Isn't the game really up on the Euro?

[Boscoe]

Saw this a while ago discussing the 'What ifs'

http://www.financialdirector.co.uk/financial-director/news/1744911/the-effects-uk-business-euro-fails

basically the strong euro zone countries (Germany, Finland etc) 'new' currency would appreciate against sterling but the weak would depreciate -

“The currency movements could be very large,” says ING’s Bright. He sees

Spain, Portugal and Ireland devaluing 65 percent against sterling,

Italy depreciating 45 percent, France 40 percent and Benelux, Austria

and Finland falling 30 percent against the pound.

 

[just john]

Bring it on[:D]

[NormanH]

[quote user="just john "]Bring it on[:D][/quote]

Bring what on?

The illogical world in which both these  predicions are true? :

basically the strong euro zone countries (Germany, Finland etc) 'new'

currency would appreciate against sterling but the weak would depreciate

-

“The currency movements could be very large,” says ING’s Bright. He sees

Spain, Portugal and Ireland devaluing 65 percent against sterling,

Italy depreciating 45 percent, France 40 percent and Benelux, Austria

and Finland falling 30 percent against the pound.

[just john]

humour is explained by the addition of a smiley 

Serious is to have real currency rates for real countries, as opposed to political experiments . . .

 

[NormanH]

You are right and I have removed the comment.

[Pommier]

I don't understand economics, but I thought sterling was in trouble yet if that report quoted is correct then the only country whose economy is better than the UK is Germany, and all the rest are overvalued against sterling.

Is that correct or am I missing something?

[Daft Doctor]

I'm no expert but I get the impression - overall - that recent economic data is suggesting the the UK economy is doing possibly better than predicted at the moment (though that is before the effects of a VAT rise and public sector job losses have hit home).  It seems that talk of a downgrading of our credit rating has vanished, manufacturing and services both seem to be recovering strongly and, because of increased tax revenues, the public sector job loss forecasts following the spending review have been downgraded from about 490,000 to 330,000.  All those pieces of news have undoubtedly been good for the pound recently, but the main positive factor for the pound at the moment is probably simply the uncertainty surrounding the european debt crisis and how it might spread from Ireland to affect other eurozone countries.  The currency markets are a reflection of human behaviour after all, and anything that scares off investors from the euro and pushes them towards the pound will help £/euro exchange rates.  There is no doubt a lot of financial uncertainty around the eurozone at present and the effect that has on the markets does not of course depend on whether that uncertainty proves ultimately to be justified. 

As to what would happen to exchange rates for the pound against european currencies in the highly unlikely event that the euro ceased to exist and countries (for arguement's sake) reverted to their original currency, surely eventually that would depend solely on the markets' views of how investments in those currencies rated compared with investments in sterling.  In the short term however I could imagine that the very fragmentation process that ending the euro would involve would create doubt and uncertainty in investors minds and might make sterling seem a relatively stable and safe haven for a while, even compared to realtively sound currencies such those of France, Finland and even possibly Germany?  

As I said I'm no expert and nobody knows.  If I had a quid for every time I wrongly predicted how the pound would fare against the euro I would easily have enough for a nice takeaway and a few beers!   

[Jako]

[quote user="Pommier"]I don't understand economics, but I thought sterling was in trouble [/quote]

Correct, the UK is insolvent and will never be able to pay back the 4.8 TRILLION pound debt but most Brits are still in denial and many MP's don't even know the difference between deficit and debt as is shown by the Daily Mail:

One day soon we'll all be millionaires

As soon as markets realise that the Eurozone problems are minor compared to the ones in the US and especially in the UK with its Mickey Mouse currency that is not supported by the biggest central bank in the world (ECB) UK gilts will be unsellable and the IMF will have be called to the rescue within days.

[WJT]

Aargh not again! In recent times as soon as there is a threat the pound will increase against other currencies they do something like this. They are trying very hard to keep it low. [:(]

http://uk.news.yahoo.com/22/20101213/tuk-uk-britain-bean-fa6b408.html

[Gluestick]

In the last two years, I have read and listened to more nonsense concerning currencies and the Euro than ever before.

KISS. Keep It Simple, Stupid!

All major global nations whose currencies are fully floating and are pure "Fiat" currencies (i.e. no absolute backing, other than a sort of promise to pay, backed by the underlying economic, fiscal and financial health of the issuing nation state) have systemic monetary problems. Quite obviously, America's being the very worst.

The Euro's continuing existence is dependent upon one core reality: Germany (Mainly) and the other members of the "Top Five" club driving the Euro and counter-balancing the fiscal and debt insanity of the rest.

How long will the German taxpayer suffer this?

That really, is the key question.

With the Euro-Government and the ECB suggesting strategies such as this (See Below), it takes away the essential underpinning of the concept of Sovereign Debt.

See here:

[just john]

Germany has seen €1 trillion – or two thirds of its entire savings since 2002 – leak out to fund the EMU party, gutting investment at home. This is toxic for Germany too.

 .telegraph. /The-eurozone-is-in-bad-need-of-an-undertaker

Each country needs to be held responsible for its own debt," said Germany’s monetary avenger at the ECB, Jurgen Stark.

[WJT]

I am embarrassed to admit that I never realised the UK was worse off than most all of Europe, even Spain until I saw the map at the bottom of the page on Gluestick's link. Very scary times. [:(]

[NormanH]

[quote user="just john "]

Germany has seen €1 trillion – or two thirds of its entire savings since 2002 – leak out to fund the EMU party, gutting investment at home. This is toxic for Germany too.

 .telegraph. /The-eurozone-is-in-bad-need-of-an-undertaker

Each country needs to be held responsible for its own debt," said Germany’s monetary avenger at the ECB, Jurgen Stark.

[/quote]

Isn"t this the link you need?

http://www.telegraph.co.uk/finance/economics/8198801/UK-would-be-derailed-by-new-eurozone-crisis-Bank-governor-Charles-Bean-warns.html

[Gluestick]

Interesting how "Experts" are now forecasting the Euro problems and more particularly, banks exposed to Eurozone member state's Sovereign Risk Debt could destroy this and collapse that and how a financial Armageddon lurks round the corner, waiting to pounce, etc.

Precisely the same prophets of doom made almost identical comments over the Latin American Sovereign Debt Crisis of the late 1970s and early 1980s!

To place this into perspective, what was then Midland Bank were exposed to this high risk junk debt for substantially more than their capital base!

See here:

It matters not what clever wheezes the European Government and/or ECB come up with: re-naming debts and changing the obligor (Borrower) from discrete member states to one federal body is simply window dressing.

The core imbalance and core debts and non-viable fringe economies remain: and they are in the majority.

The successful members states will be called upon to increase their support for the bucket shop states who have and will spend money like a demented octopus on speed, as long as idiot bankers will lend to them!

How long Germany  et al will go along with the gag is the critical reality.

[just john]

[quote user="NormanH"]  Isn"t this the link you need?
http://www.telegraph.co.uk/finance/economics/8198801/UK-would-be-derailed-by-new-eurozone-crisis-Bank-governor-Charles-Bean-warns.html  [/quote]

Norm, I see where you're coming from, but the UK is able to adjust value of the £ and ultimately is responsible for it's own, apart from a few quid to the ECB and loans to Ireland, and aid to the rest of the world, ad infinitum. Whereas the Euro (which is what this thread is about) is not; its is more like a dysfunctional family, Germany is acting like the bank of Dad, how long will he allow the rest of his family to squander his hard work before he decides enough is enough, his warnings don't seem to have been heeded. 

[quote user="Gluestick"] It matters not what clever wheezes the European Government and/or ECB come up with: re-naming debts and changing the obligor (Borrower) from discrete member states to one federal body is simply window dressing.
The core imbalance and core debts and non-viable fringe economies remain: and they are in the majority.
The successful members states will be called upon to increase their support for the bucket shop states who have and will spend money like a demented octopus on speed, as long as idiot bankers will lend to them!
How long Germany  et al will go along with the gag is the critical reality. [/quote]

repeatedly my point.

[Gluestick]

Here's a comment I wrote, published in what is probably the World's leading investment and business mag, back in 2001.

I have no reason to change my mind................

(Mods: I own the IPR, thus no copyright problems.)

"How is it that,

writing from Rio de Janeiro, your reader Carlos Araujo can see the

"inherent fragility" of the European Monetary Union, yet Europe's

politicians, business leaders, and economists cannot (Readers Report,

July 16, replying to "The euro on trial," European Edition Cover Story,

July 2)? History has proved how frail currency baskets, mechanisms, and

cocktails can be: The snake, super snake, and exchange rate mechanism

all failed. The Treaty of Rome in 1957 proposed economic and monetary

union as a central plank of then-Common Market policy, despite the

obvious ethnic and cultural barriers. But the vision of an expanded

Euroland, where economies recently moved from collective to

market-driven status are accepted into the euro "club," is political

lunacy.

Obviously, euro-based multinationals would love a single medium of

value exchange, since such would remove both the need for multicurrency

accounting and exchange risk exposure. Similarly, politicians desire

larger power bases. However, the stark fact is that about 98% of all EU

businesses (excluding agriculture and the public sector) are small and

medium enterprises. With the vast majority of global trade denominated

in U.S. dollars, a large exchange risk overhang still exists for those

trading outside euroland.

If the EU were made up of 15 Switzerlands, then the euro would work.

If, however, each economy were as fiscally stable as Switzerland, there

would be no point."

[just john]

Little discussion on Belgium, but S&P threaten to downgrade

 Eurozone-debt-crisis-spreads-to-Belgium-on-rising-political-risk.

[Kitty]

Excuse me from interrupting.  Just John - I've sent you a PM with the info you wanted.  It's tacked onto a recent PM thread because I can't seem to find a way of opening up a new PM thread.

Back to topic...

[Gluestick]

And meantime.................

See Here: