Barroso getting angry

McDave

Bigcheeze wrote: »

Sorry "the deal" not "targets" - picking on a technicality is not a substitute for rebuttal of an argument.

The single currency is largely based on the model of the DM, a strong currency run by the Bundesbank which sought to control inflation and keep general costs down, including that of money to invest in enterprise.

Now if you see that as a mere technicality, I don't think you fully understand what the Euro is about. It's about competitiveness, controlling prices and preventing populist interference by governments in manipulating fiscal instruments for electoral gain.

McDave

Bigcheeze wrote: »

Why didn't you quote the average interest rate in all euro countries over the last 30 years and see how you like those numbers.

With this particularly specious reasoning, I take it you're conceding the point.

Bigcheeze

McDave wrote: »

Now if you see that as a mere technicality, I don't think you fully understand what the Euro is about. It's about competitiveness, controlling prices and preventing populist interference by governments in manipulating fiscal instruments for electoral gain.

You dont seem to inderstand how the irish cb worked before the euro. It was structured to achieve all of that. The difference being that it was focussed on doing that in ireland.

I don't really care if the euro is or is not a good idea.
The issue really boils down to would ireland be in a better or worse position today if we had never joined the euro. If you took a poll of one hundred economists, how do you think they'd respond ?

View

Bigcheeze wrote: »

You dont seem to inderstand how the irish cb worked before the euro. It was structured to achieve all of that. The difference being that it was focussed on doing that in ireland.

The Irish CB largely adjusted interest rates up or down based on what was happening in either the UK and/or the German economies. In financial terms, Ireland was always far too small to engage in the theoretical ideal of "independently" setting its own interest rate.

As Wim Duisenberg - when head of the (much larger) Dutch CB - once commented wrt interest rates, Dutch independence consisted of the 2 seconds it took him to decide that the Dutch would "independently" raise their interest rates by the exact same amount as the German CB had just informed him that they were going to raise their interest rates.

K-9

View wrote: »

The Irish CB largely adjusted interest rates up or down based on what was happening in either the UK and/or the German economies. In financial terms, Ireland was always far too small to engage in the theoretical ideal of "independently" setting its own interest rate.

As Wim Duisenberg - when head of the (much larger) Dutch CB - once commented wrt interest rates, Dutch independence consisted of the 2 seconds it took him to decide that the Dutch would "independently" raise their interest rates by the exact same amount as the German CB had just informed him that they were going to raise their interest rates.

Iceland did have high interest rates and that caused other banking problems as depositors rushed to lodge money in Icelandic banks.

Regulation seems to be the common cause here, not interest rates.

Bigcheeze

K-9 wrote: »

Regulation seems to be the common cause here, not interest rates.

Nobody is denying that regulation is a significant factor, if not the most significant factor.

The thrust of my argument is that Euro membership was a bad economic decision for Ireland and low interest contributed significantly to the over heating of the economy and property bubble.

Bigcheeze

View wrote: »

The Irish CB largely adjusted interest rates up or down based on what was happening in either the UK and/or the German economies. In financial terms, Ireland was always far too small to engage in the theoretical ideal of "independently" setting its own interest rate.

I'd disagree. There is correlation between global interest rates. e.g. What the US Fed does will influence what the ECB does. It doesn't mean that they're not independent.

Scofflaw

Bigcheeze wrote: »

Nobody is denying that regulation is a significant factor, if not the most significant factor.

The thrust of my argument is that Euro membership was a bad economic decision for Ireland and low interest contributed significantly to the over heating of the economy and property bubble.

I'd call it quite differently - euro membership was a good decision for Ireland at the time it was made. We were, at that stage, in good shape to take advantage of being in the euro - and I would say that had we continued to follow the policies we adopted to make us ready for euro membership, we would have done well out of it. We wouldn't have had the spectacular "Celtic Tiger" growth, but we'd have had a much larger real economy rather than a property and construction bubble. We could have used the flow of cheap money to grow Irish businesses instead of pumping it into a house price asset bubble, had Fianna Fáil not chosen to do everything in their power to pump that sector as opposed to trying to route it towards business development. Instead, property development and purchase got the tax breaks, while entrepreneurialism was treated as it always has been by Fianna Fáil - as something suspect.

To quote Honohan's conclusions on the subject:

But the contrasting cases of some other small economies on the European periphery – in and out of the eurozone – show that EMU membership is neither necessary nor sufficient for a banking crisis. And the euro provided an anchor for Ireland as the crisis broke.

In brief, I think we were well-positioned for euro membership, courtesy of good decisions taken in the Nineties, but we blew the opportunity good and hard with a series of giveaway budgets starting with McCreevy in 2001, backed up by dismantling of the regulatory environment, tax breaks for property, and bloating of the PS payroll. All the wrong decisions, all popular at the time.

cordially,
Scofflaw

K-9

Bigcheeze wrote: »

Nobody is denying that regulation is a significant factor, if not the most significant factor.

The thrust of my argument is that Euro membership was a bad economic decision for Ireland and low interest contributed significantly to the over heating of the economy and property bubble.

Yes, but high interest rates as shown by Iceland didn't work either, so it was a bad economic decision for Iceland to stay out of the EU and Euro!

It was and is good for us in some ways and could have been far better if we hadn't have taken the eye of the ball, as they say.

McDave

Bigcheeze wrote: »

You dont seem to inderstand how the irish cb worked before the euro. It was structured to achieve all of that. The difference being that it was focussed on doing that in ireland.

You don't seem to understand that the CB presided over a truly independent Irish currency for a very short period of time. You're making very grand claims for the CB on limited evidence. Indeed the available evidence shows that, when put to the test, the CB was quite lame.

I get the strong impression that you're trying to imply that were we somehow to revert to an Irish currency we'd have a fit-for-purpose CB to steer us through the rough seas. Fat chance!!

McDave

Bigcheeze wrote: »

I don't really care if the euro is or is not a good idea.
The issue really boils down to would ireland be in a better or worse position today if we had never joined the euro. If you took a poll of one hundred economists, how do you think they'd respond ?

Putting my own cards on the table, I think the Euro is a great idea. Great for the European economy and its position in the world. And a practical recognition of the particular EU marriage of the free market and the social net. All it requires is that member countries pursue responsible fiscal policies. That's not too much to ask of a modern European democracy.

On the evidence of our performance in the Euro, I can only despair of how we would have behaved without any peer pressure whatsoever. We would have been utterly at the mercy of our incompetent government and immature electorate. And probably in an even worse position than Iceland.

Incidentally, your "poll of one hundred economists" question is yet another non sequitur.