Why don't we leave the EU? Join the Swiss in EFTA

K-9

SkepticOne wrote: »

I think the point has already been made that being forced to use a currency that is overvalued from Ireland's point of view does not help paying back that debt either. In fact it also makes it worse.

A rough analogy is that of a landlord with a certain debt charging a certain rent for his properties. If he finds that many of his rental units are going empty then the logical thing to do is lower that rent in order to fill the units.

He, however, will argue (incorrectly) that if he lowers his rent then, relative to his rents, his debt will go up and so will (again incorrectly) be reluctant to lower those rents.

Interestingly this is the way a lot of landlords in Ireland think at the moment. Psychologically it is very hard for them to make the necessary rational adjustment that would put them in a better position to pay their debts.

I think the same psychology is at work with many proponents of the Euro. If lowering the value of currency that we use to pay each other gives us a competitive boost then that puts us in a better, not worse, position to pay our debts. All we are talking about is correctly pricing our goods and services.

To use your example, he still has the same debt, but a less valuable currency to service those debts. Rents have come down and leases will because businesses will just close if they don't lower them. The process is underway, just not as quick as a devaluation.

K-9

SkepticOne wrote: »

OK, so you renegotiate the rents down to whatever level will keep your tenants and for the empty units you set them at a level sufficiently low to attract tenant. Whatever you do you do not benefit from having rents higher than will attract and keep tenants.

I think its interesting that there are many landlords out there who can't find tenants yet won't lower rents.The analogy is not perfect but having an unfavourable exchange rate in the medium term makes it difficult for firms in Ireland to export to other countries. It makes it hard to reduce prices to the extent necessary to become competitive. Eventually costs will come down and competitiveness will increase but that takes time and as we have seen our competitiveness situation has not improved despite several years of economic difficulty by which time long term damage to the economy will have occurred.

We are not paying our debts from a big pile of Euros that are lying around that gets devalued if we leave the Euro; we are paying them out of money that we are earning from exports. We need to get that sorted as quickly as possible.

The main reason is debt, SkepticOne, which will be harder to service if we devalue. Landlords either raise rents under devaluation or go under.

K-9

sirromo wrote: »

I'd say we'll be alright. We devalued our currency back in 1993 and we got through it. The increase in economic activity will make up for the higher costs of imported goods.

So, why 4 years later was Sterling worth more than the Punt. Why, as Euro sceptics argue, was the rate set for the € too high. It was only a few years later?

Did Devaluation fail? Was it a Short Term solution?

SkepticOne

K-9 wrote: »

To use your example, he still has the same debt, but a less valuable currency to service those debts. Rents have come down and leases will because businesses will just close if they don't lower them. The process is underway, just not as quick as a devaluation.

Like I said earlier, the process is extremely slow. Firms have to go bust. People end up on the dole and that needs to be paid for and so on. Only a small number will go on to start businesses. And the whole thing takes years and permanent damage occurs to the economy that makes recovery difficult. This is what you are trying to avoid.

SkepticOne

K-9 wrote: »

The main reason is debt, SkepticOne, which will be harder to service if we devalue. Landlords either raise rents under devaluation or go under.

I'm arguing that that is not the case. The landlord with rents too high does not find it easy to pay back debt (although it may be psychologically hard for him to lower rents). Likewise a currency set too high does not help a country pay back its debts. What helps a country pay back debts is competitiveness and, unless you can develop high value products fast, means bringing costs down. Devaluation is a means of bringing costs down fast. The debt remains the same in Euro terms but your ability to pay it back in Euros increases as your costs in Euro terms have come down (with the currency), at least in the short to medium term.

K-9

SkepticOne wrote: »

I'm arguing that that is not the case. The landlord with rents too high does not find it easy to pay back debt (although it may be psychologically hard for him to lower rents). Likewise a currency set too high does not help a country pay back its debts. What helps a country pay back debts is competitiveness and, unless you can develop high value products fast, means bringing costs down. Devaluation is a means of bringing costs down fast. The debt remains the same in Euro terms but your ability to pay it back in Euros increases as your costs in Euro terms have come down (with the currency), at least in the short to medium term.

Do you not think landlords are in serious debt? With a landlord who has debt in Euro, what costs come down fast?

K-9

SkepticOne wrote: »

Like I said earlier, the process is extremely slow. Firms have to go bust. People end up on the dole and that needs to be paid for and so on. Only a small number will go on to start businesses. And the whole thing takes years and permanent damage occurs to the economy that makes recovery difficult. This is what you are trying to avoid.

But how will this not happen under devaluation? Firms with massive debts getting less money for their debt?

How is devaluation different to your above quote?

SkepticOne

K-9 wrote: »

Do you not think landlords are in serious debt? With a landlord who has debt in Euro, what costs come down fast?

No, the analogy I'm making is between the hypothetical landlord (in whatever currency) and the country.

I'm not talking about the problems actual landlords might face when a country devalues. It was dealing with a particular point raised in the thread by someone else.

K-9

SkepticOne wrote: »

No, the analogy I'm making is between the hypothetical landlord (in whatever currency) and the country.

I'm not talking about the problems actual landlords might face when a country devalues. It was dealing with a particular point raised in the thread by someone else.

Ah, but this isn't a hypothetical question, its a very real question.

Maybe start addressing real problems, not hypothetical ones?

SkepticOne

K-9 wrote: »

But how will this not happen under devaluation? Firms with massive debts getting less money for their debt?

How is devaluation different to your above quote?

The problem is if you don't devalue and fail to bring cost down then exporting countries will go bust and it is these companies that you need to bring in money to pay debts. Foreigners buying our products don't care what currency we pay or wages in; if our prices are too high because we cant get our costs down then exporting companies go bust.

We are currently failing to bring our costs down. We are still uncompetitive.

If we devalue then, yes companies that depend on domestic business but have debts in Euros will suffer, but they are going to suffer anyway. Indigenous exports would get a boost however and it is these that bring money in from abroad and therefore overall help pay debts.

I don't think there's any alternative to exporting our way out of this yet the difficulty we're having reducing costs within the eurozone is making this hard.

SkepticOne

K-9 wrote: »

Ah, but this isn't a hypothetical question, its a very real question.

Maybe start addressing real problems, not hypothetical ones?

Not a fair comment tbh. You can't use something as an analogy and simultaneously discuss it in a literal sense. You seemed not to understand the analogy I was making and so I was trying to explain it.

K-9

SkepticOne wrote: »

Not a fair comment tbh. You can't use something as an analogy and simultaneously discuss it in a literal sense. You seemed not to understand the analogy I was making and so I was trying to explain it.

Forget analogies.

Just take rents and leases. What happens with devaluation?

Who cares about literal interpretations or analogies. Let us get real.

K-9

SkepticOne wrote: »

The problem is if you don't devalue and fail to bring cost down then exporting countries will go bust and it is these companies that you need to bring in money to pay debts. Foreigners buying our products don't care what currency we pay or wages in; if our prices are too high because we cant get our costs down then exporting companies go bust.

We are currently failing to bring our costs down. We are still uncompetitive.

If we devalue then, yes companies that depend on domestic business but have debts in Euros will suffer, but they are going to suffer anyway. Indigenous exports would get a boost however and it is these that bring money in from abroad and therefore overall help pay debts.

I don't think there's any alternative to exporting our way out of this yet the difficulty we're having reducing costs within the eurozone is making this hard.

Yet our exports are increasing? If we are so uncompetitive, exports would be dropping, not increasing.

SkepticOne

K-9 wrote: »

Forget analogies.

If I need to make an analogy to illustrate a point to someone else I will. Remember it is you that have dived in not realising an analogy is being made.

However I also realise that not everyone 'gets' analogies so I will answer your literal minded question.

Despite the recession and despite vacant units rents in Ireland are still high in Ireland, and, like other costs, must come down. There is nothing we can do about it. If landlords have overextended themselves in debt then they are going to be in difficulty. It may be the case that other landlords need to step in and purchase those properties cheaply so that they can be rented out again at a lower price. This will happen with or without devaluation and arguably to a greater extent if the economy suffers because we can't lower costs sufficiently without devaluation.

SkepticOne

K-9 wrote: »

Yet our exports are increasing? If we are so uncompetitive, exports would be dropping, not increasing.

How much of these exports you refer to are due to transfer pricing? How much of it is indigenous where the money stays in the country?

Please see the article by Constantine Gurdgiev entitled
Economcis 10/04/2010: Ireland's Competitiveness - not improving

Often overlooked today (in the usual media focus on credit flows), Ireland's Harmonized Competitiveness Indicators, published by the Central Bank are painting a really troubling picture.

The latest data, released this week in the CB's quarterly update shows that despite all the talk about wages, our competitiveness has not been improving at any significant rate during the current crisis.

DaBrow

maggy_thatcher wrote: »

The only reasons people have provided (in this thread) for leaving the EU and joining EFTA are:

1. Immigration control
2. Currency Control

You've just eliminated immigration control (assuming we manage to stay being in the EEA), so we're down to currency control. Pulling out of the EU seems like a pretty drastic measure just because you want to devalue our local currency. We'd take the control that's currently managed by ECB and put it in the hands of the Irish Central Bank, and hope that they did a better job...meanwhile putting the rest of the economy at risk, other than a "trust us we'll do it right" statement.

Are there any other reasons why we'd join EFTA in favour of the EU?

"Ireland's GDP plunged by 7.5% in 2009 and is expected to fall by another 1% this year, according to the country's Investment and Development Agency. The national economy is also heavily dependent on trade--with exports representing 90% of GDP--so the slow recovery in world trade is exacerbating the country's problems"

There you go... 90% of our trade relies on exports, products and services which thanks to the euro are too damn expensive to compete with compared to other NON-Eurozone nations.

http://www.forbes.com/2010/03/23/worst-countries-jobs-lifestyle-unemployment-rate-rising.html

sirromo

maggy_thatcher wrote:

The devaluation that occurred then was to stop currency speculators who were persistently attacking the Punt, and our interest rates were sky-rocketing. We devalued as an alternative to raising interest rates further. It's a very different game to what we have now (where our interest rates are, to some peoples opinion, too low).

It doesn't matter what the purpose of the devaluation was at the time. What matters is the outcome of the devaluation. The devaluation of 1993 provided a boost to our economy when it was in bad shape. The devaluation of 2010-2011 will provide a boost to the economy at a time when it is in even worse shape.

I think it's worth quoting David McWilliams on our current problems and why a devaluation would make sense

David McWilliams wrote:

Our problem is pretty straightforward. If a Martian economist landed in Ireland, he'd see straight away that Ireland is caught in a currency arrangement which will make our recession much deeper than necessary. This is an economic fact, not a political slogan. The euro is now part of the problem, not part of the solution.

In economic history, no sovereign country has faced a property downturn, inspired by a ridiculous credit binge, resulting in such huge personal debts without devaluing its currency.

Look at what is happening in the UK and the US. Both countries find themselves in the same bind as we do. They thought that they could get rich by buying and selling houses to each other using other people's money.

Once this ponzi scheme has been revealed, they let their currency fall. This allows them to recharge their exporting sector, making it more competitive and, more significantly, it gives them the opportunity to inflate their debts away.

Ireland, in contrast, is trying to fight its way out of a recession without any macroeconomic policy. This is political suicide.

maggy_thatcher wrote:

Also, I think you're underestimating how much the currency would drop.

The further it drops, the more competitive we'll become.

maggy_thatcher wrote:

You can't do it quickly - it requires a referendum to pull out of the EU

It would require a referendum to pull out of the EU but it wouldn't require a referendum to pull out of the euro. We could leave the eurozone while still remaining in the EU. Pulling out of the euro and devaluing could be completed in less time than it took to guarantee the banks.

maggy_thatcher wrote:

I think you're underestimating how people get when it's their own money on the line. Granted not everybody will, but as soon as the run starts, people panic (see for example the Northern Rock bank runs in the UK - if that run hadn't started, the bank would probably have survived, but there was enough uncertainty around that a run started and the bank collapsed).

A bank failure is a completely different thing from a currency devaluation. The long queues outside Northern Rock had to do with people's fears that they would lose their savings, not that their savings would decline in value. Plenty of countries have devalued their currencies in the past and it didn't result in mad runs on the banks.

maggie_thatcher wrote:

At the moment people have their savings in their national currency (the Euro). You're proposing that people convert their life savings from a stable reliable currency into a new currency (that becomes their "national" currency) in the hope that it bounces back (when one of the primary reasons for pulling out of the Euro is so that we can let the new currency devalue?).

Yes, the boost to our economy would be a temporary stimulus to held bring unemployment down and thereby reduce public spending. We can't afford to increase our deficit by funding a fiscal stimulus but if we leave the euro we'll be able to provide a monetary stimulus that will help our economic recovery by making our exports more competitive.

maggy_thatcher wrote:

That's a big if.

It's not a big if at all - it's basic economics. When a country reduces its costs it becomes more competitive. If we devalue our currency we'll reduce costs and that will increase economic activity.

The alternative is to wait for wages to fall by themselves but that could take years to happen.

baalthor wrote:

You are proposing to convert them to a new currency which will dive in value when introduced and you think that I should just sit back and wait to see what happens??? Are you for real?

I am absolutely for real. I have almost two years salary in the bank and I'm not going to take a penny out if we re-establish our own currency and devalue. The reasons I won't take a penny out:

1. I won't need to withdraw my savings any time soon and so a temporary fall in their real-value doesn't bother me all that much. It's the long-term value of my savings that I'm concerned about, not the current value.
2. My savings will increase in value through future deposits and interest anyway and so they will regain their current spending power in time.
3. The devaluation will strengthen our economy and so the long-term value of the currency is likely to rise.
4. Even if the currency never regains its value, I'm prepared to live with the loss if it means that our economy has a better chance of recovering.
5. Like most of the population, I'm just not that sensitive to fluctuations in currency exchange rates or in inflation. I just treat the variations in prices and exchange rates as being temporary and reversible.

baalthor wrote:

There's no comparison with 1993 because back then we devalued our own currency.

And are you saying we wouldn't be devaluing our own currency this time? Whose currency would we be devaluing if not our own?

baalthor wrote:

I wrote a long post on this before but I can't believe you think abolishing the euro in Ireland would be such a simple, cost-free process.

I never said it would be a simple, cost-free process. A devaluation will be costly and a painful and it will benefit people in debt at the expense of the people who behaved responsibly during the boom. I still think it's a necessary step in our economic recovery. The alternative is a long drawn-out road to recovery that could take a decade and that will probably involve another generation of Irish people being forced to leave the country in search of work. I don't want to see that happen. I think it's far better if we take the pain now and move on.

k-9 wrote:

Look, do you accept tax breaks by Govt. was a major factor in the bubble.

Yes, I do. I've never said that euro membership was the only factor.

k-9 wrote:

Other European countries did not have bubbles with the exact same interest rates.

And that's because there wasn't the same demand for housing in those other countries.

Cheap Credit + A young population = High consumption + over-investment in housing

k-9 wrote:

We have 2 common denominators, the Euro and interest rates, yet only a couple of countries had property bubbles. Causation and correlation and all that. Even Spain, which had a bubble doesn't have the same problems with banks.

I've no interest in arguing over what caused the problem. I'm more interested in how we solve the problem. I've no problem admitting that we are entirely to blame for size of the housing bubble - if that is in fact the case. I don't believe we are entirely to blame though and I don't know why people like yourself are so reluctant to admit that the policies of our central bank (the ECB) had as much of a role to play in causing our housing bubble as the Federal Reserve's policies played in fueling the housing bubble in the US.

k-9 wrote:

So, why 4 years later was Sterling worth more than the Punt.

I don't know why that was. From the point of view of the Irish economy I think it was a good thing that our currency was worth less than the currency of our closest and most important trading partner.

k-9 wrote:

Did Devaluation fail? Was it a Short Term solution?

I don't believe devaluation did fail. I don't know exactly how much the devaluation in 1993 contributed to our economic turnaround in the second half of the 1990s but I would imagine that the role it played was significant.

maggy_thatcher

sirromo wrote: »

The further it drops, the more competitive we'll become.

And the more expensive our imports become (relative to our spending ability).

sirromo wrote: »

It would require a referendum to pull out of the EU but it wouldn't require a referendum to pull out of the euro. We could leave the eurozone while still remaining in the EU. Pulling out of the euro and devaluing could be completed in less time than it took to guarantee the banks.

How long do you think it would take to print the money? As soon as the printing started, that's the notice period.

sirromo wrote: »

A bank failure is a completely different thing from a currency devaluation. The long queues outside Northern Rock had to do with people's fears that they would lose their savings, not that their savings would decline in value. Plenty of countries have devalued their currencies in the past and it didn't result in mad runs on the banks.

The difference is that when other countries devalue their currency, the physical money stays the same ($1 = $1 however you look at it). The difference here is you are converting one currency into another (€1 = ?1) and then letting the ?1 devalue so eventually €1 = ?x, where x > 1. This is what would (almost) guarantee a run on the bank. It's very different to any previous devaluation.

sirromo wrote: »

It's not a big if at all - it's basic economics. When a country reduces its costs it becomes more competitive. If we devalue our currency we'll reduce costs and that will increase economic activity.

It reduces its internal costs, but the external costs become higher...say for example you sell a product for ?10 (was €10). ?10 becomes worth less and less over time making your product cheaper and cheaper to make you more competitive, but your import costs are fixed at €8 -- as soon as ?10 becomes less than €8, you're in trouble and you have push the price of your product back up again to match...reducing your competitive edge.

sirromo wrote: »

I am absolutely for real. I have almost two years salary in the bank and I'm not going to take a penny out if we re-establish our own currency and devalue. The reasons I won't take a penny out:

1. I won't need to withdraw my savings any time soon and so a temporary fall in their real-value doesn't bother me all that much. It's the long-term value of my savings that I'm concerned about, not the current value.
2. My savings will increase in value through future deposits and interest anyway and so they will regain their current spending power in time.
3. The devaluation will strengthen our economy and so the long-term value of the currency is likely to rise.
4. Even if the currency never regains its value, I'm prepared to live with the loss if it means that our economy has a better chance of recovering.
5. Like most of the population, I'm just not that sensitive to fluctuations in currency exchange rates or in inflation. I just treat the variations in prices and exchange rates as being temporary and reversible.

I doubt most people in the country will think the same way. As soon as you say "if you leave your money in the bank you are guaranteed to lose money in the short term. You may gain it back in the long term", people will start to withdraw money from the bank. If a significant percentage do this, it starts a run on the bank, making everyone else panic withdraw to get their money before the bank goes bankrupt. The attitude would be to take the money out of the bank and stick it in a mattress until the economy starts to recover, at which point they can convert the money and be quids in (miss the trough in the drop).

sirromo wrote: »

And are you saying we wouldn't be devaluing our own currency this time? Whose currency would we be devaluing if not our own?

I believe the OP meant that it wouldn't be us choosing to devalue the currency (at least not completely), as it would be the external markets that decide how much the currency is worth.

sirromo wrote: »

I never said it would be a simple, cost-free process. A devaluation will be costly and a painful and it will benefit people in debt at the expense of the people who behaved responsibly during the boom. I still think it's a necessary step in our economic recovery. The alternative is a long drawn-out road to recovery that could take a decade and that will probably involve another generation of Irish people being forced to leave the country in search of work. I don't want to see that happen. I think it's far better if we take the pain now and move on.

So we're encouraging irresponsible behaviour? The people who were responsible are heavily penalized to bail out those who are neck deep in debt...some solution. How about instead just reforming bankruptcy laws to make it easier for ordinary people to default on their debts?

SkepticOne

maggy_thatcher wrote: »

It reduces its internal costs, but the external costs become higher...say for example you sell a product for ?10 (was €10). ?10 becomes worth less and less over time making your product cheaper and cheaper to make you more competitive, but your import costs are fixed at €8 -- as soon as ?10 becomes less than €8, you're in trouble and you have push the price of your product back up again to match...reducing your competitive edge.

But overall your costs have come down because you have brought down internally generated costs which is the object of the exercise.

e.g. Company product which sells for 10 euros. Cost of production is 2 euros imported raw material + 6 euros labour + other costs generated in Ireland.

After devaluation the imported raw materials still cost 2 euros but labour and costs have come down at least somewhat with devaluation so the overall competitive position has improved.

You can do the same analysis with the new currency and you get the same results. What you can't do is mix the currencies. You must deal with one or the other which I think is what you are doing in your example above.

SkepticOne

maggy_thatcher wrote: »

How long do you think it would take to print the money? As soon as the printing started, that's the notice period.

I think this is a fair point. The real problem is with the changeover and how it would be accomplished. Unpopular exchange controls would have to be put in place during the changeover period. However not leaving the Euro may also lead to runs on the banks in addition to the damage to the economy itself. We were very close to a run due to the collapse of a section of our economy already and there's no reason it can't happen again. As I mentioned earlier, according to economist Paul Krugman people are already taking their money out of Greek banks.

maggy_thatcher

SkepticOne wrote: »

But overall your costs have come down because you have brought down internally generated costs which is the object of the exercise.

e.g. Company product which sells for 10 euros. Cost of production is 2 euros imported raw material + 6 euros labour + other costs generated in Ireland.

After devaluation the imported raw materials still cost 2 euros but labour and costs have come down at least somewhat with devaluation so the overall competitive position has improved.

You can do the same analysis with the new currency and you get the same results. What you can't do is mix the currencies. You must deal with one or the other which I think is what you are doing in your example above.

But you aren't selling it for 10 euros, you're selling it for 10 weakpunts (or whatever the new currency is). If you fix the price at 10 euros, then your internal customers are going to have to pay more and more for it every time, and you haven't saved anything.

maggy_thatcher

SkepticOne wrote: »

I think this is a fair point. The real problem is with the changeover and how it would be accomplished. Unpopular exchange controls would have to be put in place during the changeover period.

You wouldn't be exchanging money - you have the money in hard currency; it stays in hard currency...you wouldn't need to exchange it into anything else, so I don't think you could put any controls on it.

SkepticOne wrote: »

However not leaving the Euro may also lead to runs on the banks in addition to the damage to the economy itself. We were very close to a run due to the collapse of a section of our economy already and there's no reason it can't happen again. As I mentioned earlier, according to economist Paul Krugman people are already taking their money out of Greek banks.

So there might be a run on the banks due to poor economic performance of the banks (a genuine reason for a run), but changing currency will almost guarantee a run, decimating the economy further.

SkepticOne

maggy_thatcher wrote: »

But you aren't selling it for 10 euros, you're selling it for 10 weakpunts (or whatever the new currency is). If you fix the price at 10 euros, then your internal customers are going to have to pay more and more for it every time, and you haven't saved anything.

No if you were selling it for 10 euros abroad you are still selling it for that amount. Just because you have changed your currency in Ireland does't mean it is going to change the price a foreigner is going to pay for it in whatever currency he uses. It doesn't matter what the currency is so long as you stick to one or the other. I did that analysis in euros.

Lets do the analysis in the new currency. e.g. punts.

Before devaluation let's say the currency is 1 to 1 with the Euro.

Product sells for 10 punts. Imported raw materials are are 2 punts and internally generated costs are 6 punts.

After devaluation:

Product sells for 11 punts. Imported raw materials are now 3 punts (since the currency has devalued) and internally generated costs are still 6 punts.

So looking at it from the new currencies perspective the overall competitiveness situation has also improved. You could also do the analysis in US dollars, it would not matter.

BetterLisbon

maggy_thatcher wrote: »

We do have our own foreign policy - each country can decide what policy to implement. The EU is not a country.

And we will always have the opt-out until/unless a future treaty takes place removing it from us. Running away from the EU isn't going to change that.

There's no such thing as European citizenship. European passports are just national passports with a standardized colour. The EU flag/insignia doesn't mean anything in particular. Even if there was these things, there's absolutely no reason why they can't be used in parallel anyway - look at America - a Texan is an American - they have their own flag, their own identity as someone from Texas, but they also have their identity as an American...nowhere does it say you can't have both.

And lose all the grants that we have been rebuilding the country with. Also, the Atlantic is overfished at the moment, and we should really be out there less as it is...so we'd have a bigger piece of a smaller pie.

CAP helps larger farms more than it helps small farms (an issue that is being worked on in the current reforms)...how does it "kill" a small farm? And what would you replace it with? Remove the subsidies altogether and allow the small farm to go to the wall, or somehow fund (with what?) a different subsidy system to give small farms a benefit at the expense of larger farms (reducing efficiency, pushing food prices up)?

Wrong maggy on all counts.
Haing a veto on foreign policy is not the same as an independent policy as our foreign policy must be conistent with the unions existing policies and objectives. We can prevent new foreign EU policies that we disagree with but are stuck with the current ones.

Our opt-out can be conceded under the existing framework read the opt-out protocol and the 28th amendment.

EU citizenship is specifically mentioned in the treaties. EU passports carry the title EU above Ireland. Your Texan analogy proves my point. Texas has a dual identity like an EU state.

We lose EU funding but are less burdened by market regulation and get a major industry back.

Well NZ farmers has subsidies taken away and agriculture boomed. The imbalance in favour of larger farms in CAP has been a "target of reform" for decades.

maggy_thatcher

SkepticOne wrote: »

Product sells for 11 punts. Imported raw materials are now 3 punts (since the currency has devalued) and internally generated costs are still 6 punts.

Except that internally generated costs are now higher -- your product went up in price, so it stands to reason that the internal costs went up in price by the same percentage (as their imported raw materials went up etc. down the chain).

Also remember, you'd be slowing down the economy - say you want to buy a car...that car costs €20,000 (as there are no cars made in the country). You have ?20,000 to purchase it - devaluation means you don't have enough money, so have to wait...so you start saving. If you're saving you aren't spending, so the suppliers of other goods stop making their goods. This precipitates down the chain.

maggy_thatcher

BetterLisbon wrote: »

Wrong maggy on all counts.
Haing a veto on foreign policy is not the same as an independent policy as our foreign policy must be conistent with the unions existing policies and objectives. We can prevent new foreign EU policies that we disagree with but are stuck with the current ones.

And what, exactly do you not like about the foreign policies that we've always been able to prevent but didn't.

BetterLisbon wrote: »

Our opt-out can be conceded under the existing framework read the opt-out protocol and the 28th amendment.

Ok, point conceded, though I don't have an issue with it myself.

BetterLisbon wrote: »

EU citizenship is specifically mentioned in the treaties. EU passports carry the title EU above Ireland. Your Texan analogy proves my point. Texas has a dual identity like an EU state.

And what's the problem with that?...I thought you meant in a style that would remove Irish citizenship. EU Citizenship is a completely separate entity that gives us additional rights on top of what we get as an Irish citizen. How is that a problem for you?

BetterLisbon wrote: »

We lose EU funding but are less burdened by market regulation and get a major industry back.

A major, dying industry (the phrase there are plenty more fish in the sea isn't really applicable anymore).

BetterLisbon wrote: »

Well NZ farmers has subsidies taken away and agriculture boomed. The imbalance in favour of larger farms in CAP has been a "target of reform" for decades.

NZ don't really have "small" farms in the same way that we do though (It's a much newer country, so when the farms set up they haven't had a chance to subdivide in the same way that Irish farms have). If we removed the subsidies the larger farms will survive better than the smaller ones.

SkepticOne

maggy_thatcher wrote: »

Except that internally generated costs are now higher -- your product went up in price, so it stands to reason that the internal costs went up in price by the same percentage (as their imported raw materials went up etc. down the chain).

No, the product went up in price because it is selling for 10 euros abroad (the market dictates the price). It is still selling for 10 euros abroad but that 10 euros is equivalent after devaluation to 11 new punts.

Also remember, you'd be slowing down the economy - say you want to buy a car...that car costs €20,000 (as there are no cars made in the country). You have ?20,000 to purchase it - devaluation means you don't have enough money, so have to wait...so you start saving. If you're saving you aren't spending, so the suppliers of other goods stop making their goods. This precipitates down the chain.

But is importing more cars simply to generate economic activity what we should be doing? If our problem is debt then exporting rather than importing is the solution.

maggy_thatcher

SkepticOne wrote: »

No, the product went up in price because it is selling for 10 euros abroad (the market dictates the price). It is still selling for 10 euros abroad but that 10 euros is equivalent after devaluation to 11 new punts.

And what are you selling it for internally? 11 newpunts, or 10 euros? 11 new punts would mean your price keeps rising for internal purchasers; 10 euros means that internal purchasers have to go and keep trading their soft newpunt into hard euros which seems a little pointless.

SkepticOne wrote: »

But is importing more cars simply to generate economic activity what we should be doing? If our problem is debt then exporting rather than importing is the solution.

But in the meantime we aren't purchasing anything internally or externally (because we need to save up), and as our purchasing power gets weaker and weaker we have to save more and more and spend less and less. This affects us internally as well as externally.

SkepticOne

maggy_thatcher wrote: »

And what are you selling it for internally? 11 newpunts, or 10 euros? 11 new punts would mean your price keeps rising for internal purchasers; 10 euros means that internal purchasers have to go and keep trading their soft newpunt into hard euros which seems a little pointless.

Now compare this with having to lower wages in hard Euro terms. The consumers position is also weakened through this. It has to be done nevertheless to become competitive yet this is the thing we're having trouble doing according to that report by Gurdgiev I posted earlier.

But in the meantime we aren't purchasing anything internally or externally (because we need to save up), and as our purchasing power gets weaker and weaker we have to save more and more and spend less and less. This affects us internally as well as externally.

You are exaggerating with the anything of course. Our bubble lifestyles are unsustainable and paying back that debt is not going to be easy. You can't do that without cutting back on things unfortunately (but I think we all realise this).

maggy_thatcher

SkepticOne wrote: »

Now compare this with having to lower wages in hard Euro terms. The consumers position is also weakened through this. It has to be done nevertheless to become competitive yet this is the thing we're having trouble doing according to that report by Gurdgiev I posted earlier.

But that's my point - if you have increased your costs to internal purchasers, then other businesses who are using your product as its raw material has found that its cost has gone up - so your statement that your internal costs remain the same is invalid except in the very narrow corner case of someone who is purely importing one product and exporting it without any additional internal purchases.