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Why are the British so anti Europe?
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One thing is certain after Camerons speech, the EU needs to change from a duopoly to an actual fair and equal Union of Sovereign States, if it is to survive.
Certainly the EU needs to change if it is to survive and/or progress, and the Euro fiasco has shown how it is unfit to lead anything with its disasterous introduction of the Euro and its disasterous inability to resolve the issues crippling the EU due to the flaws in the Euro.0 -
If they are that small, why should we be worried about them?
Who was worrying about them?Are they the current deposits in the covered banks?
What? No, they're the extent that the covered banks are into the ECB, and their eurozone holdings in general. The figures you quoted were off the wall.Any word on the replacement of the corporate deposits that fled the country in 2009/2010?
Don,t tell me that all of those deposits have come flooding back and we have not been told, by a Govt that only survives on propaganda.
If the banks owe the ECB 50 billion and our Govt can default on 64 billion of private bank debt, surely we have the upper hand and not the ECB?
But you know that is not the case, don't you?
Well, yes, it's not the case, but that seems to be down to you using made-up figures and stating things I haven't said - which does leave you with a pretty open goal on that score.
Currently, deposits in the covered banks stand at €219.4bn, of which the majority (€159.75bn) is now Irish. The rest is eurozone (€2.8bn) and rest of world (€56.86bn). There are bonds outstanding worth €36.5bn, with, again, the majority Irish (€21.6bn), the rest eurozone (€7.8bn) and rest of world (€7.1bn).
I'm not sure what you're claiming we could default on. Are you saying we could stiff the non-Irish depositors? If so, why is that going to bother the ECB?
cordially,
Scofflaw0 -
Disastrous? Hardly!SiegfriedsMum wrote: »Certainly the EU needs to change if it is to survive and/or progress, and the Euro fiasco has shown how it is unfit to lead anything with its disasterous introduction of the Euro and its disasterous inability to resolve the issues crippling the EU due to the flaws in the Euro.
First of all, it was a pretty nifty piece of political manouevring to get a single currency onto the agenda though Maastricht. Getting countries to actually sign up was a massive vote of confidence as well.
Even with the extent of the crisis, the Euro has fared pretty well to date, and public authorities are playing a sophisticated game.
I wouldn't be pessimistic about its prospects at all. Indeed I think the Euro is being forged under circumstances which will ensure it endures.0 -
Disastrous? Hardly!
First of all, it was a pretty nifty piece of political manouevring to get a single currency onto the agenda though Maastricht. Getting countries to actually sign up was a massive vote of confidence as well.
Even with the extent of the crisis, the Euro has fared pretty well to date, and public authorities are playing a sophisticated game.
I wouldn't be pessimistic about its prospects at all. Indeed I think the Euro is being forged under circumstances which will ensure it endures.
I hope you are right that the authorities are playing a sophisticated game, although the evidence for that is pretty thin.
The structural flaws in the Euro have not been addressed, and until they are resolved the problems will continue. Simply pretending the Euro has fared well to date ( tell that to the Greeks and the Spanish etc etc) seems to not face up to the evidence. Its obvious you are not a pessimist and are something of an optimist. I hope I am more of a realist.0 -
SiegfriedsMum wrote: »I hope you are right that the authorities are playing a sophisticated game, although the evidence for that is pretty thin.
The structural flaws in the Euro have not been addressed, and until they are resolved the problems will continue. Simply pretending the Euro has fared well to date ( tell that to the Greeks and the Spanish etc etc) seems to not face up to the evidence. Its obvious you are not a pessimist and are something of an optimist. I hope I am more of a realist.
What are the "structural flaws" in the euro that haven't been addressed? Is it the shielding from market discipline, or were you thinking of something else?
cordially,
Scofflaw0 -
Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline
Fatal Flaw #2: Profits Are Private, Losses Are Public
Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital
Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?0 -
SiegfriedsMum wrote: »Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline
Fatal Flaw #2: Profits Are Private, Losses Are Public
Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital
Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?
The former - I have my own fairly frequently-stated views on the euro's flaws, but I'm wary of the current wisdom that there must be something wrong with the euro because, well, there's "obviously something wrong".
Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.
#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.
#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.
It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.
What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.
cordially,
Scofflaw0 -
I think though we all need to be a bit more pragmatic about the EU.
Ireland's historically been a bit over-enthusiastic about it (especially our political classes) and the UK's been a bit hysterically Euro-sceptic at times.
We needs something in the middle where we're involved, but not at any cost and ask all the right questions and insist on democratic accountability.
FF, FG and Labour tend not to really see any downsides to some of what the EU does.
I would describe myself as pragmatically pro-european (with a small e). There's no doubt though that it needs reform in terms of making it less remote and more accountable (directly) to the electorate.
We seem to be moving towards a federation by function creep instead of by proper consent.
As over the top as the UK can be about Euroscepticism, at least it is making people think about what direction it's going and if that's really where and how we want to do things.0 -
why am i not suprised that no one on this thread has picked up on french minister michel sapins statement that france is totally backrupt, a poll in the le figaro showed that 80% of its readers agreed with him,all is not well in the EU and it is in need of a real change,0
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Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.
Sure, treat it as two issues if you prefer. I put them together because part of the flaws we have seen with the Euro was greatly expanded private credit which was encouraged and made vastly worse by toothless fiscal discipline.
#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.
It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.
To me, that's a major flaw. You may judge otherwise.#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.
It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.
It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.
Again, you seem to not consider that the flaws in the euro had any bearing on the problems, and not recognice it was the inability of member states to cool their economies, because the introduction of the Euro deprived individual countries of the ability to use interest rates to dampen their individual economies.
What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.
Unfortunately, when it comes to interest rates, there is no joint response because the interest rates which are right for Germany are not right for Greece, and vice versa. No amount of joint hands can square that circle, as we have seen, hence its a structural problem which seems to have no resolution.0 -
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I think though we all need to be a bit more pragmatic about the EU.
Ireland's historically been a bit over-enthusiastic about it (especially our political classes) and the UK's been a bit hysterically Euro-sceptic at times.
We needs something in the middle where we're involved, but not at any cost and ask all the right questions and insist on democratic accountability.
FF, FG and Labour tend not to really see any downsides to some of what the EU does.
Well, those comments are incorrect.
Ireland, for instance, bitterly opposed efforts to develop a "single European mortgage market" when that idea was mooted by the Commission a decade or so ago. Our existing mortgage system was hailed by our government as being better for us (although the "us" may not have been the tax-payer I suspect). That worked out well, didn't it?
Likewise, just mention the phrase "Common Consolidated Tax Base" and our political reaction is akin to that of a rabid dog (never mind that a "Base" is not the same as a "Rate" with VAT being a perfect example of the difference between the two).As over the top as the UK can be about Euroscepticism, at least it is making people think about what direction it's going and if that's really where and how we want to do things.
A debate founded on active misrepresentation of the EU is, by definition, not going to be an accurate one nor is it likely to draw correct conclusions.0 -
SiegfriedsMum wrote: »It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.
To me, that's a major flaw. You may judge otherwise.
Given, that the non-Euro EU member states pursued the same strategy, it is hard to see how the ECB is supposed to be blame for this. Is the Bank of England a front for the ECB or something?SiegfriedsMum wrote: »It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.
A great theory, if we discount:
1) the UK which has managed to have the fourth (or fifth) worst budget deficit in the EU despite having the magic "control our own interest rate" option as its disposal, and,
2) all the Eurozone member states which have managed to run smaller deficits than the UK despite the lack of the interest rate "magic option", and,
3) provided we forget about Iceland, Hungary, Romania and Latvia, all of whom with the "magic option" at their disposal, have had the IMF in over the last few years...0 -
SiegfriedsMum wrote: »Sure, treat it as two issues if you prefer. I put them together because part of the flaws we have seen with the Euro was greatly expanded private credit which was encouraged and made vastly worse by toothless fiscal discipline.
I don't think the two are related - fiscal discipline doesn't prevent private credit expansion, and I'm not sure how one might come to link those in that way? Ireland, for example, was extremely fiscally disciplined prior to the crash by all the usual indicators, but obviously had a huge expansion of private credit.SiegfriedsMum wrote: »It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.
To me, that's a major flaw. You may judge otherwise.
The ECB had a hand in that as its price for some support, certainly, but the vast majority of it was standard national operating procedure for bank rescues. As I said, the UK is in the same boat, and for the same reasons as us - nothing to do with the ECB. In our case, the ECB seems to have insisted on us honouring the last remaining bits of senior debt on our books come the bailout, but we'd already paid off 85%+ under our own steam (under our own guarantee), and, to be honest, the information we have to hand about the negotiations there suggests that it wasn't so much a case of the ECB making a reluctant Ireland take on the last €8bn or so in senior debt as making it clear that Ireland wouldn't get to hide behind the ECB to burn it.
So, yes, I judge differently, because bank rescues have worked out pretty much the same wherever they've been, ECB or no ECB, and in line with the historical behaviour of each country - neither we nor the UK have ever let banks fail, and indeed, neither country even had (or in our case has) a bank resolution mechanism. The main exceptions have been very small banks, which have been let go to the wall in a few cases, and Iceland, which couldn't save its banks even though it did want to.SiegfriedsMum wrote: »It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.
Er, no, the common interest rate has nothing to do with the problems in Greece. Greece didn't have a property bubble, nor a banking crash - it quite simply borrowed more than it should have done, and on false pretences. The euro-related failures that highlights are actually the failure of markets to treat euro members separately in risk terms (the "euro convergence"), which was a choice on the part of the markets, and the very weak insight into national accounts involved in euro entry.SiegfriedsMum wrote: »Again, you seem to not consider that the flaws in the euro had any bearing on the problems, and not recognice it was the inability of member states to cool their economies, because the introduction of the Euro deprived individual countries of the ability to use interest rates to dampen their individual economies.
Unfortunately, when it comes to interest rates, there is no joint response because the interest rates which are right for Germany are not right for Greece, and vice versa. No amount of joint hands can square that circle, as we have seen, hence its a structural problem which seems to have no resolution.
Sure - but I view things differently for quite a few reasons, which lead to me to one main point of difference.
First, there was a global property boom, not just a eurozone one (and not even a eurozone-wide one, even in those countries with low real interest rates), which suggests that the expansion of credit was a global phenomenon which probably would have affected eurozone countries even in the absence of the euro.
Second, as it turns out since the property crash, there were all kinds of things that the government (and Spain's government) could have done, and are now talking about doing. Spain, for example, has suggested lowering the loan to value ratios on mortgages during booms, automatically limiting the extension of credit - and our own central bank has suggested the same. These measures were not unavailable during the bubble, they just weren't even thought of.
Third, and building on the second, those tools that were in the hands of the Irish government were all used to stoke the bubble, not to cool it. Planning laws could have been tightened - they weren't, they were loosened, and government TDs mounted a media campaign against bodies like An Taisce who were seen as getting in the way of development. Tax breaks could have been directed away from property - they weren't, they were relentlessly directed into property, from FTB grants to mortgage relief to seaside development breaks. Policy and public statements all encouraged people to get on the property ladder, to get into property, with no apparent recognition that there might be problems down the line.
Fourth, following from third, there's no evidence that, had the government had control of interest rates, it would have used them to cool the bubble - the evidence points directly the other way.
Fifth, control over our own interest rates almost certainly wouldn't have prevented the bubble, because there are a variety of bubble drivers in addition to cheap credit. The most rational one is rising employment and income expectations, the most irrational one is that people only use a 2-3 year window for gauging asset price movement as well as income expectations. This can be seen in Iceland's case, where there was a property bubble despite quite high real interest rates.
Sixth, again, control over our own interest rates probably wouldn't have resulted in adequately high interest rates anyway, because interest rates are a very blunt tool which impact everybody, whether they're borrowing for a house or borrowing for business expansion.
Overall, then, I'd agree that the single interest rate produces a disparity in real interest rates, and that low real interest rates are a driver of credit expansion and, that, in turn, produces the risk of credit misallocation such as property bubbles. Where we differ is in viewing the eurozone member states as helpless to respond to that. What I see is that Ireland, like several other states, failed to respond properly to a perfectly well signposted outcome of the euro. Not only did Ireland fail to respond properly, it responded in perverse ways that made the problem worse, not only in respect of the boom, but in respect of the bust - as a vote-chasing exercise, the government progressively balanced the tax take on consumption taxes and in particular on property-related stamp duty.
The single interest rate is certainly a structural property of the euro - and an ineradicable one, too - and, seeing as the euro doesn't seem to have dissolved as expected, it looks like one we're stuck with. That means that national governments have to work out how to respond in such a way that the single interest rate doesn't have a negative impact - and suddenly they are finding they do have ways to do that. Not new ways, either, but tools that have been available all along, had anyone been looking for them. Importantly, though, nobody was.
That, in turn, implies very simply that they could have responded properly from 1999 onwards, but didn't - and that, in turn, implies that the problems you identify aren't the result of the single interest rate, but the result of inadequate national responses to the challenges it poses.
As I've said elsewhere, there's a strong danger that simplistic narratives about the crisis are clouding the important lessons to be learned. Thus the idea that the single interest rate is a problem in itself, and one which needs to be "solved" in itself, by some distant agreement somewhere we bear no responsibility for, then, is to me a very dangerous one, because it completely ignores the importance of government response to the single interest rate. The single interest rate is an integral part of the euro, the euro doesn't seem to be going away, and we, as citizens, therefore need to pay attention to whether our government is responding to it properly, rather than believing it's something we, and they, can do nothing about.
cordially,
Scofflaw0 -
I don't think the two are related - fiscal discipline doesn't prevent private credit expansion, and I'm not sure how one might come to link those in that way? Ireland, for example, was extremely fiscally disciplined prior to the crash by all the usual indicators, but obviously had a huge expansion of private credit.
I am somewhat daunted by the length of your response, but will do my best to reply.
In the example of Ireland, the fiscal policy of the banks was to borrow money cheaply abroad, and then lend it here, increasingly to worse and worse risks. Nothing in the fiscal policy, or fiscal practice, of either the Irish authorities, the ECB or the EU acted to prevent this, and in face we all remember the words of the former Taoiseach who effectively tried to silence any criticism of that lack of action.
To judge that Ireland was extremely fiscally disciplined prior to the crash seems unusual, although you don’t specifically say it’s in relation to policy or practice regarding bank lending.
Whatever happened, under the Euro private debt has become public debts. We are told this was necessary to save the Euro and save the banking system, but it is unheard of anywhere outside the Eurozone.
The ECB had a hand in that as its price for some support, certainly, but the vast majority of it was standard national operating procedure for bank rescues. As I said, the UK is in the same boat, and for the same reasons as us - nothing to do with the ECB. In our case, the ECB seems to have insisted on us honouring the last remaining bits of senior debt on our books come the bailout, but we'd already paid off 85%+ under our own steam (under our own guarantee), and, to be honest, the information we have to hand about the negotiations there suggests that it wasn't so much a case of the ECB making a reluctant Ireland take on the last €8bn or so in senior debt as making it clear that Ireland wouldn't get to hide behind the ECB to burn it.
So, yes, I judge differently, because bank rescues have worked out pretty much the same wherever they've been, ECB or no ECB, and in line with the historical behaviour of each country - neither we nor the UK have ever let banks fail, and indeed, neither country even had (or in our case has) a bank resolution mechanism. The main exceptions have been very small banks, which have been let go to the wall in a few cases, and Iceland, which couldn't save its banks even though it did want to.
In the USA, countless banks have been let fail in recent years with no suggestion that their debts should be transferred to the public purse. The USA banking system is in rude good health, and probably in better health than the European banking system. The difference is, we are told, we need to transfer private debt to the taxpayers to save the Euro and the banking system.
Er, no, the common interest rate has nothing to do with the problems in Greece. Greece didn't have a property bubble, nor a banking crash - it quite simply borrowed more than it should have done, and on false pretences. The euro-related failures that highlights are actually the failure of markets to treat euro members separately in risk terms (the "euro convergence"), which was a choice on the part of the markets, and the very weak insight into national accounts involved in euro entry.
Greece is not the only country in the Euro. If it’s your judgment that the brake of interest rates is not a useful tool to prevent, in the case of Ireland and Spain, runaway property bubbles, then that’s your view. However, it is a tool used successfully by governments across the world for many decades. Due to being members of the Euro, individual countries gave up the ability to control their own interest rates.
Hence it’s a structural flaw which has not yet been addressed.
Again you miss the point. What was important was not a rise in house and land prices, but the amount of the increase. In Ireland the increase was vastly higher than in most other countries, and that’s the point you seem to miss. Ireland as a country was powerless to stop it because (a) it couldn’t control its interest rates thanks to the Euro (b) it made the mistake of not regulating the banks lending criteria more strictly and (c) the government was getting fat on the taxes it all generated and was openly hostile to criticism.Sure - but I view things differently for quite a few reasons, which lead to me to one main point of difference.
First, there was a global property boom, not just a eurozone one (and not even a eurozone-wide one, even in those countries with low real interest rates), which suggests that the expansion of credit was a global phenomenon which probably would have affected eurozone countries even in the absence of the euro.
Second, as it turns out since the property crash, there were all kinds of things that the government (and Spain's government) could have done, and are now talking about doing. Spain, for example, has suggested lowering the loan to value ratios on mortgages during booms, automatically limiting the extension of credit - and our own central bank has suggested the same. These measures were not unavailable during the bubble, they just weren't even thought of.
Every time after a boom governments make the same suggestion. In an open market it’s probably not possible or even desirable for a government to dictate lending criteria to banks. Governmenst generally tend to make a mess of things, and in any case it’s possible to borrow from a bank which is offshore and avoid any government attempts to restrict borrowing at home. Banks tend to be quite clever about that sort of thing.
Besides, when the boom is past, the government always tend to become more lax again about this sort of suggestion, and off it all goes again.
Historically, interest rates were the best lever to use to dampen the economy, and if you knew you have to pay interest rates of 10 or 15%, then that’s a very good method of stopping you paying €1.5 million for a 3 bed house, when the interest bill alone every year will be €150 000 on the property.Third, and building on the second, those tools that were in the hands of the Irish government were all used to stoke the bubble, not to cool it. Planning laws could have been tightened - they weren't, they were loosened, and government TDs mounted a media campaign against bodies like An Taisce who were seen as getting in the way of development. Tax breaks could have been directed away from property - they weren't, they were relentlessly directed into property, from FTB grants to mortgage relief to seaside development breaks. Policy and public statements all encouraged people to get on the property ladder, to get into property, with no apparent recognition that there might be problems down the line.
That’s exactly my point, governments are great at talking the talk after booms, but not before or during them.Fourth, following from third, there's no evidence that, had the government had control of interest rates, it would have used them to cool the bubble - the evidence points directly the other way.
I’m afraid that’s where you are incorrect. There are decades of evidence of interest rates being used to dampen the economy in times when it’s judged necessary. It is extraordinary that you seem to believe that interest rates are of no use to a government when trying to prevent an overinflated economy. If its your position that, for example, Alan Greenspan, or Nigel Lawson never used interest rates in that way, then that’s your position. However they would differ with you.
I am actually astonised that someone of you otherwise apparent intelligence would apparently try to make such an argument, that interest rates have no place to play for a government to help dampen an overheating economy.Fifth, control over our own interest rates almost certainly wouldn't have prevented the bubble, because there are a variety of bubble drivers in addition to cheap credit. The most rational one is rising employment and income expectations, the most irrational one is that people only use a 2-3 year window for gauging asset price movement as well as income expectations. This can be seen in Iceland's case, where there was a property bubble despite quite high real interest rates.
I remember interest rates of 15% for mortgages in the 1970’s in Ireland. That had precisely the effect of preventing a bubble and taking the heat out of the property market. No one sane would suggest that it’s the only factor, but try paying 15% interest on a large mortgage and you’ll see the stupidity of what you are saying.Sixth, again, control over our own interest rates probably wouldn't have resulted in adequately high interest rates anyway, because interest rates are a very blunt tool which impact everybody, whether they're borrowing for a house or borrowing for business expansion.
Lack of any control over our interest rates definitely didn’t result in adequately high interest rates. And that’s the structural flaw in the Euro.
Whether or not the Irish government would have done as they did in the 1970’s and had interest rates at 15% is speculation, but it’s really beside the point. The Euro isn’t just the Irish government, and we are talking about eh structural flaws in the Euro, not the structural flaws in the Irish government.Overall, then, I'd agree that the single interest rate produces a disparity in real interest rates, and that low real interest rates are a driver of credit expansion and, that, in turn, produces the risk of credit misallocation such as property bubbles. Where we differ is in viewing the eurozone member states as helpless to respond to that.
The fact is all member states are helpless as they have no control over their interest rates which is a condition of joining the Euro and is a structural flaw in the Euro.As I've said elsewhere, there's a strong danger that simplistic narratives about the crisis are clouding the important lessons to be learned. Thus the idea that the single interest rate is a problem in itself, and one which needs to be "solved" in itself, by some distant agreement somewhere we bear no responsibility for, then, is to me a very dangerous one, because it completely ignores the importance of government response to the single interest rate. The single interest rate is an integral part of the euro, the euro doesn't seem to be going away, and we, as citizens, therefore need to pay attention to whether our government is responding to it properly, rather than believing it's something we, and they, can do nothing about.
It seems impossible to resolve an issue which is why it’s a structural flaw of the Euro. Your faith that we can just be ignored is really at the root of the problem, as we have seen this is the response of the EU also.
The issue will not disappear as the problem causing the issue remains.0 -
The former - I have my own fairly frequently-stated views on the euro's flaws, but I'm wary of the current wisdom that there must be something wrong with the euro because, well, there's "obviously something wrong".
Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.
#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.
#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.
It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.
What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.
cordially,
Scofflaw
At last something we agree on.
The euro is not the problem. The basis for it's foundation is a problem. The interest rate, by the way, is a problem.
But the biggest problem is the lack of infrastructure to deal with the problem.
The euro should not exist without the necessary planks to ensure it's fair and equal application.
The situation that exists at the moment is not fair and not equal and in my mind is therefore not legal under EU law.0 -
thechanger wrote: »And I'm not simply referring to just Daily Mail readers. I've noticed quite an anti Europe trend on more liberal papers like the Guardian recently.
I'm guessing the average man on the street couldn't explain the whole euro economic situation to a kid, so why do they want to leave the EU so badly?
Have you ever tried working with either/both ....the French or the Italians ?
No words can describe the experience.0 -
SiegfriedsMum wrote: »I am somewhat daunted by the length of your response, but will do my best to reply.
Sorry, it sometimes happens that way!SiegfriedsMum wrote: »In the example of Ireland, the fiscal policy of the banks was to borrow money cheaply abroad, and then lend it here, increasingly to worse and worse risks. Nothing in the fiscal policy, or fiscal practice, of either the Irish authorities, the ECB or the EU acted to prevent this, and in face we all remember the words of the former Taoiseach who effectively tried to silence any criticism of that lack of action.
To judge that Ireland was extremely fiscally disciplined prior to the crash seems unusual, although you don’t specifically say it’s in relation to policy or practice regarding bank lending.
Well, no, I'm saying - correctly - that "fiscal discipline" is a term that has nothing to do with lending practices. It's a term that applies to public finances, not banks.
So to say that the eurozone had "toothless fiscal discipline" by reference to the banks is meaningless, because there was no fiscal discipline in relation to the banks, nor any intention that there be. Bank regulation was a national function, something which is now being changed - the ECB, or rather the ESCB, exercised nothing more than a communication and advisory function in relation to banking across Europe. It did not exercise a regulatory function at all.
So the statement that Ireland exercised "good fiscal discipline" up to the crisis is entirely true - it's just that "fiscal discipline" doesn't mean what you thought it meant. It means that Irish governments ran budget surpluses and had a low debt:GDP ratio, that's all.SiegfriedsMum wrote: »Whatever happened, under the Euro private debt has become public debts. We are told this was necessary to save the Euro and save the banking system, but it is unheard of anywhere outside the Eurozone.
In the USA, countless banks have been let fail in recent years with no suggestion that their debts should be transferred to the public purse. The USA banking system is in rude good health, and probably in better health than the European banking system. The difference is, we are told, we need to transfer private debt to the taxpayers to save the Euro and the banking system.
Eh, people have said that, but mostly as a cop-out, although it's true to some extent. It should be obvious that the UK is not letting banks fail, despite being outside the eurozone, and equally clearly it's not doing that to save the euro. Neither did we save our banks to "save the euro", that's political eyewash - we did it to save our banks, something that was clearly stated at the time, but which has become conveniently blurred since in order to shift the blame when the "cheapest bank bailout in the world" turned out to be one of the most expensive.
As far as the US goes, they present an almost entirely different picture to the situation in Ireland. If you look through a list of their bank failures in recent years (Wiki have one), there's a very obvious pattern. The banks that actually go into receivership are in a tiny minority, not only numerically but in terms of their value. They're not letting big banks fail, they're letting tiddlers fail. The others are acquired by other banks, often with the government's boot up their backsides to do so - the UK has done the same. We had no banks left over that could buy the others, and virtually all our covered banks are massive in comparison with our economy compared to those allowed actually fail in the US.
Have a look at that Wiki list - there are 465 banks on that list, worth a total of $687bn. Of them, the number allowed to actually fail, rather than being bought by another bank, is 24. That is 5%. As to their value, the biggest allowed fail was worth a measly $4.1bn, while the sum total of those allowed fail is $14.6bn - which is 2% of the value of banks that got into trouble. It's not even a vaguely comparable situation - we simply don't have little banks like that (unfortunately), and we don't have the number of banks to allow failing banks to be bought by others either. All our banks went to hell in the very same handbasket.SiegfriedsMum wrote: »Greece is not the only country in the Euro. If it’s your judgment that the brake of interest rates is not a useful tool to prevent, in the case of Ireland and Spain, runaway property bubbles, then that’s your view. However, it is a tool used successfully by governments across the world for many decades. Due to being members of the Euro, individual countries gave up the ability to control their own interest rates.
Hence it’s a structural flaw which has not yet been addressed.
Again you miss the point. What was important was not a rise in house and land prices, but the amount of the increase. In Ireland the increase was vastly higher than in most other countries, and that’s the point you seem to miss. Ireland as a country was powerless to stop it because (a) it couldn’t control its interest rates thanks to the Euro (b) it made the mistake of not regulating the banks lending criteria more strictly and (c) the government was getting fat on the taxes it all generated and was openly hostile to criticism.
Every time after a boom governments make the same suggestion. In an open market it’s probably not possible or even desirable for a government to dictate lending criteria to banks. Governmenst generally tend to make a mess of things, and in any case it’s possible to borrow from a bank which is offshore and avoid any government attempts to restrict borrowing at home. Banks tend to be quite clever about that sort of thing.
Besides, when the boom is past, the government always tend to become more lax again about this sort of suggestion, and off it all goes again.
Historically, interest rates were the best lever to use to dampen the economy, and if you knew you have to pay interest rates of 10 or 15%, then that’s a very good method of stopping you paying €1.5 million for a 3 bed house, when the interest bill alone every year will be €150 000 on the property.
That’s exactly my point, governments are great at talking the talk after booms, but not before or during them.
I’m afraid that’s where you are incorrect. There are decades of evidence of interest rates being used to dampen the economy in times when it’s judged necessary. It is extraordinary that you seem to believe that interest rates are of no use to a government when trying to prevent an overinflated economy. If its your position that, for example, Alan Greenspan, or Nigel Lawson never used interest rates in that way, then that’s your position. However they would differ with you.
I am actually astonised that someone of you otherwise apparent intelligence would apparently try to make such an argument, that interest rates have no place to play for a government to help dampen an overheating economy.
I remember interest rates of 15% for mortgages in the 1970’s in Ireland. That had precisely the effect of preventing a bubble and taking the heat out of the property market. No one sane would suggest that it’s the only factor, but try paying 15% interest on a large mortgage and you’ll see the stupidity of what you are saying.
I'll deal with those together because they contain the same mistake - I haven't said that interest rates can't be used to help control things like property bubbles. I've said that the Irish governments of the Celtic Tiger period wouldn't have wanted to use them that way, which you have implicitly agreed with at quite some length. As you pointed out, governments don't want to do these things, the Irish government definitely didn't want to cool down the bubble, and was, as you say, openly hostile to the idea. I'm not sure why you then go on to make out as if the Irish government would somehow obviously have used interest rates to cool the bubble when you're happy to state it patently didn't want to cool the bubble!
I can't really see the point of your complaints that the government lacked a particular tool when you're entirely aware that it didn't use any of the other tools it had to hand - which was my point. It's as if you're saying of someone who didn't fasten something together "he didn't have a hammer", and when anyone points out that he had several other tools that can be used to fasten something together, and not only didn't try them but deliberately hid them away, simply repeating "he didn't have a hammer", as if he would have used the hammer.SiegfriedsMum wrote: »Lack of any control over our interest rates definitely didn’t result in adequately high interest rates. And that’s the structural flaw in the Euro.
Whether or not the Irish government would have done as they did in the 1970’s and had interest rates at 15% is speculation, but it’s really beside the point. The Euro isn’t just the Irish government, and we are talking about eh structural flaws in the Euro, not the structural flaws in the Irish government.
The fact is all member states are helpless as they have no control over their interest rates which is a condition of joining the Euro and is a structural flaw in the Euro.
It seems impossible to resolve an issue which is why it’s a structural flaw of the Euro. Your faith that we can just be ignored is really at the root of the problem, as we have seen this is the response of the EU also.
The issue will not disappear as the problem causing the issue remains.
This is repetitive, doesn't strengthen your claim in any way, and is in parts bizarre. Interest rates are not the only tool to control housing bubbles, something that has been belatedly stated by our own central bank amongst others. You focus on them as if they were, and then use your own inability or unwillingness to see other possible tools to make out as if they are. You dismiss the other tools as something the government (actually the central bank) wouldn't use in a bubble, while completely failing to apply the same logic to interest rates.
Finally, I have no idea where "I]my[/I faith that we can just be ignored" comes from, when your view of the problem is such that we can't do anything about it as Irish voters bar leaving the euro, while my point is that we certainly can, and that not only that, but that we will have to, because the euro doesn't seem to be going away, and no Irish government is going to leave it. That the euro has a single interest rate is not going to change, and it is well past time that national governments and central banks adapted to it properly, rather than with the kind of perverse policy responses the Irish government indulged in during the bubble.
And that, it seems to me, is something that's up to us as voters to make it clear we want.
cordially,
Scofflaw0 -
Sorry, it sometimes happens that way!
Really, its fine. It’s just I enjoy this as an occasional thing, whereas I am guessing from your posts here you have more time to devote to it.
Well, no, I'm saying - correctly - that "fiscal discipline" is a term that has nothing to do with lending practices. It's a term that applies to public finances, not banks.
Perhaps the it’s a matter of terminology.
What I said wasSiegfriedsMum wrote: »Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline
Fatal Flaw #2: Profits Are Private, Losses Are Public
Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital
Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?
What I meant about fiscal discipline was, partly, that individual governments have less control over their fiscal policy as a result of joining the Euro. One way of reducing the credit available is to use the fiscal tool of interest rates to make that credit more expensive.Bank regulation was a national function, something which is now being changed - the ECB, or rather the ESCB, exercised nothing more than a communication and advisory function in relation to banking across Europe. It did not exercise a regulatory function at all.
Of course, any government is able to regulate their own banks. The problem comes when its citizens decided to borrow outside the regulatory area covered by the individual government. I already talked about that in a previous post, and banks are very clever about that sort of thing as a way to get around regulations.So the statement that Ireland exercised "good fiscal discipline" up to the crisis is entirely true - it's just that "fiscal discipline" doesn't mean what you thought it meant. It means that Irish governments ran budget surpluses and had a low debt:GDP ratio, that's all.
There are many forms of truth, and yours is not the only one. Nor is mine.
Whether or not one judges the irish government exercised good fiscal discipline or not misses the point that the irish government was not able to use the necessary tool of increasing interest rates due to its membership of the Euro.
You seem to have some sort of mental block about this point, and the point is simple as that inability to use interest rates as a tool is one of the structural issues for the Euro.
Eh, people have said that, but mostly as a cop-out, although it's true to some extent. It should be obvious that the UK is not letting banks fail, despite being outside the eurozone, and equally clearly it's not doing that to save the euro. Neither did we save our banks to "save the euro", that's political eyewash - we did it to save our banks, something that was clearly stated at the time, but which has become conveniently blurred since in order to shift the blame when the "cheapest bank bailout in the world" turned out to be one of the most expensive.
Isn’t it curious how the USA have let so many banks fail and their banking system seems ok.
Our memory are clearly different as I remember all the talk was about saving the Euro. In any case, it’s not really relevant as the issue was the structural flaws in the Euro which led to the panic about the banks, particularly that the French & German banks were very exposed to the more than bankrupted irish banks.
The EU’s version of capitalism differes from the USA’s version in that the EU transferred the lossess of private banks on to the taxpayer, while the USA lets banks fail and lets their lossess be decided by the liquidator.Have a look at that Wiki list - there are 465 banks on that list, worth a total of $687bn. Of them, the number allowed to actually fail, rather than being bought by another bank, is 24. That is 5%. As to their value, the biggest allowed fail was worth a measly $4.1bn, while the sum total of those allowed fail is $14.6bn - which is 2% of the value of banks that got into trouble. It's not even a vaguely comparable situation - we simply don't have little banks like that (unfortunately), and we don't have the number of banks to allow failing banks to be bought by others either. All our banks went to hell in the very same handbasket.
I think it’s a matter of policy, you think it’s a matter of size.
Not all “our” banks were implicated, and again even if that were true (and its not) it’s not a reason to pass on debts to taxpayers.I'll deal with those together because they contain the same mistake - I haven't said that interest rates can't be used to help control things like property bubbles. I've said that the Irish governments of the Celtic Tiger period wouldn't have wanted to use them that way, which you have implicitly agreed with at quite some length. As you pointed out, governments don't want to do these things, the Irish government definitely didn't want to cool down the bubble, and was, as you say, openly hostile to the idea. I'm not sure why you then go on to make out as if the Irish government would somehow obviously have used interest rates to cool the bubble when you're happy to state it patently didn't want to cool the bubble!
I am afraid I never agree that the Irish government might or might not have used interest rates. The structural flaw is not about what the irish government might or might not have done. The structural flaw is about the fact that membership of the Euro denies every member the ability to use interest rates as one important tool in its fiscal armoury.
You seem to have, as I havbe said, a mental block about this and seem to keep reverting to speculating as to what one government might or might not have done if it had the option available (which it didn’t in any case).I can't really see the point of your complaints that the government lacked a particular tool when you're entirely aware that it didn't use any of the other tools it had to hand - which was my point.
That much is obvious. I have made no complaint, as you suggest, and have no interest in speculating about what the irish government might or might not have done.
My point was about a structural flaw in the Euro which applies to all governments.
This is repetitive, doesn't strengthen your claim in any way, and is in parts bizarre. Interest rates are not the only tool to control housing bubbles, something that has been belatedly stated by our own central bank amongst others. You focus on them as if they were, and then use your own inability or unwillingness to see other possible tools to make out as if they are. You dismiss the other tools as something the government (actually the central bank) wouldn't use in a bubble, while completely failing to apply the same logic to interest rates.
I don’t need to strengthen what you call is my claim, and no one has suggested that interest rates ar the only tool to control housing bubbles. Again the views of one central bank are of little importance.
The flaws I pointed out in the Euro have nothing to do with other fiscal tools available to governments. You asked for examples of structural flaws in the Euro and I gave you three.
I don’t “dismiss” other fiscal tools available to governments as they are not relevant to the structural flaws in the Euro, which is what I am talking about.
You seem to keep wanting to talk about the irish government, other fiscal tools available to them, and speculate what this one government might or might not have done had it the fiscal tool of interest rates at its disposal. To me that’s not relevant, and is of little interest, in a conversation about the structural flaws in the Euro.Finally, I have no idea where "I]my[/I faith that we can just be ignored" comes from, when your view of the problem is such that we can't do anything about it as Irish voters bar leaving the euro, while my point is that we certainly can, and that not only that, but that we will have to, because the euro doesn't seem to be going away, and no Irish government is going to leave it. That the euro has a single interest rate is not going to change, and it is well past time that national governments and central banks adapted to it properly, rather than with the kind of perverse policy responses the Irish government indulged in during the bubble.
And that, it seems to me, is something that's up to us as voters to make it clear we want.
Your faith in the Euro comes from me – I said that in my last post and,
Your contention is the Euro will succeed come what may. You may be right, or not, but simply stating that as an article of faith doesn’t make it any more, or less, likely to happen.
While I admire your certainty, I am concerned about your inability to understand that the Euro has flaws which are structural, and which may if not resolved (however that might happen) bring long term problems for the members of the Euro and for the EU.0 -
SiegfriedsMum wrote: »Really, its fine. It’s just I enjoy this as an occasional thing, whereas I am guessing from your posts here you have more time to devote to it.
Self-employment in the internet industry leaves one a lot of time in front of a computer, and discussion with human beings makes a nice change from coding. I shouldn't really do the long posts, though.SiegfriedsMum wrote: »Perhaps the it’s a matter of terminology.
What I said was
What I meant about fiscal discipline was, partly, that individual governments have less control over their fiscal policy as a result of joining the Euro. One way of reducing the credit available is to use the fiscal tool of interest rates to make that credit more expensive.
Fair enough - in that case, yes, it's a question of terminology, because "fiscal discipline" has a fairly standard meaning in the crisis of sticking to the Stability & Growth Pact limits on debt and deficit.SiegfriedsMum wrote: »Of course, any government is able to regulate their own banks. The problem comes when its citizens decided to borrow outside the regulatory area covered by the individual government. I already talked about that in a previous post, and banks are very clever about that sort of thing as a way to get around regulations.
I'm not aware, though, that Irish people did borrow much outside the Irish regulatory area - that's actually very rare. Nor can I see why they would have wanted to, really, given that Irish bank regulation and lending standards were amongst the weakest available anyway.SiegfriedsMum wrote: »There are many forms of truth, and yours is not the only one. Nor is mine.
Well, see earlier point. "Fiscal discipline" just has a very specific common meaning in the crisis.SiegfriedsMum wrote: »Whether or not one judges the irish government exercised good fiscal discipline or not misses the point that the irish government was not able to use the necessary tool of increasing interest rates due to its membership of the Euro.
You seem to have some sort of mental block about this point, and the point is simple as that inability to use interest rates as a tool is one of the structural issues for the Euro.
Er, no, again. I'll state it again - I agree that the Irish government were not able to use interest rates as a tool to combat a property bubble. As already said, my point is that they already knew they couldn't, that they did have other tools at their disposal, that they didn't use those tools, and that they will have to use those tools in future.
I don't think it's me who has the mental block - you're not even looking at what I'm saying!SiegfriedsMum wrote: »Isn’t it curious how the USA have let so many banks fail and their banking system seems ok.
Er, that's the point - they've let virtually no banks actually fail, and nothing bigger than a tiny one. Do you actually read what I post?SiegfriedsMum wrote: »Our memory are clearly different as I remember all the talk was about saving the Euro. In any case, it’s not really relevant as the issue was the structural flaws in the Euro which led to the panic about the banks, particularly that the French & German banks were very exposed to the more than bankrupted irish banks.
Your memory is indeed different, and not just on the question of "saving the euro". Indeed, in these matters I find it unwise to rely on memory, which is a great telescoper and back-caster of events and explanations. I invite you to rewind to 2008 - there was no talk of "saving the euro" when we saved out banks - on the contrary:Yet Tuesday’s guarantee offered by the Irish government to its six national banks to safeguard €400bn ($563bn) of deposits and bank debt is causing ructions in Brussels, where there is concern the Irish move shatters any hope of pan-European regulatory response to the turmoil.
Brian Lenihan, finance minister, said he had notified the European Commission of the plan but “a member state is responsible for the stability of its own banking system and I am responsible for the stability of these particular banks.
“In the absence of a Europe-wide system, there is an onus on the Irish government as the sovereign body with responsibility in this state to take action.”
On Tuesday, he conceded that Ireland might be accused of reverting to economic nationalism and ignoring pan-European solutions to the market turmoil.
He said: “I accept it is a tendency towards economic nationalism but we’re on our own here in Ireland and the government had to act in the best interests of the Irish people”.
http://www.ft.com/intl/cms/s/0/b514c10a-8f2e-11dd-946c-0000779fd18c.html#axzz2FPPwqgoN
The whole "saving the euro" thing was added to the mix in 2010, to help spare FF's blushes over taking a bailout. It has now been mixed up with saving the banks, but it's never been the case - we took the bailout to save our own skins, just as we saved the banks to save the banks.SiegfriedsMum wrote: »The EU’s version of capitalism differes from the USA’s version in that the EU transferred the lossess of private banks on to the taxpayer, while the USA lets banks fail and lets their lossess be decided by the liquidator.
Er, no, that's complete twaddle. Please read the list of "failed banks" in the US I provided. Only a tiny minority, and the smallest banks, were allowed fail and had their losses decided by the liquidator.SiegfriedsMum wrote: »I think it’s a matter of policy, you think it’s a matter of size.
Not all “our” banks were implicated, and again even if that were true (and its not) it’s not a reason to pass on debts to taxpayers.
I'm not sure what that's even supposed to mean, or at what point it touches reality. Which of our banks didn't fail?
You've already simply ignored the fact that the US only let a tiny number of tiny banks fail, mind you, so I guess you could also pretend that we had some large bank that didn't fail, and which could have bailed out the others. I have no idea what bank you think you're talking about, though - the covered banks constituted 78% of the domestic banking sector, and it's rather hard to use a smaller bank to bail out a bigger one.SiegfriedsMum wrote: »I am afraid I never agree that the Irish government might or might not have used interest rates. The structural flaw is not about what the irish government might or might not have done. The structural flaw is about the fact that membership of the Euro denies every member the ability to use interest rates as one important tool in its fiscal armoury.
You seem to have, as I havbe said, a mental block about this and seem to keep reverting to speculating as to what one government might or might not have done if it had the option available (which it didn’t in any case).
Sigh. Yes, because the government already knew it couldn't change interest rates.SiegfriedsMum wrote: »That much is obvious. I have made no complaint, as you suggest, and have no interest in speculating about what the irish government might or might not have done.
My point was about a structural flaw in the Euro which applies to all governments.
I don’t need to strengthen what you call is my claim, and no one has suggested that interest rates ar the only tool to control housing bubbles. Again the views of one central bank are of little importance.
The flaws I pointed out in the Euro have nothing to do with other fiscal tools available to governments. You asked for examples of structural flaws in the Euro and I gave you three.
I don’t “dismiss” other fiscal tools available to governments as they are not relevant to the structural flaws in the Euro, which is what I am talking about.
You seem to keep wanting to talk about the irish government, other fiscal tools available to them, and speculate what this one government might or might not have done had it the fiscal tool of interest rates at its disposal. To me that’s not relevant, and is of little interest, in a conversation about the structural flaws in the Euro.
Your faith in the Euro comes from me – I said that in my last post and,
Your contention is the Euro will succeed come what may. You may be right, or not, but simply stating that as an article of faith doesn’t make it any more, or less, likely to happen.
While I admire your certainty, I am concerned about your inability to understand that the Euro has flaws which are structural, and which may if not resolved (however that might happen) bring long term problems for the members of the Euro and for the EU.
I'm concerned about your ability to actually read what I post - I'm sorry to be rude, but you clearly haven't - but I'll try again.
The euro has not gone away. That's an observation. We have not left the euro. That's another observation. The eurozone governments are doing their best to ensure that it doesn't go away. Again, an observation. The Irish government is doing its best to ensure we don't leave it. Again, an observation.
As such, as far as we can see at this point in time, the euro will continue, and Ireland will continue to be a member of it. There will, therefore, continue to be a single interest rate, over which Ireland does not exercise individual control. If we leave the euro, or the euro dissolves, that changes, but neither of those is currently planned, and if they come about, the question I am considering is redundant.
But if we stay in the euro, we will continue not to have individual control of interest rates. We both agree that individual control of interest rates is an important policy tool, and the Irish government will, if it continues in the euro, continue not to have it.
That means that the Irish government - and other eurozone governments - will have to find substitute tools for controlling economic acceleration and ensuring "fiscal discipline" (your meaning). Or, rather, their central banks will, because governments have not had control of interest rates for a while.
Our central bank, like other central banks, has begun the process of applying creative thought to this problem - something they should have done over a decade ago. They see options there that will allow them to deal with the problems we had, and in a far more targeted way than using interest rates, which affect everyone across the economy, not just the sector you're intending to hit. When interest rates are shoved up to cool the housing market, they make it harder for SMEs to operate, which is not what is wanted. If, on the other hand, the central bank enforces lower loan-to-value limits, or loan-to-income limits, or more prudential lending criteria, it targets only the housing market. That is a better outcome.
You, meanwhile, bluntly, are absolutely fixated on the fact that they don't have control of interest rates, and you dismiss all the other tools that are being thought of as alternatives to interest rate control, not because you know them not to work (you don't), but simply because they're not interest rates.
This is circular thinking. Fortunately, you're not in charge of the central bank, which allows me some measure of faith that further alternative tools will be found, and that they, and the others already identified, will be used.
The single interest rate is undeniably a structural feature of the euro, perhaps its most obvious and unavoidable one. You see it as a problem, and will continue to see it as a problem, because you are unwilling even to see there might be alternatives to its use - I don't, because I don't have that circle stuck in my head.
cordially,
albeit bluntly and perhaps rudely in parts,
Scofflaw0 -
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Fair enough - in that case, yes, it's a question of terminology, because "fiscal discipline" has a fairly standard meaning in the crisis of sticking to the Stability & Growth Pact limits on debt and deficit.
I think this is the difference, which seems to be we started talking about structural issues with the Euro, and that’s what I am still talking about.
You seem to want to keep taking the conversation away from that to the particular circumstances and actions or inactions of the irish Government, or to speculate about whether the Irish government might or might not have used the tool of higher interest rates if they has that particular tool available to them, which they didn’t.I'm not aware, though, that Irish people did borrow much outside the Irish regulatory area - that's actually very rare. Nor can I see why they would have wanted to, really, given that Irish bank regulation and lending standards were amongst the weakest available anyway.
I never claimed they did. Again, you seem to prefer to talk about Ireland rather than about the structural issues with the Euro.
You suggested that the Irish government did not, and does not, need interest rates as a tool to help maintain stability in the irish economy, because it would be able to regulate the banks to stop them lending.
I pointed out that, if that happened, the banks are very clever at getting around such attempts by governments.
Er, no, again. I'll state it again - I agree that the Irish government were not able to use interest rates as a tool to combat a property bubble. As already said, my point is that they already knew they couldn't, that they did have other tools at their disposal, that they didn't use those tools, and that they will have to use those tools in future.
No matter how many times you state it, it’s of little interest to me what the irish government did or didn’t do.
I am talking about the structural issues with the Euro, not about the failures or successes of the irish government.
Your memory is indeed different, and not just on the question of "saving the euro". Indeed, in these matters I find it unwise to rely on memory, which is a great telescoper and back-caster of events and explanations. I invite you to rewind to 2008 - there was no talk of "saving the euro" when we saved out banks - on the contrary:
http://www.ft.com/intl/cms/s/0/b514c10a-8f2e-11dd-946c-0000779fd18c.html#axzz2FPPwqgoN
The whole "saving the euro" thing was added to the mix in 2010, to help spare FF's blushes over taking a bailout. It has now been mixed up with saving the banks, but it's never been the case - we took the bailout to save our own skins, just as we saved the banks to save the banks.
I’m really not sure what the point is of one article talking about Brian Lenihan to try to show that the Euro is not under threat dues to its inherent faults. Here is one from the Economist which is rather more recent which discusses the problems facing the Euro. You’ll probably disagree with it, but it should demonstrate that not everyone has your faith in the Euro, and there is a considerable body of opinion which thinks its structural flaws are irresolvable, and will hasten it end.
http://www.economist.com/node/21562206…His promise in July to “do whatever it takes” to protect the euro from speculation was enough to persuade traders to pack their bags and head for the Riviera. Yet the euro zone now looks woefully behind in its mission to save the single currency. That is partly because a rescue is genuinely complicated. But it is also because too many people think that time is on their side…
I'm not sure what that's even supposed to mean, or at what point it touches reality. Which of our banks didn't fail?
Rabobank.
You’ll probably now redefine “our banks” to only those with the name “Ireland” or “Irish” in their name J
You've already simply ignored the fact that the US only let a tiny number of tiny banks fail, mind you, so I guess you could also pretend that we had some large bank that didn't fail, and which could have bailed out the others. I have no idea what bank you think you're talking about, though - the covered banks constituted 78% of the domestic banking sector, and it's rather hard to use a smaller bank to bail out a bigger one.
I said it was a principle but you are, of course, correct that, for example, bank of America were given emergency funding by the USA. You’ll note the USA didn’t take Bank of America’s debts and tell the people of Ohio, or Nebraska that they had to take those debts on and repay them. Bank of America has to repay the loans, which it is doing.I'm concerned about your ability to actually read what I post - I'm sorry to be rude, but you clearly haven't - but I'll try again.
The euro has not gone away. That's an observation. We have not left the euro. That's another observation. The eurozone governments are doing their best to ensure that it doesn't go away. Again, an observation. The Irish government is doing its best to ensure we don't leave it. Again, an observation.
As such, as far as we can see at this point in time, the euro will continue, and Ireland will continue to be a member of it. There will, therefore, continue to be a single interest rate, over which Ireland does not exercise individual control. If we leave the euro, or the euro dissolves, that changes, but neither of those is currently planned, and if they come about, the question I am considering is redundant.
That’s where we differ. You have faith that the Euro will continue, whereas I can see there are structural flaws in the Euro which mean there will be trouble ahead.But if we stay in the euro, we will continue not to have individual control of interest rates. We both agree that individual control of interest rates is an important policy tool, and the Irish government will, if it continues in the euro, continue not to have it.
That means that the Irish government - and other eurozone governments - will have to find substitute tools for controlling economic acceleration and ensuring "fiscal discipline" (your meaning). Or, rather, their central banks will, because governments have not had control of interest rates for a while.
Our central bank, like other central banks, has begun the process of applying creative thought to this problem - something they should have done over a decade ago. They see options there that will allow them to deal with the problems we had, and in a far more targeted way than using interest rates, which affect everyone across the economy, not just the sector you're intending to hit. When interest rates are shoved up to cool the housing market, they make it harder for SMEs to operate, which is not what is wanted. If, on the other hand, the central bank enforces lower loan-to-value limits, or loan-to-income limits, or more prudential lending criteria, it targets only the housing market. That is a better outcome.
Governments around the world have been dealing with financial problems for hundreds of years, and to suggest that they don’t know at this stage how to pull the various levers, or that there are new levers which have never before been discovered and which we are just waiting for various central banks to find, seems far fetched. To suggest that it’s only now that central banks & governments around the world are starting to apply what you call “creative thought” to the problems of financial stabilisation is ludicrous, as they have been doing that for hundreds of years, and have not just started to do it now.
I wish you well with your thoughts that the government can control how much banks lend to individuals, to business men and to businesses and to others. I’ll bet you it wont work and will also bet you the banks will find ways around it, and in any case governments are pretty rotten at trying to run things as we see every day around the world.You, meanwhile, bluntly, are absolutely fixated on the fact that they don't have control of interest rates, and you dismiss all the other tools that are being thought of as alternatives to interest rate control, not because you know them not to work (you don't), but simply because they're not interest rates.
It is a fact that a structural flaw of the Euro is that individual governments are denied the ability to control interest rates for their individual countries.
The right rate for Berlin is not the right rate for Madrid or Athens.This is circular thinking. Fortunately, you're not in charge of the central bank, which allows me some measure of faith that further alternative tools will be found, and that they, and the others already identified, will be used.
The single interest rate is undeniably a structural feature of the euro, perhaps its most obvious and unavoidable one. You see it as a problem, and will continue to see it as a problem, because you are unwilling even to see there might be alternatives to its use - I don't, because I don't have that circle stuck in my head.
Again you have “faith” that after hundreds of years of governments, economists, central banks and other around the world examining the issue, that sometime soon someone is going to find some new and exciting alternative tools which have not yet been thought of.
Until one of those people in which you have “faith” finds the new tools which you are holding out for, this structural flaw in the Euro remains.
I am impressed by your belief and faith that some new tools will be found, but after so many hundreds of years looking, what leads you to think they might be found in time to save the Euro?0 -
GIPS countries are obviously experiencing difficulties. But the Euro as an entity is proving to be remarkably resilient.SiegfriedsMum wrote: »I hope you are right that the authorities are playing a sophisticated game, although the evidence for that is pretty thin.
The structural flaws in the Euro have not been addressed, and until they are resolved the problems will continue. Simply pretending the Euro has fared well to date ( tell that to the Greeks and the Spanish etc etc) seems to not face up to the evidence. Its obvious you are not a pessimist and are something of an optimist. I hope I am more of a realist.
Having seen the Irish economic cycle go round in circles over the years, with our seeming inability to learn being the only constant domestically, I'm probably closer to being a realist.
The political strength behind the Euro is a reality that is slowly dawning on more and more and more people. I'm optimistic that there will be a medium term positive outcome for the single currency.
If I were to be pessimistic about any particular economic model in the West, it would be for the short-term, unsustainable Anglo-Saxon approach. Once the Euro has established itself on the world economic stage, I' afraid the dollar and, particularly, sterling are at risk of a slow decline.0 -
I'm not really stepping into the wider discussion, just picking at this bit: Economics as a field is in a pretty bad state, and with a lot of the deregulatory policies/ideology that have been (and worryingly still are) pushed, this has removed a lot of the policies needed to control such bubbles from the 'rulebook' as such.SiegfriedsMum wrote: »Governments around the world have been dealing with financial problems for hundreds of years, and to suggest that they don’t know at this stage how to pull the various levers, or that there are new levers which have never before been discovered and which we are just waiting for various central banks to find, seems far fetched. To suggest that it’s only now that central banks & governments around the world are starting to apply what you call “creative thought” to the problems of financial stabilisation is ludicrous, as they have been doing that for hundreds of years, and have not just started to do it now.
I wish you well with your thoughts that the government can control how much banks lend to individuals, to business men and to businesses and to others. I’ll bet you it wont work and will also bet you the banks will find ways around it, and in any case governments are pretty rotten at trying to run things as we see every day around the world.
That said, you're right that most of the policies needed are well known, they just have to actually be relearned and applied; controlling how much banks lend to people/business is just a matter of proper regulation, and enforcing that regulation (with very stiff fines for breaching the regulations, whereas now we only have 'cost of doing business' fines, and only then rarely).
There's not really any way around properly enforced regulations, but they need to actually be enforced; these give all the benefits of tightly controlling private debt and bubbles, without the collateral damage of high interest rates.0 -
KyussBishop wrote: »I'm not really stepping into the wider discussion, just picking at this bit: Economics as a field is in a pretty bad state, and with a lot of the deregulatory policies/ideology that have been (and worryingly still are) pushed, this has removed a lot of the policies needed to control such bubbles from the 'rulebook' as such.
That said, you're right that most of the policies needed are well known, they just have to actually be relearned and applied; controlling how much banks lend to people/business is just a matter of proper regulation, and enforcing that regulation (with very stiff fines for breaching the regulations, whereas now we only have 'cost of doing business' fines, and only then rarely).
There's not really any way around properly enforced regulations, but they need to actually be enforced; these give all the benefits of tightly controlling private debt and bubbles, without the collateral damage of high interest rates.
Hers is a question; had Ireland had the option of putting up interest rates in the period 2004-2008, is it your view that would have caused collateral damage to the economy which would make irelands present predicament worse?
The point of an interest rate policy is to prevent collateral damage, and has been used with varying degrees of success over the years and decades.
The point here is that the very structure of the Euro prevents any government from having an interest rate policy, which is why it is a structural flaw in the Euro which has no obvious solution.0 -
SiegfriedsMum wrote: »I think this is the difference, which seems to be we started talking about structural issues with the Euro, and that’s what I am still talking about.
You seem to want to keep taking the conversation away from that to the particular circumstances and actions or inactions of the irish Government, or to speculate about whether the Irish government might or might not have used the tool of higher interest rates if they has that particular tool available to them, which they didn’t.
I never claimed they did. Again, you seem to prefer to talk about Ireland rather than about the structural issues with the Euro.
You suggested that the Irish government did not, and does not, need interest rates as a tool to help maintain stability in the irish economy, because it would be able to regulate the banks to stop them lending.
I pointed out that, if that happened, the banks are very clever at getting around such attempts by governments.
No matter how many times you state it, it’s of little interest to me what the irish government did or didn’t do.
I am talking about the structural issues with the Euro, not about the failures or successes of the irish government.
I’m really not sure what the point is of one article talking about Brian Lenihan to try to show that the Euro is not under threat dues to its inherent faults. Here is one from the Economist which is rather more recent which discusses the problems facing the Euro. You’ll probably disagree with it, but it should demonstrate that not everyone has your faith in the Euro, and there is a considerable body of opinion which thinks its structural flaws are irresolvable, and will hasten it end.
http://www.economist.com/node/21562206
Rabobank.
You’ll probably now redefine “our banks” to only those with the name “Ireland” or “Irish” in their name J
I said it was a principle but you are, of course, correct that, for example, bank of America were given emergency funding by the USA. You’ll note the USA didn’t take Bank of America’s debts and tell the people of Ohio, or Nebraska that they had to take those debts on and repay them. Bank of America has to repay the loans, which it is doing.
That’s where we differ. You have faith that the Euro will continue, whereas I can see there are structural flaws in the Euro which mean there will be trouble ahead.
Governments around the world have been dealing with financial problems for hundreds of years, and to suggest that they don’t know at this stage how to pull the various levers, or that there are new levers which have never before been discovered and which we are just waiting for various central banks to find, seems far fetched. To suggest that it’s only now that central banks & governments around the world are starting to apply what you call “creative thought” to the problems of financial stabilisation is ludicrous, as they have been doing that for hundreds of years, and have not just started to do it now.
I wish you well with your thoughts that the government can control how much banks lend to individuals, to business men and to businesses and to others. I’ll bet you it wont work and will also bet you the banks will find ways around it, and in any case governments are pretty rotten at trying to run things as we see every day around the world.
It is a fact that a structural flaw of the Euro is that individual governments are denied the ability to control interest rates for their individual countries.
The right rate for Berlin is not the right rate for Madrid or Athens.
Again you have “faith” that after hundreds of years of governments, economists, central banks and other around the world examining the issue, that sometime soon someone is going to find some new and exciting alternative tools which have not yet been thought of.
Until one of those people in which you have “faith” finds the new tools which you are holding out for, this structural flaw in the Euro remains.
I am impressed by your belief and faith that some new tools will be found, but after so many hundreds of years looking, what leads you to think they might be found in time to save the Euro?
To be honest, I think we can mostly boil this down, rather than continuing with long posts, because the discussion definitely has a focal point.
You continue to repeat that the single interest rate is a "structural flaw", and think I'm trying to change the subject when I talk about the actions and policies of individual states. I'm not changing the subject, I'm addressing your point - you see the single interest rate as a "structural flaw" because you believe there are no alternatives to individual national interest rates as a method to control the economic temperature of a country.
I am asserting, on the contrary, that there are such tools. Hundreds of years have not been spent looking for them, by any stretch - on the contrary, as far as I can see, nobody bothered looking for them at all because they had interest rates to hand as a tool (for about 150 years, not "hundreds of years"). That they exist, however, is not a matter of faith or speculation, but of statements by central banks saying they exist, and should in future be used. They may not work perfectly, but then neither do interest rates (the UK manages to have had regular property bubbles despite their use), and a prejudice in favour of one rather than the other is more likely inertia than a rational response.
Given that alternative tools are available for controlling what was previously controlled by interest rates, the euro is no longer a "structural flaw" but a "structural feature".
Since your belief that the euro is going to founder is based on your view that the single interest rate is an irremediable structural flaw, I won't address that separately, since if you're wrong in your assumptions - and I think you are - then your conclusion doesn't follow.
There's a couple of specific points I'll address separately.
cordially,
Scofflaw0 -
Having seen the Irish economic cycle go round in circles over the years, with our seeming inability to learn being the only constant domestically, I'm probably closer to being a realist.
By definition, am economic cycle is something which goes round and round, and thats not unique to ireland. Every country has an economic cycle. Every economy has a bit of an inability to learn insofar as it forgets the lessons learned in earlier times.
If I were to be pessimistic about any particular economic model in the West, it would be for the short-term, unsustainable Anglo-Saxon approach. Once the Euro has established itself on the world economic stage, I' afraid the dollar and, particularly, sterling are at risk of a slow decline.
Its an ususual opinion that the USA, which is on target to become a net oil and gas exporter, and who is creating more jobs at the moment than almost any other economy, employing more scientists than anywhere else in research, leading the world in IT and Medicine, and you judge the dollar will decline in relation to the Euro, which has huge unemployment and negative growth?
If I were a betting man, I'd offer you a wager that you will be proved wrong.
If you read many economists, you'll see many think the Euro is heading for the rocks. Of course, we all hope they are wrong, but hopes are really not enough.0 -
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SiegfriedsMum wrote:I’m really not sure what the point is of one article talking about Brian Lenihan to try to show that the Euro is not under threat dues to its inherent faults. Here is one from the Economist which is rather more recent which discusses the problems facing the Euro. You’ll probably disagree with it, but it should demonstrate that not everyone has your faith in the Euro, and there is a considerable body of opinion which thinks its structural flaws are irresolvable, and will hasten it end.
Actually, I quoted the article in question in response to your claim that saving the Irish banks was about "saving the euro" - the quotes from Lenihan at the time make it clear it wasn't. You don't actually address that point, but move the goalposts somewhere else.SiegfriedsMum wrote:
Rabobank.Scofflaw wrote:I have no idea what bank you think you're talking about, though - the covered banks constituted 78% of the domestic banking sector, and it's rather hard to use a smaller bank to bail out a bigger one.
You’ll probably now redefine “our banks” to only those with the name “Ireland” or “Irish” in their name J
No, I'm entirely aware of Rabobank, but it's far too small to have bought out Anglo or AIB or BOI, let alone all of them - the same goes for Danske, or KBC. Rabobank has a balance sheet of about €20bn in Ireland - it would have had difficulty swallowing even one of the small bailed out institutions. And that assumes something which is related to your point about "being Irish" - I doubt the government would have preferred to see even one of the smaller institutions be bought out by a "foreign" bank - again, other countries have ensured "their" failing banks were bought out by "their" non-failing banks. Weird, but I assume somewhere it makes sense.
cordially,
Scofflaw0 -
I didn't say interest rate adjustments aren't useful (indeed, the removal of their use, without the addition of adequate regulation to replace them, I may view as a damaging policy the EU is collectively responsible for), just that there are other policies for clamping down on economic bubbles, which allow targeting of specific areas of the economy, whereas the interest rate targets many areas at once (including areas you don't want to put a damper on, such as business loans).SiegfriedsMum wrote: »Hers is a question; had Ireland had the option of putting up interest rates in the period 2004-2008, is it your view that would have caused collateral damage to the economy which would make irelands present predicament worse?
The point of an interest rate policy is to prevent collateral damage, and has been used with varying degrees of success over the years and decades.
The point here is that the very structure of the Euro prevents any government from having an interest rate policy, which is why it is a structural flaw in the Euro which has no obvious solution.0 -
SiegfriedsMum wrote: »By definition, am economic cycle is something which goes round and round, and thats not unique to ireland. Every country has an economic cycle. Every economy has a bit of an inability to learn insofar as it forgets the lessons learned in earlier times.
Well, one of the whole points of the EZ model is to smooth out the cycles and avoid booms and busts. Which are by no means necessary or inevitable. Even Bill Clinton got this point with his and Paul Volcker's 'Goldilocks' economy. Before Clinton lost the plot by abolishing Glass-Steagall.0 -
With the exception of a period after its launch, the Euro has been trading above its original launch rate against the dollar. So there is evidence that this process is already in train.SiegfriedsMum wrote: »Its an ususual opinion that the USA, which is on target to become a net oil and gas exporter, and who is creating more jobs at the moment than almost any other economy, employing more scientists than anywhere else in research, leading the world in IT and Medicine, and you judge the dollar will decline in relation to the Euro, which has huge unemployment and negative growth?
By resorting to QE the Fed is attempting to inflate its way out of debt. It won't work. The US will continue to over rely on fossil fuels, something which will cause parts of its economy, and indeed regions, to deteriorate over time.
The US still has a big and vibrant economy. I'd like to see it doing well. But it has had it's golden era, and it future prosperity will depend heavily on productivity and efficiency. And to going back to basics. For instance in industrial manufacturing.
I note you did not refer to the UK in your response.0 -
There are many economists I wouldn't read to save my life anymore who have spectacularly misread the Euro. People like Krugman, McWilliams, Gurdgiev and many, many other who've been dooming heavily on the EZ over the last four years.SiegfriedsMum wrote: »If you read many economists, you'll see many think the Euro is heading for the rocks. Of course, we all hope they are wrong, but hopes are really not enough.0 -
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KyussBishop wrote: »I didn't say interest rate adjustments aren't useful (indeed, the removal of their use, without the addition of adequate regulation to replace them, I may view as a damaging policy the EU is collectively responsible for), just that there are other policies for clamping down on economic bubbles, which allow targeting of specific areas of the economy, whereas the interest rate targets many areas at once (including areas you don't want to put a damper on, such as business loans).
A minor point, there, which I think I've made before - the EU, in the sense of the institutional EU, wasn't tasked with producing additional and adequate regulation to replace the lost control over interest rates. That was a power, and responsibility, retained by the Member States.
cordially,
Scofflaw0 -
Even though I still dispute the extent of EU's regulatory role, the failure to actually put in place adequate regulatory measures at an EU level, to replace interest rate adjustments, is still a choice all member states are collectively responsible for; i.e. all member states are collectively responsible for negotiating inadequate EU policies, and for putting a dangerously incomplete system in place, without mandating the policies/regulations needed to provide a safe system (this goes for all problems the current EU configuration is causing).0
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KyussBishop wrote: »Even though I still dispute the extent of EU's regulatory role, the failure to actually put in place adequate regulatory measures at an EU level, to replace interest rate adjustments, is still a choice all member states are collectively responsible for; i.e. all member states are collectively responsible for negotiating inadequate EU policies, and for putting a dangerously incomplete system in place, without mandating the policies/regulations needed to provide a safe system (this goes for all problems the current EU configuration is causing).
That does largely go without saying, but in addition, as far as I recall, the most we were able to come up with for the various EU bodies involved in financial 'supervision' was some rather weak overview competences and a communications and advisory function, so it's not really a matter of opinion the extent to which the EU institutions had regulatory responsibility.
That they should have been given such regulatory functions and weren't, on the other hand, I agree was a definite structural flaw of the euro system. Insufficient integrated monitoring, localised regulation, and no crisis plan - it's not really a very impressive list.
cordially,
Scofflaw0 -
True enoughThat does largely go without saying, but in addition, as far as I recall, the most we were able to come up with for the various EU bodies involved in financial 'supervision' was some rather weak overview competences and a communications and advisory function, so it's not really a matter of opinion the extent to which the EU institutions had regulatory responsibility.
That they should have been given such regulatory functions and weren't, on the other hand, was a definite structural flaw of the euro system. Insufficient integrated monitoring, localised regulation, and no crisis plan - it's not really a very impressive list.
cordially,
Scofflaw
Though I'm still kind of reserving judgment on the extent of regulatory power (largely agree there though), and in particular, responsibility, as I'd like to give that a closer look eventually (since as weak as the EU's regulatory power was, some of its powers look like they could possibly have been leveraged). 0 -
Actually, I quoted the article in question in response to your claim that saving the Irish banks was about "saving the euro" - the quotes from Lenihan at the time make it clear it wasn't. You don't actually address that point, but move the goalposts somewhere else.
If you want me to agree that in one speech Brian Lenihan said this or that, then I have no problem with that.
What seems important to you is that some people didn't think the Euro was in difficulties five or so years ago. And if thats what you want to concentrate on, that's fine.
We started off this discussion about structural flaws in the Euro. Your focus over the last few posts has been on Ireland, speculating what the Irish Government may or may not have done had they the fiscal lever of interest rates, which they did not have. and now wanting to parse a report of what the Irish Finance Minister said over five years ago.
I am not really concerned about the Irish Participation in the Euro, but in the Euro itself. You asked me to name three structural flaws in the Euro, so I did.
If it's your view that the Euro is a strong and stable currency which has no structural flaws, then lets disagree and move on.
No, I'm entirely aware of Rabobank, but it's far too small to have bought out Anglo or AIB or BOI, let alone all of them - the same goes for Danske, or KBC. Rabobank has a balance sheet of about €20bn in Ireland - it would have had difficulty swallowing even one of the small bailed out institutions. And that assumes something which is related to your point about "being Irish" - I doubt the government would have preferred to see even one of the smaller institutions be bought out by a "foreign" bank - again, other countries have ensured "their" failing banks were bought out by "their" non-failing banks. Weird, but I assume somewhere it makes sense.
You asked "which of our banks didn't fail" and I named one.
For some reason, you now want to discuss whether or not it might have been able to have bought one of the other banks which was bailed out, and further speculate about your doubts over what the Irish Government may or may not have wanted.
The irony is then you accuse me of "moving the goalposts"
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SiegfriedsMum wrote: »If you want me to agree that in one speech Brian Lenihan said this or that, then I have no problem with that.
What seems important to you is that some people didn't think the Euro was in difficulties five or so years ago. And if thats what you want to concentrate on, that's fine.
No, that's not the point of the quote, or even remotely close to it. I'll repeat what I said already:Actually, I quoted the article in question in response to your claim that saving the Irish banks was about "saving the euro" - the quotes from Lenihan at the time make it clear it wasn't. You don't actually address that point, but move the goalposts somewhere else.
You appear now to have taken the goalposts off the pitch entirely.SiegfriedsMum wrote: »We started off this discussion about structural flaws in the Euro. Your focus over the last few posts has been on Ireland, speculating what the Irish Government may or may not have done had they the fiscal lever of interest rates, which they did not have. and now wanting to parse a report of what the Irish Finance Minister said over five years ago.
I am not really concerned about the Irish Participation in the Euro, but in the Euro itself. You asked me to name three structural flaws in the Euro, so I did.
If it's your view that the Euro is a strong and stable currency which has no structural flaws, then lets disagree and move on.
Sigh. You named three problems, and we're discussing one of them, the question of whether the single interest rate is a "structural flaw" or not.
My contention is that it's a structural feature, not a flaw. It becomes a flaw only if countries don't react to it properly. My contention is that they did not react to it properly, using the case of Ireland as the specific example.
Your contention is that they cannot react to it properly, because they can't control their own interest rates. My contention is that controlling their own interest rates is unnecessary, because other tools are available. Your response is to repeat your original claim, and so we go round in a circle.
You cannot see anything but interest rates as a control for certain economic issues, but you haven't actually been able to refute the Central Bank's view that they have other tools at their disposal - you've simply dismissed it out of hand on the basis that they couldn't possibly have thought of something they didn't already think of in "hundreds of years". They, on the other hand, obviously think they have. Of the two of you, they are rather more likely to be right, particularly given the nature of your argument, which, taken as correct, would mean that we can't really have had any technical progress in any existing field over the last couple of centuries.SiegfriedsMum wrote: »You asked "which of our banks didn't fail" and I named one.
For some reason, you now want to discuss whether or not it might have been able to have bought one of the other banks which was bailed out, and further speculate about your doubts over what the Irish Government may or may not have wanted.
The irony is then you accuse me of "moving the goalposts"
Yes, indeed I do, because I didn't just ask you to name a bank that didn't fail in order for you simply to give me the name of a bank. I asked you to name a bank that didn't fail in the context of our doing what they did in the US and UK, and using non-failed banks to buy out failed banks. In that context - and I have no other reason for asking the question - the size of Rabobank is important, because Rabo couldn't have taken over any of the failed "Irish" banks.
I don't know whether you cannot actually take evidence on board, or are moving the goalposts rather more consciously. Either way, you're evidently not open to any contradiction on the question of the single interest rate being a "structural flaw", and to a very large extent apparently resistant to even discussing it unless I concede in advance that you're correct. However, as I said already, the euro does not appear to be going away, and Ireland doesn't appear to be leaving it, so I guess we'll have to hope I'm right.
cordially,
Scofflaw0 -
As has already been pointed out we disagree whether the inability to use interest rates as a tool is a structural flaw.However, as I said already, the euro does not appear to be going away, and Ireland doesn't appear to be leaving it, so I guess we'll have to hope I'm right.
For me, hopes are not enough.
Lets disagree and move on.0 -
SiegfriedsMum wrote: »As has already been pointed out we disagree whether the inability to use interest rates as a tool is a structural flaw.
You are starting from a flawed premise as:
A) the ECB does use interest rates as a tool on a regular basis as part of its efforts to ensure low inflation, and,
there is no currency anywhere in the world where its political "sub-compoments" (for want of a better phrase) get to set differing individual interest rates. A common currency means a common interest rate - you do not find cantons Schwyz or Uri setting their own interest rates never mind Nebraska or Oregon doing so.
That said since you have shown great determination in discarding all evidence from outside the Eurozone that doesn't fit your view, no doubt you'll discount that latter point as well.0 -
You are starting from a flawed premise as:
A) the ECB does use interest rates as a tool on a regular basis as part of its efforts to ensure low inflation, and, there is no currency anywhere in the world where its political "sub-compoments" (for want of a better phrase) get to set differing individual interest rates. A common currency means a common interest rate - you do not find cantons Schwyz or Uri setting their own interest rates never mind Nebraska or Oregon doing so.
That said since you have shown great determination in discarding all evidence from outside the Eurozone that doesn't fit your view, no doubt you'll discount that latter point as well.
Give me an example of a Central Bank in a currency Union that is not allowed print money.
The ECB is not a Central Bank fit for the equality and fairness of a currency union.0 -
Give me an example of a Central Bank in a currency Union that is not allowed print money.
Well, since the ECB does "print money" - or to be more precise, has the local central banks of the ESCB print money at the ECB's instruction - the relevance of your point is what exactly?The ECB is not a Central Bank fit for the equality and fairness of a currency union.
Ahh, the old "I think it is wrong, therefore it is wrong" argument...0 -
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Well, since the ECB does "print money" - or to be more precise, has the local central banks of the ESCB print money at the ECB's instruction - the relevance of your point is what exactly?
Ahh, the old "I think it is wrong, therefore it is wrong" argument...
The ECB is not allowed print money.
The money it has given to Banks and countries comes with terms and conditions.
In the case of Banks money is given inreturn for collateral and in the case of countries an interest rate and a Memorandum of Understanding.
It might actually craeate the money artificially but it only loans it out.
That is not the case with other Central Banks.
In fact if you look closely at the Trichet regime, they borrowed printed money from the U.S Fed and did not actually print it itself.
Thinking you are right, does not mean that you are, in fact in your case, thinking at all, might be harmful to your health.0 -
The ECB is not allowed print money.
Really?
Quote the article(s) in the EU Treaties where it says that...The money it has given to Banks and countries comes with terms and conditions.
In the case of Banks money is given inreturn for collateral and in the case of countries an interest rate and a Memorandum of Understanding.
It might actually craeate the money artificially but it only loans it out.
That is not the case with other Central Banks.
So, you are saying that the Bundesbank - probably the most conservative central bankers in the world - decided to gamble the entire German economy on a whole new type of never-tried-before central banking rather than stick with their tried-and-tested-but-boring old-fashioned central banking?
I am not sure why you'd believe why our (Irish) central bankers would be so stupid much less those of every other member state who has either introduced the Euro or is legally committed to doing so.
Central Bankers like boring in case you didn't notice...0 -
Really?
Quote the article(s) in the EU Treaties where it says that...
So, you are saying that the Bundesbank - probably the most conservative central bankers in the world - decided to gamble the entire German economy on a whole new type of never-tried-before central banking rather than stick with their tried-and-tested-but-boring old-fashioned central banking?
I am not sure why you'd believe why our (Irish) central bankers would be so stupid much less those of every other member state who has either introduced the Euro or is legally committed to doing so.
Central Bankers like boring in case you didn't notice...
I repeat, the ECB is constitutionally barred from printing money.
Check its constitution.
Noonan has repeated this at least a dozen times in the last 24 hours.0 -
I repeat, the ECB is constitutionally barred from printing money.
Check its constitution.
Noonan has repeated this at least a dozen times in the last 24 hours.
PROTOCOL ON THE STATUTE OF THE EUROPEAN SYSTEM OF CENTRAL BANKS
AND OF THE EUROPEAN CENTRAL BANKArticle 16
Banknotes
In accordance with Article 106(1) of this Treaty, the Governing Council shall have the exclusive right to authorize the issue of
banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the
ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.
The ECB shall respect as far as possible existing practices regarding the issue and design of banknotes.
Although I guess you are referring to alternative forms of money creation, but that's covered in the document as well in Chapter IV.0 -
I repeat, the ECB is constitutionally barred from printing money.
Check its constitution.
Noonan has repeated this at least a dozen times in the last 24 hours.
Noonan is referring to "monetary financing" of states - that is, printing money for some Member State or other specifically to spend as it likes. The ECB being in control of the euro money supply rather obviously requires it to be able to print money when necessary.
cordially,
Scofflaw0 -
I repeat, the ECB is constitutionally barred from printing money.
Check its constitution.
Noonan has repeated this at least a dozen times in the last 24 hours.
Well, I asked you to prove it couldn't do so but since you can't I would refer you to the TFEU Articles 128.1 & 128.2 which deals with notes & coins respectively plus Article 16 of the ECB statute (dealing with notes).
In TFEU 128.1, we have:The European Central Bank shall have the exclusive right to authorise the issue of euro banknotes within the Union. The European Central Bank and the national central banks may issue such notes.
In other words, the ECB has an explicit right to issue money (notes) if it so chooses and the sole right to authorize the national central banks to do so. It also must authorise the issuance of coins by the NCBs under article 128.2 (but is neither explicitly authorized or prohibited from doing so directly itself).
In fact, an ECB report from back in 2004 indicated that the ECB had exercised its right to issue notes and these ECB directly issued notes accounted for circa 8% of the total notes in circulation at the time. That figured could obviously have changed wildly in either direction since then.
PS Please don't get into a pedantic argument about the difference between "issuing notes" and "printing notes" as half the central banks in the world need (legally separate) mints that do the printing or coining for them. There is even a UK private company - De La Rue printers - which handles the physical printing of bank notes for central banks, so they don't even have to do that much if they don't want!0 -
What do you guys think about DC keeping to his promise of keeping the rebate while also cutting the EU budget? Not many thought it likely.0
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What do you guys think about DC keeping to his promise of keeping the rebate while also cutting the EU budget? Not many thought it likely.
It's a worthwhile achievement, and a necessary one from his perspective. At the moment, though, it looks likely to be shot down by the European Parliament.
cordially,
Scofflaw0 -
So if all of the countries agree it means nothing if the euro parliament dosent like it? This is what scares people and makes them skeptical.
It's a worthwhile achievement, and a necessary one from his perspective. At the moment, though, it looks likely to be shot down by the European Parliament.
cordially,
Scofflaw0 -
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Absolutely: if there's one thing that the Euroskeptics have been consistently giving out about, it's that far too much power is in the hands of the EU institution that's directly elected by EU citizens. If only we could get rid of that nasty, undemocratic parliament and let the Commission and the heads of state do things their way.So if all of the countries agree it means nothing if the euro parliament dosent like it? This is what scares people and makes them skeptical.0
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