistance will be taken and that is money flowing out of this country faster than you can say "crash"

heres some reading for you

1$ trillion silent bank run on UK banks
http://www.independent.co.uk/news/business/news/run-on-uk-sees-foreign-investors-pull-1-trillion-out-of-the-city-1639413.html

and $550 billion bank run on the US in under 2 hours
http://boingboing.net/2009/02/09/rep-kanjorski-550-bi.html


do you honestly think the public sectors and people on welfare would accept payments in anything but hard currency if "monopoly" punts are imposed on them by the government?


look our country is in a deep mess but loosing the euro would be economic suicide, you will take the bottom out of the economy

SkepticOne

ionix5891 wrote: »

wrong they will just move their money to another euro denominated account or exchange for other assets such as gold, the path of least resistance will be taken and that is money flowing out of this country faster than you can say "crash"

But like I say, is your money safe anyway in an Irish bank?

heres some reading for you

1$ trillion silent bank run on UK banks
http://www.independent.co.uk/news/business/news/run-on-uk-sees-foreign-investors-pull-1-trillion-out-of-the-city-1639413.html

and $550 billion bank run on the US in under 2 hours
http://boingboing.net/2009/02/09/rep-kanjorski-550-bi.html

But vast amounts were also siphened out of irish banks during the crisis last Autumn. And we're not out of the clear yet.

do you honestly think the public sectors and people on welfare would accept payments in anything but hard currency if "monopoly" punts are imposed on them by the government?

look our country is in a deep mess but loosing the euro would be economic suicide, you will take the bottom out of the economy

But where do you think we're going to get the money to pay the public sector and welfare recipients in Euros? The private sector is collapsing due to a too strong currency and lack of competitiveness. Where is the tax money supposed to come from?

All these problems you raise are either going to happen anyway or are going to be worse in the Euro.

ionix5891

SkepticOne wrote: »

are going to be worse in the Euro.

i dont see how current direction of the country can get any worse compared to a complete economic collapse that would occur if we do leave the euro

the public sector and dole will be cut alot one way or another, tho paying these people in valueless paper definitely would cause alot bad of social issues

to answer the personal question: i dont any savings moneys left in irish banks, they dont deserve good customers, let them fail will teach the next generation of bankers a little bit about risk and gambling

SkepticOne

ionix5891 wrote: »

i dont see how current direction of the country can get any worse compared to a complete economic collapse that would occur if we do leave the euro

The collapse is happening because we are using a currency that is too strong for our current economy. Leaving the currency is an attempt at fixing that. Obviously it is not without problems but no solution will be without problems. The basic point is to allow devaluation which will happen quickly rather than try and negotiate cost cutting measures within a strong currency that will take years and happen unevenly.

The public sector and dole will be cut alot one way or another, tho paying these people in valueless paper definitely would cause alot bad of social issues

Neither overt cutting of wages and welfare nor devaluation of the currency is something people are going to be happy with. But if you don't want riots the evidence from other countries is that the second solution is preferable.

When Finland had its banking crisis, one of the things that helped them was their devaluation of the markka.

ionix5891

SkepticOne wrote: »

The collapse is happening because we are using a currency that is too strong for our current economy. Leaving the currency is an attempt at fixing that. Obviously it is not without problems but no solution will be without problems. The basic point is to allow devaluation which will happen quickly rather than try and negotiate cost cutting measures within a strong currency that will take years and happen unevenly.Neither overt cutting of wages and welfare nor devaluation of the currency is something people are going to be happy with. But if you don't want riots the evidence from other countries is that the second solution is preferable.

When Finland had its banking crisis, one of the things that helped them was their devaluation of the markka.

yes but they were not tied to a strong currency such as gold, euro, dollar or swiss frank, they just devalued from existing local currency, what you want to do is a 2 step process SWITCH > DEVALUE, its the switching step that would give a shock to the heart bad enough that you wont get to a devalue step

i cant find any case in history of a small country doing that, the smaller soviet republics spring to mind after the collapse of the USSR (which i happened to visit at that time :cool:), but that resulted in hyperinflation and hardship and everyone using US$ for everything (houses beign sold in $ and so on), the rouble at that time was being kept artificially low in order to boost exports and that led to the above, and the complete lack of confidence in local currencies.


by the way i found amusing that UK devalued by over 30% (making everyone a third poorer) and they are still in a recession, which when compared to the euro zone is very severe if you take the devaluation into equation, what they done was fiddle with figures so their politicians can point at us and eu and say look they have it worse, but when one takes into account the little exercise the undertaken in real terms things are much much worse, i think the only paper in the UK that is realsing whats going on is the Telegraph