Will the world really meltdown?

[Dawg]

Many of them also have debts that far exceed the money they have.



What do you want? A round of applause? A medal?

Steve

Given his 'Bentley' positioning a large helping of Hubris might be apt.

 

[ROY JONES]

Given his 'Bentley' positioning a large helping of Hubris might be apt.

Yes pride in my business acumen.

 

[dagr]

Would be good if someone posted --in laymans terms ( without the gobbledy gook) as to the pros and cons of being in the Eurozone. You mention disadvantages and advantages.. and as posted above importance and implications?

a layman

You'll need to speak to an expert, but the biggest positive aspect is not paying a premium when doing business with another country. In other words, even in a stable exchange rate system where the two currencies are not moving much, you have to go through a middleman (bank, forex service) who will take his cut for doing absolutely nothing. You only think you are dealing directly with your foreign supplier/customer. However, that's nothing. When the currencies start to sharply deviate, as seen recently with the £ vs €, then business (i.e. trade) can even come to a halt in some areas for one of the parties if the drop is too fast and too high, specially in a low-margin business.

The biggest advantage of having two currencies is when there is a major difference in wealth of the two respective countries, and this gap isn't going to close. One country can adjust its currency to better fit new or seasonal conditions.

(It's a bit more complicated when one currency is also a standard or refuge currency, as this will be subject to external pressures).

This isn't specific to the UK pound and the Euro. I seem to remember a study somewhere that showed how a few of the poorer states in the USA would benefit economically overall by leaving the US dollar and using their own currency, that would then be devalued. Obviously, this was theoretical.

 

[dagr]

It cost the UK £1million per hour to be a member of the EU, apart from an additional level of bureaucracy I am unsure what we really get back from it. Plenty of countries from around the world are not members of the EU and trade successfully with...

I agree that the return on investment, so to speak, is not obvious. This is especially true as even though the UK is part of the EU, it is always portrayed as "the UK and the EU", despite the fact that the UK is playing a key part of EU policy making. If the UK were to leave the EU, then they would have to renegotiate agreements with every country, and like Switzerland and Norway, be forced to agree to the EU's ways of doing things, but without having any say at all. It is true that the more insular the UK is/becomes, the less sense it makes to be part of the EU. If the UK wants to stride out both in business terms and politically, then being part of the EU is a condition sine qua non.

I actually think it will take the UK to leave the EU for it all to become apparent. And this may very well happen.

 

[directmarketingadvice]

I didn't see this story until today:

(from Telegraph, January 8th)

Germany failed to sell a full batch of government bonds at its annual `Sylvester Auction', which kicks off the debt season. Investors took up just two thirds of a €6bn (£5.6bn) sale of 10-year Bunds

i.e. Germany is finding it hard to get credit on the bond market.

and, from the same article:

Britain is expected to issue £146bn this year, or 10pc of GDP. While a £2bn sale of Gilts went smoothly yesterday, the Debt Management Office has warned of possible trouble later this year.

Robert Stheeman, the DMO's chief, says Britain may be nearing the limits of investor tolerance. "I'm not predicting that we will have a failed auction, but I can't rule that out. It's a big amount of debt to be sold. We are in a different world from a year ago," he told Bloomberg News.

As long as Britain keeps its coveted `AAA' rating it should be able to the tap the bond markets at a reasonable price, but this rating is no longer entirely secure. Fitch says the UK will have jumped from 44pc of GDP in 2007 to 68pc by late 2010, a staggering rise for major country. It usually takes a war to do such damage.

If we're the low man on the totem poll when it comes to borrowing money...
and there are a lot of governments borrowing unprecedented amounts of money... and there's a shortage of credit...

... and that means we can't get people to lend our country money... then what?

Do we have any plan B other than inventing a lot of money?

Steve

 

[tom111]

I didn't see this story until today:

(from Telegraph, January 8th)



i.e. Germany is finding it hard to get credit on the bond market.

and, from the same article:



If we're the low man on the totem poll when it comes to borrowing money...
and there are a lot of governments borrowing unprecedented amounts of money... and there's a shortage of credit...

... and that means we can't get people to lend our country money... then what?

Do we have any plan B other than inventing a lot of money?

Steve

If that scenario plays out, the only choice is to raise interest rates very, very quickly. You'd be looking at a GDP fall of around 10-15% in a year, with high (greater than 10%) inflation and very high unemployment.

There's not a lot of plan B, the IMF doesn't have the money to bail us out.

 

[An Oasis]

...If the UK wants to stride out both in business terms and politically, then being part of the EU is a condition sine qua non....

Yes, I can understand and respect that, in life why should any country expect special privileges?

The main issue that I have is not the idea of the EU being layer of bureaucrats helping to coordinate policy across member states, which I can see the need for. My issue is the EU deciding policy for members, which are then rolled out across the EU.

As we all know the larger an organisation becomes the more generalised the decisions and the more inappropriate these decisions become for any country (within the EU) where that decisions are either inapplicable or an issue which not need have been addressed. Multiple this scenario across 100,000’s of instances and the wastage, loss…takes on enormous proportions.

Now combine that with another layer of bureaucrats (central gov and the civil service) as a second tier and then passed on down to the third tier local government, the mix is not one that is conducive to “good” government.

To get back to the EU. The main issues that worry me are the huge levels of secrecy by which they act and the vast numbers of people involved is frankly staggering.

...just to draft and work out how to implement legislation the EU requires a bureaucratic staff of around 62,026 people...

For further statistics...

http://www.openeurope.org.uk/media-centre/pressrelease.aspx?pressreleaseid=82

 

[directmarketingadvice]

If that scenario plays out, the only choice is to raise interest rates very, very quickly. You'd be looking at a GDP fall of around 10-15% in a year, with high (greater than 10%) inflation and very high unemployment.

There's not a lot of plan B, the IMF doesn't have the money to bail us out.

That's what I think, too.

Steve

PS THe news is saying that the BofE have voted unanimously in favour of quantitive easing. Great, we're betting everything on something that's never been shown to work.

 

[dagr]

Yes, I can understand and respect that, in life why should any country expect special privileges?

The main issue that I have is not the idea of the EU being layer of bureaucrats helping to coordinate policy across member states, which I can see the need for. My issue is the EU deciding policy for members, which are then rolled out across the EU.

As we all know the larger an organisation becomes the more generalised the decisions and the more inappropriate these decisions become for any country (within the EU) where that decisions are either inapplicable or an issue which not need have been addressed. Multiple this scenario across 100,000’s of instances and the wastage, loss…takes on enormous proportions.

Now combine that with another layer of bureaucrats (central gov and the civil service) as a second tier and then passed on down to the third tier local government, the mix is not one that is conducive to “good” government.

To get back to the EU. The main issues that worry me are the huge levels of secrecy by which they act and the vast numbers of people involved is frankly staggering.



For further statistics...

http://www.openeurope.org.uk/media-centre/pressrelease.aspx?pressreleaseid=82

I admit to being pro-European, but that doesn't mean I wouldn't like to change lots of aspects in the way the EU is run, and I agree with many of the negatives you list above. Moving forward, I'd like the UK to take an even bigger, more active role in changing it. The EU often appears like a rudderless ship, with decisions often seemingly appearing out of nowhere. National governments have a lot to blame for this. In the meantime, the UK should do what the French do if they don't like something - just ignore it.

 

[dagr]

It may just be semantics, but the simple fact that the government can't even call a spade a spade (i.e. printing money), is very worrying. I reckon they are going to do it, and screw up big time. Hence all the news stories over the last two days about how the inflation rate has fallen, etc. They are preparing the ground. The Germans are still traumatised by hyper inflation, and so would not do it in a big way with the Euro.