Are you proud of using the Euro?

[Jason]

If the Chinese want to bail out the Euro in exchange for an end to the arms embargo then that's fine by me. The UK wins twofold, we're no longer on the hook all the Eurozone's debt which Alistar Darling kindly negotiated for us before he left office (with the compliance of Osbourne et al), and it opens up another market for our defence industry, which has long formed the backbone of British manufacturing. If we subsequently do want to carry on the embargo we can have a national debate in the proper chamber: the Commons, and weigh up the pros and cons of moral superiority vs badly needed jobs.

I'd be more than happy if the EU ended all their embargos, it's not their decision to make.

It would certainly help the UK if the euro could stagger on for a bit longer and if the eurocrats can manage the transition to the future framework for the eurozone (whatever that might be) without some financial catastrophe. So the UK benefits from this Chinese policy.

I also agree that embargos should be made at national level. But with the free movement of goods and services in the EU there are difficulties as a product can be exported via an EU country that does not have an embargo. However maybe in the area of arms nations might come to over-rule EU sensibilities. The major arms manufacturers in the EU are the UK and France, who have now agreed a 50 year defence alliance. The UK and France may come to be in a position to dictate policy.

The Anglo-French alliance is IMO going to outlast the euro (and therefore the EU). :wink:

 

[Speculator]

There's a very interesting article here at the Cobden centre about's the ECB's acceptance of Greek bonds. Apparently the rules surrounding repo agreements with the ECB were initially very tight but due to the banking meltdown Trichet had them relaxed, however Fitch just downgraded Greek debt to junk status -which meant they would have been no good from the ECB's point of view- but they're going to continue to accept them as grade A debt regardless!

More EU funny business that is kept away from the public due it's technical nature.

 

[Jason]

More EU funny business that is kept away from the public due it's technical nature.

It is curious how a financial catastrophe is taking place with minimal press coverage.

Greek bonds have been considered all-but-junk for quite a while, but the Fitch downgrade (14th Jan) does clarify this position - Greek bonds are now undoubtedly junk. Maybe it is worth noting that junk is not newspaper language but an objective financial assessment. There is no prospect of Greece repaying the face value of these bonds. There has been press coverage of an orderly Greek default in 2013 with ECB agreement, and this might happen - if the situation can be stabilised for this long. Greece is being urged to do ever more to cut its domestic expenditure and raise taxes. However this is now pointless for Greece (though it may help the eurozone). When you go bankrupt debts are written off. There is no nice way of expressing it - the lives and aspirations of the Greek people are being sacrificed on the altar of a failing eurozone ideal. Greece is a victim of present economic colonialism where its assets are being stripped to uphold the ideal of other countries. Poor, poor Greece. This is a nation abused. We are looking at a situation where Greece may in the future have reparations claims against the eurozone nations for an act of economic warfare.

The wider issues are around the eurozone periphery debt and the stability of the ECB. Ireland remains in a dire position with a government about to fall and no opposition party with a credible way forward. Ireland isn't Greece - it isn't that bad yet - but Ireland could easily become a second sacrifice, especially as Fine Gael (the likely victor in the election) seems so gormless. Portugal and Spain are now dependent on China buying their bonds, dependent on whatever sordid and secret deal has been struck. Like Greece and Ireland their economic policy is dictated by the needs of the eurozone, not of their people.

Then there's the ECB. This is the bank now backed by billions in dodgy debt. It is treating Greek junk bonds as the equivalent of the solid debt of Germany.

The talk has been that the periphery will go down like dominos. In fact this hasn't happened. The domino order (post Greece) was supposed to be Greece, Portugal, Spain, Italy. Then Ireland was put in the picture, and we know Ireland in fact went second. Now there is talk of Portugal and Spain going together (they are so inter-twined that the markets will assume a Portuguese default means a Spanish default). But the true spectre at the table is a whole eurozone default. Italy and Belgium are both looking weak. The ECB is beginning to look like a bad bank. Right now it is hard to see that there is anything other than China holding up the eurozone.

 

[midlifebear]

Jason, don't dis junk bonds. The old, MAFIA-confrolled Las Vegas was torn down and rebuilt into the odd and reasonably successful curiosity it is today financed with Michael Milken-style junk bonds which paid off in spades (literally, spades, hearts, diamonds, and clubs) long before the economic collapse of 2008.

And one man's junk bond may just become another man's freedom fighter. Time will tell as China figures out how to play them.

 

[Speculator]

It is curious how a financial catastrophe is taking place with minimal press coverage.

Greek bonds have been considered all-but-junk for quite a while, but the Fitch downgrade (14th Jan) does clarify this position - Greek bonds are now undoubtedly junk. Maybe it is worth noting that junk is not newspaper language but an objective financial assessment. There is no prospect of Greece repaying the face value of these bonds. There has been press coverage of an orderly Greek default in 2013 with ECB agreement, and this might happen - if the situation can be stabilised for this long. Greece is being urged to do ever more to cut its domestic expenditure and raise taxes. However this is now pointless for Greece (though it may help the eurozone). When you go bankrupt debts are written off. There is no nice way of expressing it - the lives and aspirations of the Greek people are being sacrificed on the altar of a failing eurozone ideal. Greece is a victim of present economic colonialism where its assets are being stripped to uphold the ideal of other countries. Poor, poor Greece. This is a nation abused. We are looking at a situation where Greece may in the future have reparations claims against the eurozone nations for an act of economic warfare.

The wider issues are around the eurozone periphery debt and the stability of the ECB. Ireland remains in a dire position with a government about to fall and no opposition party with a credible way forward. Ireland isn't Greece - it isn't that bad yet - but Ireland could easily become a second sacrifice, especially as Fine Gael (the likely victor in the election) seems so gormless. Portugal and Spain are now dependent on China buying their bonds, dependent on whatever sordid and secret deal has been struck. Like Greece and Ireland their economic policy is dictated by the needs of the eurozone, not of their people.

Then there's the ECB. This is the bank now backed by billions in dodgy debt. It is treating Greek junk bonds as the equivalent of the solid debt of Germany.

The talk has been that the periphery will go down like dominos. In fact this hasn't happened. The domino order (post Greece) was supposed to be Greece, Portugal, Spain, Italy. Then Ireland was put in the picture, and we know Ireland in fact went second. Now there is talk of Portugal and Spain going together (they are so inter-twined that the markets will assume a Portuguese default means a Spanish default). But the true spectre at the table is a whole eurozone default. Italy and Belgium are both looking weak. The ECB is beginning to look like a bad bank. Right now it is hard to see that there is anything other than China holding up the eurozone.

Central banks and governments around the world had more or less two choices in response to the crunch, they could have forced the private sector i.e the pension funds, banks and savers to shoulder the burden (a painful but honest and quick solution to the debt) or they could sacrifice the currency, which is infinitely more dangerous because it's not immediately obvious what is going on and because it has an impact upon the very foundations of the economy. Currency holders are a bit like stock holders, they have a VI in ensuring the quality of their asset, the central banks though have unilaterally decided to squeeze their position by issuing billions of new currency units, or "share certificates". I mention this because it's not necessarily the entire Greek or Irish nation that is being ripped off by the ECB -not in the short term anyway- they're pitting saver against debtor and trying to scramble the pricing mechanism enough to bamboozle the former into going along with the plans (without a fuss) even though it's not in their interests. In other words they're trying to avoid an Iceland.

This cannot continue indefinitely though, a free market system thrives on sensible pricing data. If the ECB deliberately distorts that information it becomes almost impossible to make sensible investment decisions so living standards start to slide as capital is abused rather than used. Unless the EU wants to adopt full on Communism (which is the epitomy of the suppression of the pricing mechanism) there's nowhere to go but some form of collapse.

 

[Jason]

I'm seeing europhiles on Twitter who are keen to put a trade barrier around the EU because foreign imports are "too cheap" and are causing job losses in the EU. The same people want yet another round of restrictive labour practices implemented in the EU, which are in effect yet higher wages. The idea seems to be the "more Europe" solution - that somehow the whole world should start paying itself EU-level wages (so as not to disadvantage the EU) and that the ECB is big enough to create money out of no-where without consequencies. Remember a lot of citizens in EU nations were in the Warsaw pact system that went in for trade barriers and created money - the idea is part of the European DNA.

Yes Midlifebear I know there is some value in junk bonds. But it is a worrying position that a eurozone nation's bonds have gone to junk. It is worrying that the ECB is treating them as if they are not juk, distorting the asset position of the ECB. The ECB is already technically insolvent and doesn't fall because the assumption is that if funds are needed Germany and France will pay up. It is also worrying that there is not a section in the Lisbon Treaty that says what the EU will do if a nation's bonds go to junk - we don't have a treaty framework for the present problem. Nor does Lisbon say what the EU will do if the ECB's liabilities are greater than the eurozone can cover.

 

[B_crackoff]

I'm seeing europhiles on Twitter who are keen to put a trade barrier around the EU because foreign imports are "too cheap" and are causing job losses in the EU. The same people want yet another round of restrictive labour practices implemented in the EU, which are in effect yet higher wages. The idea seems to be the "more Europe" solution - that somehow the whole world should start paying itself EU-level wages (so as not to disadvantage the EU) and that the ECB is big enough to create money out of no-where without consequencies. Remember a lot of citizens in EU nations were in the Warsaw pact system that went in for trade barriers and created money - the idea is part of the European DNA.

Frankly, it's not like the French or Germans ever open up their domestic markets to international competition. Have they relinquished control of their utilities yet?

Unfortunately, a by product of creating so much debt, especially in recent years - the majority of which has just inertly gone to inflate property prices - means that we have to pay ourselves ever more to manage that bill.

This is why we become uncompetitive, & bankers reap the rewards of free interest from financial instruments created by the customer themselves, whilst at the same time paying to safeguard the profligate liabilities of the bankers themselves.

Ad to this idiotic EU employment laws, & the CAP, & i'd say we had a bloody good reason to safeguard our fellow citizens.

Even Keynes recognized that their is always a time for protectionism, & that time is when you're truly up the creek. If he'd been aware of the outsourcing of services, I think he'd have baulked at creating a monetary policy at all, because there isn't a hope in hell of managing it in a free market, where domestically you've tied your hands.

Naturally -I'm all for each nation having their own domestic policy - not the Eurocrats deciding one because the chaps that give them bungs are having to cut down on the number of hookers they have on their boats in the Med!

 

[Speculator]

I'm seeing europhiles on Twitter who are keen to put a trade barrier around the EU because foreign imports are "too cheap" and are causing job losses in the EU. The same people want yet another round of restrictive labour practices implemented in the EU, which are in effect yet higher wages. The idea seems to be the "more Europe" solution - that somehow the whole world should start paying itself EU-level wages (so as not to disadvantage the EU) and that the ECB is big enough to create money out of no-where without consequencies. Remember a lot of citizens in EU nations were in the Warsaw pact system that went in for trade barriers and created money - the idea is part of the European DNA.

These arguments should have been buried with the repeal of the Corn Laws, but in times of crisis the opportunists are always keen to take advantage and use government regulation to cement their position as a monopoly supplier. Europe is ideal for this type of activity. It's no surprise that when the EU really began to usurp powers lobbyists moved from their respective national capitals into Brussels; 500m "EU" citizens; what an opportunity to benefit from a bit of helpful regulation!


The term "protection" is a misnomer as consumers always end up on the receiving end, it's the big corporates that gain from the protection. The free market and free international trade protects the weak consumer from them. Which is why they dislike the idea.

 

[WelshMark]

dodgily111
'dodgily111', why would anyone want the Euro? It confers no economic advantage and ties you into an economic policy dictated by decision makers you do not, and cannot, vote for or against. Control of the currency is control of your sovereignty. Surely you should be seeking devolution of power to people locally and regionally, not giving that power to a centralising 'state' - in this case the EU? Currency is not just about 'pride' or 'posturing'. Control of your means of exchange of wealth is about control of your decison making ability - witness the problems caused by the recent banking collapses and runs on credit for national governments.

 

[WelshMark]

Oh, and with all due respect to our American friends here - the United States of America is one of the most protectionist states on the planet.

 

[eurotop40]

dodgily111
'dodgily111', why would anyone want the Euro? It confers no economic advantage and ties you into an economic policy dictated by decision makers you do not, and cannot, vote for or against. Control of the currency is control of your sovereignty. Surely you should be seeking devolution of power to people locally and regionally, not giving that power to a centralising 'state' - in this case the EU? Currency is not just about 'pride' or 'posturing'. Control of your means of exchange of wealth is about control of your decison making ability - witness the problems caused by the recent banking collapses and runs on credit for national governments.

Well, let's see how well the UK will manage the crisis still using the pound.

 

[B_nyvin]

dodgily111
'dodgily111', why would anyone want the Euro? It confers no economic advantage and ties you into an economic policy dictated by decision makers you do not, and cannot, vote for or against. Control of the currency is control of your sovereignty. Surely you should be seeking devolution of power to people locally and regionally, not giving that power to a centralising 'state' - in this case the EU? Currency is not just about 'pride' or 'posturing'. Control of your means of exchange of wealth is about control of your decison making ability - witness the problems caused by the recent banking collapses and runs on credit for national governments.

Obviously you've never heard of a optimum currency area.

 

[Jason]

Optimum Currency Area is an intriguing idea that is useful for discussing how past currency unions and splits have happened. However it is circular. Thus when applied to the nineteenth century there are examples as follows: the USA adopted a single currency, therefore the USA was an OCA; the European Latin currency union failed, therefore the Latin union did not represent an OCA. It is a way of conceptualising what has happened, not predicting a future process.

The idea is of course the darling of the European integrationists who see the EU as an OCA - and today a version of ECA theory is an academic justification for the creation of the euro. Curiously economists from just about all schools criticise the OCA concept, though for different reasons. The wonders of the EU integrationist bandwaggon means that a lot of funding has been put in the direction of academics who want to demonstrate that the EU is an OCA. It is a shocking falsification of an academic idea to give bogus support to a political ideal.

The key economic concept (one that unlike the ECA is not bogus) is that a currency union and fiscal union must go hand in hand - and whenever you have this you have what future generations will conceptualise as an ECA. Basically currency and fiscal union need to happen together or with just a very short lag between one and the other. The eurozone doesn't have this. Right now it doesn't have a process in place to create a eurozone fiscal union. Additionally it is now impossible for two countries (Greece and Ireland) to take part in that theoretical fiscal union, and most unlikely that Portugal, Spain, Italy and even Belgium and Austria could.

The reality is that the euro project has already failed - it's just inertia that keeps it going.

 

[Drifterwood]

The reality is that the euro project has already failed - it's just inertia that keeps it going.

Another reality is that a lot of people in the world want the Euro as a counter balance to the US $.

 

[Jason]

Another reality is that a lot of people in the world want the Euro as a counter balance to the US $.

Exactly! People want the euro for all sorts of reasons including this, as well as many reasons tied up with a heartfelt desire for European integration. But wanting something isn't enough. Economics defies politics. The euro is declining, and future generations of economic historians will no doubt conclude that the EU was not an OCA.

I haven't heard anything in the news yet about what the problems in the Arab world will do to the eurozone and the EU. I suppose no-one really knows. But I put forward the following as a no-brainer:

• There will be increased economic uncertainty which will affect all nations. The nations of Europe and the USA are particularly vulnerable because of high sovereign debt.
• Nations with their own currency will take out part of the problems through the exchange rate (certainly UK and USA).
• The euro is a dead weight. Already it needs to rise for the core nations and fall for the periphery. I don't see how it can stand against the economic tidal wave about to hit it.

 

[B_nyvin]

I'm honestly starting to think the whole Euro-crisis with PIIGS and all that was just a spoof and blunder put out by skeptics. All you typically hear from them is DOOM! DOOM! DOOM! ....but it never really happens.

 

[B_crackoff]

I'm honestly starting to think the whole Euro-crisis with PIIGS and all that was just a spoof and blunder put out by skeptics. All you typically hear from them is DOOM! DOOM! DOOM! ....but it never really happens.

Yeah that's what Mubarak said too about revolution! I bet Saddam didn't think the US would invade, again! People never believe something is gonna happen until poof. Look at 9/11! Suddenly people wake up from their cozy existence to the threat of attack, something which many around the world live with every day.

There is a political will to ensure the Euro's survival. The UK sold its gold & bought Euros, the Chinese & the US have piles of them too. It won't work, currencies come & go all the time historically.

The entire monetary system should have collapsed in 2008.

 

[Jason]

I'm pretty much with Crackoff on this - the euro will continue until the day it doesn't.

It may be a big bang. Given the economic instability now unleashed from the Arab world this is certainly a possibility. But I think it is more likely to be a process.