Anyone read Mcwilliams new book and agree with his alternative to the current mess?

Flamed Diving

SkepticOne wrote: »

No, I don't think I have mentioned FDI in this thread as part of the argument.Again, I don't think I have suggested that a specific valuation should be targeted. A floating currency is what I have suggested.

Right, so you chose to nit-pick out two points I made rather than address anything in a thoughtful way. Marvellous.

Since foreign firms account for such a large proportion of our exports, it should be obvious even to a 1st year economics student what FDI implied in that context. This is getting tiresome. Must this continue as a economics lesson or a discussion?

Ok then, we decide to pull out of the Euro and let the Punt to float. The predicted initial outcome of this will be flight from the Punt, simply due to uncertainty. You say "leave the market decide", yet the market could very well drive the value of the Punt far below levels that the government wanted. What do they do to ensure a currency collapse doesn't occur?

ei.sdraob

SkepticOne wrote: »

So most of your operations are in the US where the dollar has devalued against the Euro?

several reason for moving equipment:

* electricity (cost) is 4 times cheaper, devaluing to a New Punt wont help as fuels have to be imported into Ireland still

* bandwidth cost is 20 times cheaper, thank you public sector beuracracy this wont change under New Punt

* customers are mostly in US and pay in dollars, changing to a New Punt wont help with that, the Irish market is tiny, we have more customers in Egypt of all places than Ireland

* the atmosphere is more stable in US, Obama really did manage to instill confidence and hope, which matters alot, if a New Punt is introduce there be alot of fear and uncertainty



your forgetting that all the countries that attempt to devalue are large, and can be more selfcontained if needed, not the case with Ireland

as i told you in another thread, all our problems can be solved with cuts, changing the units of exchange wont make a difference and only introduced all out of very ****ty side effects

introducing a new weaker currency would result in businesses uprooting or closing, we are here to make money no help an incompetent government who dont have the balls to cut the fat

SkepticOne

Flamed Diving wrote: »

Right, so you chose to nit-pick out two points I made rather than address anything in a thoughtful way. Marvellous.

You tried to summarise my argument, but got it wrong, which I pointed out. The rest of your post was arguing against this incorrect argument of your (though not deliberate) invention.

ei.sdraob

btw for companies trading in other currencies


its is not the rate of exchange that matters is the rate of change

if the euro:dollar were stuck at same ratio of 1:1.5 then it really no problem, its when the rate suddenly jumps up or down in either direction when money can be made or lost

what you do is hedge yourself



changing the units of currency in ireland wont help simply because the underlying problems are due to incompetence and gombeenism, not currency fluctuations (which work both ways)

it be similar to painting the blue chairs in red paint on the Titanic, the underlying problems are not currency related

Flamed Diving

SkepticOne wrote: »

You tried to summarise my argument, but got it wrong, which I pointed out. The rest of your post was arguing against this incorrect argument of your (though not deliberate) invention.

Nonsense, the only point I missed was on the floating rates, which as you can see, I amended my question, and yet you still dodge it. Much like how you dodged the other pertinent questions I put to you. The FDI question should have been obvious to anyone with more than a Popes Children understanding of economics. Stop bluffing and answer the questions, or is it simply a case that you don't know how to?

Flamed Diving

SkepticOne wrote: »

In real terms somewhat lower than they are now. Not negative.

1) How much lower?

2) Ok then, we decide to pull out of the Euro and let the Punt to float. The predicted initial outcome of this will be flight from the Punt, simply due to uncertainty. You say "leave the market decide", yet the market could very well drive the value of the Punt far below levels that the government wanted. What do they do to ensure a currency collapse doesn't occur?

3) In addition, you are blatantly ignoring all the other reasons why CEOs are not choosing Ireland to invest in:

http://gcr.weforum.org/gcr09/

Being competitive isn't about having weak currencies, you know. It is far, far more complex than the average armchair economist thinks.


Your move, Sherlock.

SkepticOne

Flamed Diving wrote: »

Nonsense, the only point I missed was on the floating rates, which as you can see, I amended my question, and yet you still dodge it. Much like how you dodged the other pertinent questions I put to you. The FDI question should have been obvious to anyone with more than a Popes Children understanding of economics. Stop bluffing and answer the questions, or is it simply a case that you don't know how to?

You amended the question and at the same time accused me of nitpicking for pointing it out. I also disagree with the FDI issue. That is something you raised not me. Fair enough if you want to raise it as a fresh issue but what you tried to do was not playing fair. I think it is only right to point this out.

Scofflaw

We appear to be in "the solution is to leave the EU/euro, now what's the question?" territory.

cordially,
Scofflaw

Flamed Diving

Any day now...

SkepticOne

ei.sdraob wrote: »

its is not the rate of exchange that matters is the rate of change

if the euro:dollar were stuck at same ratio of 1:1.5 then it really no problem, its when the rate suddenly jumps up or down in either direction when money can be made or lost

what you do is hedge yourself

I think it is a fair point that currency risk is introduced, but I don't think we eliminate it by being in the Euro. Being in the Euro means our currency moves in a way that may have little or nothing to do with what is happening in Ireland. It may move in a slow and cumbersome manner but still faster than businesses can adjust through the renegotiation of wages and other costs. With a floating currency there is at least some opportunity for the currency to find an appropriate level through the normal market mechanisms.

ei.sdraob

SkepticOne wrote: »

I think it is a fair point that currency risk is introduced, but I don't think we eliminate it by being in the Euro. Being in the Euro means our currency moves in a way that may have little or nothing to do with what is happening in Ireland. It may move in a slow and cumbersome manner but still faster than businesses can adjust through the renegotiation of wages and other costs. With a floating currency there is at least some opportunity for the currency to find an appropriate level through the normal market mechanisms.

what normal market mechanisms? we already widely interfere in markets

paying PS a shid load than they deserve?
someone say NAMA?

in light of recent events how would you impose such a dramatic paycut on everyone and everything, when a section of society are holding the country ransom?

Rujib1

SkepticOne wrote: »

I think it is a fair point that currency risk is introduced, but I don't think we eliminate it by being in the Euro. Being in the Euro means our currency moves in a way that may have little or nothing to do with what is happening in Ireland. It may move in a slow and cumbersome manner but still faster than businesses can adjust through the renegotiation of wages and other costs. With a floating currency there is at least some opportunity for the currency to find an appropriate level through the normal market mechanisms.

Why on earth would we leave the euro, just to devalue and gain competitiveness.
Let there be a new national wage agreement. You know like the ones we had under bumbling Bertie, which celebrated our mythical tiger status by awarding ourselves hefty pay increases and increases in publiv expenditure.
EXCEPT, this time have an agreement which reflects the reality of our time.
Impliment McCarthy ......... every last bit of it. No faffing around.

Job done. Competitiveness restored. Still in euro.

But hey, that takes bottle and leadership, and cop on. That went out with the flood.

As for McWilliams ......... biggest con since Eddie Hobbs.

Now who could do the job that needs doing ............. Margaret Thatcher.

Scofflaw

SkepticOne wrote: »

I think it is a fair point that currency risk is introduced, but I don't think we eliminate it by being in the Euro. Being in the Euro means our currency moves in a way that may have little or nothing to do with what is happening in Ireland. It may move in a slow and cumbersome manner but still faster than businesses can adjust through the renegotiation of wages and other costs. With a floating currency there is at least some opportunity for the currency to find an appropriate level through the normal market mechanisms.

So a problem with the euro is that it floats, but that wouldn't be a problem with a floating currency?

The problem with a floating Irish currency is that "an appropriate level" may also have little or nothing to do with what is happening in Ireland, and may not even slightly resemble the level we would like it to be at.

About half our exports these days go to the euro zone - which protects those exports against currency risk. A floating Punt Nua isn't going to protect our exports against any currency risks at all.

cordially,
Scofflaw

SkepticOne

Scofflaw wrote: »

So a problem with the euro is that it floats, but that wouldn't be a problem with a floating currency?

But it doesn't float according to conditions in Ireland but to conditions in the eurozone as a whole.

The problem with a floating Irish currency is that "an appropriate level" may also have little or nothing to do with what is happening in Ireland, and may not even slightly resemble the level we would like it to be at.

Actually that is the situation with the euro at present. If a number of countries in the eurozone do well, other things being equal, this would tend to have the effect of strengthening the euro, but it has nothing to do with circumstances in Ireland or another country that isn't experiencing that boom. In fact the tendency will be to drive those other countries further under.

About half our exports these days go to the euro zone - which protects those exports against currency risk. A floating Punt Nua isn't going to protect our exports against any currency risks at all.

I think the issue of currency risk is a fair one. The only way to completely eliminate it is to join a currency union and then do all your trading within those countries that are part of that union although I don't believe that is realistic either.

Flamed Diving

SkepticOne wrote: »

But it doesn't float according to conditions in Ireland but to conditions in the eurozone as a whole. Actually that is the situation with the euro at present. If a number of countries in the eurozone do well, other things being equal, this would tend to have the effect of strengthening the euro, but it has nothing to do with circumstances in Ireland or another country that isn't experiencing that boom.

Why does the good performance of a countries economy "tend to" lead to the strengthening of its currency?

SkepticOne wrote: »

In fact the tendency will be to drive those other countries further under. I think the issue of currency risk is a fair one. The only way to completely eliminate it is to join a currency union and then do all your trading within those countries that are part of that union although I don't believe that is realistic either.

Yes, but we can also seek to minimise currency risk, and this is what sound policy makers do. It isn't a choice between one extreme or the other.

What are these slightly lower interest rates you were suggesting?

What do they do to ensure a currency collapse doesn't occur, in the case of the Punt falling too far?

What of the many, many other issues that affect Irish competitiveness that cannot be changed with a quick fix?

SkepticOne

Rujib1 wrote: »

Why on earth would we leave the euro, just to devalue and gain competitiveness.

In the longer term we would have control over monetary policy. At present too much of a burden is placed on politicians to use fiscal methods with the consequences that we are now seeing.

Scofflaw

SkepticOne wrote: »

In the longer term we would have control over monetary policy. At present too much of a burden is placed on politicians to use fiscal methods with the consequences that we are now seeing.

So...again...although the politicians are no good at fiscal methods, their control over monetary policy would have good consequences?

amused,
Scofflaw

ei.sdraob

SkepticOne wrote: »

In the longer term we would have control over monetary policy. At present too much of a burden is placed on politicians to use fiscal methods with the consequences that we are now seeing.

LOL

look at the UK, the money printing machines (actually thats too expensive they just add digits to accounts nowadays) are under the control of the government and are printing money to pay for .... government debt

yeah I can see that working out great in Ireland :rolleyes:

SkepticOne

Scofflaw wrote: »

So...again...although the politicians are no good at fiscal methods, their control over monetary policy would have good consequences?

amused,
Scofflaw

Before Ireland joined the Euro, an independent central bank controlled monetary policy for Ireland. Britain still had the politicians controlling monetary policy up until I think 1997 but this is an exception and certainly not what is being suggested. With respect I'm a bit surprised that you would think that control would go back to the politicians when before Ireland joined the Euro.

Flamed Diving

Why does the good performance of a countries economy "tend to" lead to the strengthening of its currency?

What are these slightly lower interest rates you were suggesting?

What do they do to ensure a currency collapse doesn't occur, in the case of the Punt falling too far?

What of the many, many other issues that affect Irish competitiveness that cannot be changed with a quick fix?


The questions that SkepticOne cannot answer are piling up, folks.

Scofflaw

SkepticOne wrote: »

Before Ireland joined the Euro, an independent central bank controlled monetary policy for Ireland. Britain still had the politicians controlling monetary policy up until I think 1997 but this is an exception and certainly not what is being suggested. With respect I'm a bit surprised that you would think that control would go back to the politicians when before Ireland joined the Euro it was handled by an independent central bank.

Given what we've seen in terms of the banking and regulatory sector in the last decade (we still have a central bank, after all, and a financial regulatory authority which shares personnel with it), I'm not sure why you're surprised. What exactly did either the Central Bank or the Financial Regulator (who comes under the Central Bank's authority) do to mitigate the effects of the decade-long bubble or otherwise interfere with the government's pro-cyclic policies?

cordially,
Scofflaw

ei.sdraob

SkepticOne wrote: »

Before Ireland joined the Euro, an independent central bank controlled monetary policy for Ireland. Britain still had the politicians controlling monetary policy up until I think 1997 but this is an exception and certainly not what is being suggested. With respect I'm a bit surprised that you would think that control would go back to the politicians when before Ireland joined the Euro.

in theory the central bank in UK is not in government control but in practice it is, almost all of the 220 billion pounds in quantitative easing (aka printing of money) was used to buy government debt

the Queen meet with Mervin King (head of their bank) and it sure as hell wasn't to talk about the weather



on more thinking maybe this is why DMcW is proposing this, there could be some history with himself and the Central bank in Ireland for whom he worked before, maybe himself and other lost their jobs thanks to the move to the euro

SkepticOne

Scofflaw wrote: »

Given what we've seen in terms of the banking and regulatory sector in the last decade (we still have a central bank, after all, and a financial regulatory authority which shares personnel with it), I'm not sure why you're surprised. What exactly did either the Central Bank or the Financial Regulator (who comes under the Central Bank's authority) do to mitigate the effects of the decade-long bubble or otherwise interfere with the government's pro-cyclic policies?

The reason I'm surprised is that you appeared not to have known that our monetary policy was not handled by politicians prior to joining the euro since you thought that it would be handed back to them if we left the euro.

I take your point about these institutions not doing much to counter the government's policies, however the real tool needed was taken away from them and we do know that interest rates dropped considerably upon Ireland's entry to the euro as they were relatively high up to that point to deal with overheating of the Irish economy.

ei.sdraob

SkepticOne wrote: »

The reason I'm surprised is that you appeared not to have known that our monetary policy was not handled by politicians prior to joining the euro since you thought that it would be handed back to them if we left the euro.

I take your point about these institutions not doing much to counter the government's policies, however the real tool needed was taken away from them and we do know that interest rates dropped considerably upon Ireland's entry to the euro as they were relatively high up to that point to deal with overheating of the Irish economy.

ah yes the fatman argument

its the fault of the fastfood joint that the fatman became fat because he couldnt stop eating cheap food, and he was to busy to put any food aside for a hungry day

how come other small economies who also joined the euro are not so ****ed?

how come the Germans and others invested the money wisely in renewables??

theres nothing wrong with low rates, as long as the money is used wisely

stevedublin

I think the main issue people/workers have with pay cuts/layoffs etc. is that it reduces their ability to pay off DEBT.
If Ireland drops out of the Eurozone and devalues the Punt Nua, then people still have to pay the debt they took out (e.g. mortgages, car loans etc.) in the old currency (Euros usually), so from a debt point of view the workers in debt have effectively taken a pay cut anyway.
Hence devaluing makes little difference over a paycut to an individual in debt. The same logic would apply to Irish businesses (I think).

SkepticOne

ei.sdraob wrote: »

ah yes the fatman argument

its the fault of the fastfood joint that the fatman became fat because he couldnt stop eating cheap food, and he was to busy to put any food aside for a hungry day

how come other small economies who also joined the euro are not so ****ed?

how come the Germans and others invested the money wisely in renewables??

The interest rates are suited to the eurozone as a whole, I think we can agree on that. So there are going to be some countries for which that interest rate is suitable and others for which it is not suitable, hence they respond differently.

nesf

SkepticOne wrote: »

The interest rates are suited to the eurozone as a whole, I think we can agree on that. So there are going to be some countries for which that interest rate is suitable and others for which it is not suitable, hence they respond differently.

How much do you know about macro-economic forecasting? i.e. what's used to work out interest rate targets/inflation forecasts.

SkepticOne

Flamed Diving wrote: »

Why does the good performance of a countries economy "tend to" lead to the strengthening of its currency?

I think the normal theory is that a competitive country with a positive trade surplus will generate demand for its currency and this will drive up its value. Similarly a trade deficit will have the opposite effect. I don't think this is particularly controversial.

Note that I'm not saying that this is the only factor, just that it is a factor. I'm sure most people are aware that the likes of printing money or a government buying up another countries currency directly will have an effect.

What are these slightly lower interest rates you were suggesting?

I don't think this is a reasonable question. I don't think it is possible to know in advance what the correct interest rate should be though you could well have an idea that it should be higher or lower than it currently is.

What do they do to ensure a currency collapse doesn't occur, in the case of the Punt falling too far?

I don't think a particular level should be aimed at. Artificially trying to maintain a level is what leads to currency crises, e.g. Black Wednesday already mentioned.

What of the many, many other issues that affect Irish competitiveness that cannot be changed with a quick fix?

No one is denying that these other factors don't exist and should not be dealt with, so I'm not sure of the relevance of this question.

SkepticOne

nesf wrote: »

How much do you know about macro-economic forecasting? i.e. what's used to work out interest rate targets/inflation forecasts.

I'm open to correction but I think logically you can't have an interest rate policy that simultaneously works for a group of economies and at the same time be suited to each economy individually.

nesf

SkepticOne wrote: »

I'm open to correction but I think logically you can't have an interest rate policy that simultaneously works for a group of economies and at the same time be suited to each economy individually.

Depends on a host of factors but yes a one-size-fits-all approach isn't going to be as good as individual interest rates however you can't have two countries using the same currency with different interest rates so it's one or the other.

The reason I ask is because we're getting into "how to model" territory with this particular strand of the debate and this will get quite technical very quickly.