Damn, the one time I don’t preview, I mess up :dubious:
European economies don’t work the same way the American economy does. It’s more of a steady curve, slightly up, slightly down.
I recommend you to look at the bigger picture, which includes both the cost of absorbing new members and the increase in FDI’s.
The total budget of the EU is around 1% of the sum of GDPs. And a good chunk of that goes straight into farm subsidies through the CAP. Yes, localised cases of EU funding having a dramatic effect on regional impoverishment, but that doesn’t anywhere near counteract the painful effect that interest rates changes can have. (And those two countries were plucked out of the air as a hypothetical example of the types of arguments given.)
I think any implication of this has been meant as sarcasm - it certainly was from me 
… very true. And I’m not sure how Germany’s 3600km of coastline make it ‘practically landlocked’. (If it was, I doubt U-Boats would ever have been developed 
…)
…and, apparently, a steady drop in employment, if that quote from the FT was correct.
Citing the “special” conditions under which Switzerland, Singapore, and Hong Kong flourish is just nonsense. Everyone has “special” conditions; in the case of the US you can say that it has vast resources and a favorable geography due to the oceans providing it a large measure of protection from invasion. So what? Means nothing. The more important point for the US is that it has a vast and deep capital market that encourages innovation, and this overwhelms the friction caused by having a uniform currency and set of interest rates across a wide array of economies dependent on exports of vastly different products and services to make a living. Europe lacks a culture of equity ownership and risk-taking on the scale practiced in the US, so it isn’t going to be able to overcome the disadvantages of a currency union in that way, at least not today, anyway. The evidence is in the stagnation being experienced in the eurozone. You’re ignoring that evidence.
As for saying that local currencies for small countries and city-states are subject to international speculation, this is once again a completely meaningless statement. Anything is subject to international speculation; that’s a sorry excuse for dismissing local currencies that might actually respond in real time to the actual economic conditions on the ground, and a real sorry excuse for strangling yourselves with this currency union. It also contradicts the actual evidence of the prosperity of all of these countries. You’re ignoring this evidence as well.
If an attitude of laissez-faire were strictly followed by all of the governments of the world in regards to currencies, as happened in the period from the end of the Napoleonic Wars to the beginning of World War I, speculative outbursts would gradually become more infrequent, and currency values would stabilize, with the caveat that there would always be the occasional crackup. I already quoted The History of Foreign Exchange to this effect. Check your history; this isn’t pie-in-the-sky utopianism; it’s simple historical fact. You can, once again, ignore this evidence if you so choose, but that doesn’t make it any less true or make it go away. If you want relative currency stability and smooth flows of capital around the world, set a standard by which all currencies should be valued - it really doesn’t matter what kind of standard, even a floating currency standard would be just fine, as long as every government is forced to follow it strictly. Once you have that, and allow those eeevil international speculators to have free reign, what you’ll get is stability. It’s a proven historical fact.
The problem you have today is that you have some countries with floating currencies, like the US and the UK, and fixed or currencies on “dirty floats” vs the dollar in Asia. There is no standard in the currency markets; what you have is a mess where every government gets to arbitrarily decide what the value of its currency will be. It’s Alice in Wonderland, with everyone playing the Queen of Hearts. This is a recipe for instability and a lurch from one disaster to another, which is what we’ve been experiencing for at least the time since Bretton Woods broke up in 1971. This evidence, too, is ignored.
All the evidence is there. That it’s systematically and studiously ignored doesn’t make it go away.
For somebody who wants to be so methodical and scientific, you seem very willing to ascribe every single thing that’s happened in the eurozone to the Euro. Way back in, oooh, reply number two, this thread made it clear that there’s plenty other factors to account for.
Yes, there’s lots of other factors, and Eurosclerosis was a term coined in the seventies. And? The euro isn’t making it any better. It doesn’t answer why the UK is doing better than either Germany or France, even though it suffered equally from Eurosclerosis back in the seventies. Once again, evidence ignored.
But I already gave you a specific reason why these two big countries are stagnating: how about coming up with a way for Germany and France to grow much at all when the ECB sets an average inflation target of 2%. Just want to ignore that too?
I certainly can’t come up with a way, unless you stop all of the smaller economies - Spain, Portugal, Ireland, Greece, et alia, from growing in order to do it. Not terribly realistic, eh? Not desireable either. Given that, it comes as no surprise that France and Germany have wound up being the ones to break the deficit limits. Not surprising at all.
Pretty much any economist will tell you that Gordon Brown has been a far more capable Chancellor than his predecessors. For all my misgivings about the Labour government, he’s one of the few reasons I’d still vote for them.
And come on, do you really want to claim that Britain in the 70s has anything whatsoever to do with the Euro or the present economy of Europe?
Congrats on Gordon Brown, who would, if the UK were in the euro, have exactly zero power to do anything other than carp from the sidelines. I’d say that supports my argument, but maybe I’m being dumb.
Anyway, what I’m saying - I thought I was being clear but maybe I wasn’t - is that the eurozone has two large economies in it that are being held back by the euro: France and Germany. All three countries suffered from this “eurosclerosis”. The UK today decidedly does not, while France and Germany stagnate along. Once again, another data point that at the least points to the fact that the euro doesn’t help. The ECB inflation target is one specific way in which it hurts.
My sense is that the euro ~ultimately~ will be a good thing.
Unlike many here, I think much of the rationalisation behind the euro was and is to limit a countries ability to play with/rig its currency to give its companies a perceived advantage. Its rather kind of silly to have a free trade zone with multiple currencies; its not going to last. Either the multiple currencies will dwindle to one, or there really wont be free trade. Hong Kong had (has?) its own currency; Hong Kong was a free trade zone. Different areas of Hong Kong didnt have their own currencies.
The only way multiple currencies are not a barrier to trade is when those currencies are all relatively the same value, in which case there might as well be one.
Its really far too early to be talking about who gains or loses by the euro. In the long run, I think the EU members who didnt sign up will eventually have to, if they want to remain in the zone. Not because of any law, but because of the hassle it will be to invest in that member nation. Why open a factory in Sweden and spend extra money on accountants and such to keep track of the currency difference, when you can just open one in Poland or Hungary or whereever and save that much more money?
I agree with pantom that the EU needs a culture of investment capital, but thats true regardless of whether a member has adopted the euro or not. Its not really germaine to the point. Much of that is due to social attitudes as much as it is to infrastructure.
I really don’t wanna get into a US-Europe debate. America has some major economical problems rights now. We’ll see soon enough if they’re able to pull out of it. I hope they do. The European economy is doing fine. Our workforce participation ratio is 10%-15% higher than in America. And while growth is slow, you cannot really incorporate ten poor new members and switch to a common currency and expect the economy to bloom six months or, for that matter, two years later. These things take time, and European markets still has a lot of restructuring to pull through. As I said, there’s a lot of good signs under the radar.
If things really were as bad as you say it is, the Euro would have become weaker, not stronger. The market speaks against you.
You obviously missed my point. I’m in favor of floating currencies and international markets. But I’ve also experienced first hand brute force attacks on small economies, carried out by a handful of currency speculators who wanted nothing more than to sink an economy to put billions into their own pockets. Basically, when these speculators have more available capital than a national bank has reserves, they win. What you fail to see is that many of the smaller economies in Europe were not able to respond in real time to the actual national economic conditions, because they had to fend off these kind of attacks at the same time.
I can see that you’re pretty pissed at China, and rightfully so. But the fact is that America can solve this problem on their own if they want to, by reducing or eliminating the twin deficit. Nobody can determine other nations exchange policies, that’s the very nature of having a currency market.
I didn’t answer this earlier because I’m not entirely sure (so anybody, please correct me anyone if I’m wrong), but I believe the inflation target applies to each EU member individually, and not as a total for the entire EU (though that would still be the result). Thus, small economies, like Portugal, and big economies, like France, all have to stay inside the inflation window. That’s the way it works for deficits at least. But I may be wrong. And btw, Spain is a big economy within EU, not a small one.
I’ll take a moment to answer this one as well. First of all, it sound like you’re saying a lot of taxes is a good thing. 
Secondly, it’s quite clear from your post that you haven’t been to Europe lately, or that you have no idea how the labor market works in Europe. There’s quite a lot of Europeans moving to work in other countries, in spite of the language barrier. In my family alone, my brother is working in Germany. His girlfriend is a Polish girl in Germany. Before they met she was working as a teacher in Sweden. We’re also seeing a lot of splits, where planning and management is done in one country, and production somewhere else.
As far as I know, cross-border transactions are priced in Euros, not dollars. The advantage of having a common currency was estimated at 8% longterm before the switch, only time will tell if they were right or even close. As for the Europe-wide price equilibrium, the market has become quite competitive in spite of the young age of the Euro, not at least due to the rule that public contracts have to be put up for bids Europe-wide. But there’s a long way to go, I’ not going to argue with that.
…for as long as Brown’s in that position. Prior to 1997, we had some exceptionally bad chancellors.
I just dont think currency speculators are a large part of the motivation behind the euro. I think govts playing with their currency with the puprose of giving a false impression of economic health where there is none is not only part of the rational behind the euro, but also the cause of many currency speculators making a windfall from those particular currencies.
Currency speculators dont move in and destroy a healthy currency to make a profit. That doesnt make any sense; if the currency is healthy, they make more profit by investing in it, less by dumping it. Its when a currency is not healthy that a speculator will unload a currency, not so much to gain a profit as to avoid a huge loss.
If speculators start unloading a currency, it means they know/have figured out something that the govt that puts out that currency is trying to hide. If youve lived in a place that endured such a thing dont blame the speculators, blame the idiots in that govt for playing with shit they apparently didnt understand.
Nope.
First of all, it’s no such thing as a perfectly healthy economy, any economy is vulnerable (and thereby exploitable) somehow. Certainly, mistakes are made and sometimes governments try to prop up their currencies, But they cannot “hide” stuff, there simply too much transparency.
Second, the goal of currency speculators is to make money, at the expense of you and me, the taxpayers. It’s perfectly legal, but their presence in the market is not needed. Normally, people trading on exchange markets will buy and sell based on their expectation for a given currency/national economy. But international speculators try to manipulate a currency to swing, and then they make money on these swings.
Foreign Affairs has a good article
Google also turned up some nice quotes, though I don’t know anything about the authors:
and:
Ah yes, now we get to the crux of the issue.
Tommyrot. Flapdoodle. Poppycock.
Yes, speculators make money on swings. I have an account where, with a small part of my money, I do nothing but trade the swings in the stock market. It’s leveraged to the hilt, and I go short and long.
CEO’s and other human waste think, when I appear in the market as a short seller, that I’m a bad person, an eevil bloodsucker, etc, etc. That I and the rest of the people who trade like me add liquidity to the market by being there to take the other side of a trade on days of “excessive” (love that word) volatility doesn’t cut any ice with these people.
Ditto for currency speculators. In their cases, the tinpot dictators, ruthless politicians, clueless Central Bankers, and their hangers-on, blame them when they themselves do stupid things. It’s, not to put too fine a point on it, pure bullshit.
Did you read your own cite? Point #1 was the cause of the Asian crisis: they fixed their currencies to the dollar, and when the fixed rates became unsustainable, the speculators moved in. As voodoochile said, they took advantage of a rot that was already there, nothing more and nothing less. The rates were unsustainable; that’s what caused the crisis. Blaming speculators is engaging in scapegoating, pure and simple.
Look, thats not the point. The point is whether the value of a currency accurately reflects the health or lack thereof of an economy. You can have the worst economy, and as long as the value of your currency reflects it, speculators would never have invested and so wont pull out.
Pegging your currency to the currency of another country is a huge gamble. A currency is backed by nothing more than a govts future ability to tax its citizens. So, ultimately, currencies are backed by nothing more than human labor and future trade prospects.
When Mexico or Argentina or Korea pegged their currencies to the dollar or another currency, their respective currencies no longer reflected the value of the labor of their respective citizens, but instead their currencies reflected the value of the labor of the citizens of whatever countries currency they pegged to. Yes, pegging your currency to that of another country ~is~ trying to hide stuff. Only today with increased transparency, govts cant get away with it. And yes, then taxpayers sufer.
When Argentina pegged to the dollar, the strength of the Real wasnt reflective of any strength due to changes in the economy of Argentina, it was reflective of the strength of the US dollar. Argentinas mistake was, while its currency was pegged, it didnt carry through reforms needed to increase their economic strength. When there was a backlash against the reforms that ~were~ enacted, it was clear to speculators that the value of the Real was going to remain an illusion. Hell, speculators were willing to give them time to enact reforms so that the Real wouldnt be in such disparity with the dollar. Thats what speculation is. But they didnt use that time, and so speculators bailed.
I dont hear you thanking the speculators for their role in helping to prop up those currencies while those govts tried to enact reforms. I see no reason to blame them for bailing out when it became obvious reforms werent forthcoming.
Im sorry man but blaming currency speculators is like blaming the dead canary in the mines when you smell gas. Thats the purpose speculators serve; they are the canary in the mines.
Hardly any disagreement here. Lissen pantom, I don’t believe that currency traders are evil-doers. I simply said that some of them became so powerful that they were able to destabilize entire national economies, some pretty healthy ones, but small.
This is sub-discussion to the topic at hand, where I said that one of the reasons I prefer the Euro is that those days are gone. But as Voodoochile said, that is far from the reason why we have the Euro today.
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I agree with everything you said except the following two things:
That’s not entirely true. You know as well as I do that with enough capital you can drive up the value of a currency and drain the reserves, even if that economy was in perfect balance.
This sounds a little bit like wishful thinking. An investor wont put up millions on the hope that politicians turn the tide his way. Yes, this is true for traders who are willing to hold accounts longterm, but not for people trading shortterm.
But again, as I said above, this is a sub-discussion in the thread.
Great post btw.
Alien: I’d like a specific example of a country you think was healthy before currency speculators targetted it. You keep making this assertion, but I don’t see any evidence to back it up.
And I don’t think it’s a sub-discussion (or hijack, as we like to say): currency stability is a principal reason to enact a monetary union, after all. Lots of currency traders lost their jobs when the euro came online, and that wasn’t an accidental side-effect; it was deliberate.
So this isn’t a sub-discussion; it’s the heart of why the euro is favored by governments and whoever thinks governments should be allowed to intervene as a matter of course in currency markets.
My question remains: since the adoption of the EURO, have any of these european economies experienced a big jumpin growth(attributable to the currency change)?
I find the complaints about currency speculators strange-currency markets arise because there are trade imbalnces (i.e. a surplus of dollars over pounds, or marks, francs, etc.) The speculators role is to balance those oversupplies/undersupplies-do they harm economies? No more so than the governemnts who permitted a too-rapid expansion of the money supply.
So, the Danish voters vote on this (euro adoption) in 2006-can they count on a big boost in growth if they drop the krone a adopt the euro?
By the way, how did the Italians get used to an apparent drop in prices–you used to pay several MILLION lire for a car, for example-what was the psychological effect of this?