Devaluing the Euro

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onq

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Has anybody ever suggested that the EURO should devalue?
What is the Irish borrowing figure from the Eurozone as a whole?
How much of Ireland's borrowings are in dollars and how much in Euros?
All the internal Euro Markets would maintain parity with each other if it devalued.
The Eurozone in general would benefit from cheaper exports to other parts of the world.

Anyone see anything wrong with this strategy/query?

ONQ.
 
The euro floats against other major currencies such as the UK and US, both of which are engaged in QE....printing money. Of course the euro can be printed too so these DEvaluations due to money printing to gain a competitive advantage are already happening.
Also the major currencies can buy and sell each others currencies If they deem it is too high or too low.
Thus the euro can`t really do a competitive devaluation against the major currencies.
Even if it could ,it wouldn`t debase the currency to help ireland out.Having a single stable currency is supposed to instill discipline.
Instead of devaluation our government will have to tax more and spend less and cut public sector wages.That would make us more competitive while still retaining a stable currency.
 
All Western central banks are in a fight to the bottom for having a weak currency. The EcB is a bit behind the curve bit will eventually have to do so.

The result, eventually rampant inflation and a reduction in living standards.

The euro has been a disaster for Ireland, Spain, Greece, etc when measured in terms of competitiveness.
 
I agree.

It was foreseen at the time but we had assurances about being "part of something bigger".

The trouble is the something bigger isn't fully formed and so as partially part of something bigger we are between a rock and a hard place.

This suggests a full federalization of Europe is required to stabilise Ireland, with us becoming a northwestern province without autonomous control of our economy or government.

Given how FUBAR the current situation is, and the availability of likely people of vision to lead us out of this in Brussels or Ireland or the rest of Europe, I'm not sure what way to go.

Free fall exchange rates and opening ourselves to competition from Third World Countries - aka globalization - doesn't seem to be doing us many favours, does it?

Rapid change is not designed to benefit the many or even a country.
Its designed to concentrate wealth in the hands of the few and destabilize the middle classes.

ONQ.
 
When the Euro was formed it was parity with the Dollar and about £1.30 so are we not lower now. It all seems relative. I know because my UK pension took a drop
 
Are you referring to Sterling or Punts with that pound sign?

I don't see how it could both equal 1 Dollar and 1.30 Sterling.
 

The biggest problem with direct devaluation (like Japan has been doing) is that it makes import prices very expensive. One of the most important products that Ireland and the EU import is oil, which has a knock on effect on all products sold. Also imagine the increase in prices of all the goods imported from China, all these would immediately go up in price, while the EU would still not be able to compete with Chinese production costs. At the very best you could hope for a break even between increased export income and increased import outgoings.
As for the practicalities of a direct devaluation, ringledman has already provided info that all major central banks are currently on a race to the bottom. Any major devaluation by the ECB will be matched by one in the other major central banks. This is already happening on a smaller scale and will end up in tears. The question is who's going to cry first.
The following link has been posted before on other threads. I paints a truely awful picture of Irish debt: http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html
 
Thanks Chris,

The diagram I had seen before but the picture wasn't that bad to me.

I actually felt badly for Germany, carrying all that debt from countries other people are saying might default.

ONQ.
 
onq said:
Thanks Chris,

The diagram I had seen before but the picture wasn't that bad to me.

I actually felt badly for Germany, carrying all that debt from countries other people are saying might default.

ONQ.
Click to expand...

Yes indeed, Germany is the big creditor in this picture, and that is why Germany's crony-capitalist elite were so hell bent on a bailout package to be put in place. This Irish debt simply cannot be repaid in any meaningful way that would allow Ireland to recover. When you rack up this much debt default is the only sane option, and adding debt is the worst thing that can be done.
 
We're screwed, aren't we Chris?

What's the likely outome if we default?
 
can we not just opt out of the euro and bring back the punt or even introduce sterling as our own currency,am i just being naive?
 
I would imagine a new Irish Punt would be severely devalued as against the current value of our euro, thereby diminishing the value of our bank deposits while increasing the costs of imports and the costs of all our debts which are still in euros. And quite apart from the other benefits which the common currency has for us, the only plus side of leaving the euro would be the unquantifiable increase in competitiveness with our exports. This seems a lot to risk in search of the silver bullet of "devalue and export our way out". We all know we're top heavy in public service, quangos, business costs etc etc, and these should initially be tackled to improve our competitiveness, before even considering the last resort scenario of leaving the euro. Of course, things are not quite right with a lot of our euro neighbours either, and the euro might yet disintegrate without any decisions on our part. (See link posted by Chris above about the interdependancy of our euro neighbours debt)

http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html
 
Oil being priced in Euros by Saddam highlighted a threat to the dollar that America had seemed content to ignore.

The rest of this disaster, the repackaging of toxic debt, the edging away from the old 8% Capital reserve requriements through subterfuge resulting in the re-imposition of those requirements - all this has to be viewed at a global level.

I see the dissolution of the Euro as the desired end game for some of those in positions of power, but its a short-sighted result.

ONQ.
 
onq said:
We're screwed, aren't we Chris?

What's the likely outome if we default?
Click to expand...

I actually think that default would be very positive. It would mean that Ireland would come clean about its debts. Argentina and Russia are the two largest sovereign defaults of recent history, and default had a positive effect on their economies in a pretty short time.
The common argument against default is that it would send borrowing costs through the roof. But the aim of default is not to be in a position to borrow more. The aim should be to get your existing debt to a manageable level and then pay it down.
 
If we devalued and introduced our own currency, "the Cowen" (to always remind us of the danger of ignoring the obvious) we could continue to live in our financial paradise and pay public service salaries that appear to be twice the UK average? Of course the quantity of units could remain the same but the value of the Cowen might only be worth 50 cent to the euro. Our imports would fall, exports would increase, jobs wold come on stream and with our short memories Fianna Fail might get re-elected. The alternative is that we are literally bailed out of the euro and we are forced to introduce the Cowen that might initially be worth only 25 cents to the Euro.
So lets have some leadership, get out of the Euro with dignity and regain our financial sovereignty!
 

The problem is that certain imports cannot fall, e.g. oil, gas, certain food. And the price of these would go through the roof and have a knock on effect on the entire economy.
 
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