Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our economy

[Smart_Saver]

See article from D. McWilliams in todays Independent.



Interesting reading.
Personally I'm not sure. If we drop out can we get back in later once more? That would be my worry.
feedback would welcome or other suggestions

 

[Padraigb]

Re: todays indo - Ireland should drop out of the Euro

McWilliams used to be an economist.

Now he is a controversialist in the entertainment industry.

 

[Calico]

Re: todays indo - Ireland should drop out of the Euro

I think he's right to float the idea.

I don't understand why our euro membership is not up for debate. It clearly contributed to our current mess in giving us artificially low interest rates over the years, and it is now severely restraining our ability to fix ourselves.

What exactly did the euro ever do for us anyway, except make going on holidays easier along with seeing how much we get ripped off compared to our european neighbours?

People think that being in the euro has saved us, but it is hard to see how much of a worse state we could be in. Maybe 17% unemployment next year may be the reality check.

It's just a pity we have to reach that point (or worse) before ~hopefully~ doing the obvious.

 

[Bank Manager]

Re: todays indo - Ireland should drop out of the Euro

McWilliams used to be an economist.

Now he is a controversialist in the entertainment industry.

Agreed - but he's probably also peeved that GL has been selected as a political candidate - and he hasn't .... ego can be a terrible thing ...

 

[elefantfresh]

Re: todays indo - Ireland should drop out of the Euro

So whether or not he has an ego or you like/dislike him, does he not make a few points there?

 

[Bank Manager]

Re: todays indo - Ireland should drop out of the Euro

He's makes loads of points - as does every other commentator at the moment - what we can't seem to get is a general agreement from them all (the experts) on any of the points ...

 

[Simeon]

Re: todays indo - Ireland should drop out of the Euro

McWilliams used to be an economist.

Now he is a controversialist in the entertainment industry.

Well said. If you followed Ginger's advice to buy oil/gold at various times you would now be worse off than you are . Unless you always got out at the top. Why he (and George Lee) didn't coin it in their chosen field is beyond me. Let's face it, journalism/politics is not the goldmine that "backing your hunches" is .......... especially when these two keep telling us that they get it right consistently. On a somewhat different note, Brendan McWilliams was a forecaster with a far better record than his offspring.

 

[Smart_Saver]

Re: todays indo - Ireland should drop out of the Euro

Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
E.g. here are a couple of questions.
If we did drop out - would all banks go under?
If they did waht happens to ordinary man on street with his mortgage??
Is it taken over by someone else and can they then charge whatever rate they want on the mortgage??
What happens to your savings ?

 

[Padraigb]

Re: todays indo - Ireland should drop out of the Euro

If we dropped out of the euro our guarantee on bank deposits would be worthless (more exactly, worth less) and that would probably tip the balance and collapse the banks.

Our international debts would increase in line with any fall in value of a re-instated Irish pound, and our capacity for further borrowing (including rollovers) would all but disappear or be unaffordably expensive.

Whatever support we get from the EU and the ECB to help us address our difficulties would be lost.

Need I go on?

 

[Simeon]

Re: todays indo - Ireland should drop out of the Euro

Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
E.g. here are a couple of questions.
If we did drop out - would all banks go under?
If they did waht happens to ordinary man on street with his mortgage??
Is it taken over by someone else and can they then charge whatever rate they want on the mortgage??
What happens to your savings ?

In answer to your above four questions:
No one knows.
No one knows.
No one knows.
No one knows.
The pundits can yak 'til they're blue in the face ........ but no one knows!

 

[Sunny]

Re: todays indo - Ireland should drop out of the Euro

Here is a good article on the subject.

http://www.voxeu.org/index.php?q=node/729

For what its worth, I don't think anyone could seriously suggest that Ireland leaves the EURO. Only time it will happen is if the entire euro project collapses.

 

[Mpsox]

Re: todays indo - Ireland should drop out of the Euro

I won't go into the economic plusses and minuses of being in the € (or not), but the cost of the system changes and impact on businesses at a time when many are struggling is not to be recomended

Secondly, if we want to become less dependent on the UK as an export market and export more to Europe, surely asking Irish exporters to factor in exchange rate risk when dealing with EU customers is not to be recomended?

 

[Bank Manager]

Re: todays indo - Ireland should drop out of the Euro

Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
E.g. here are a couple of questions.
If we did drop out - would all banks go under?
If they did waht happens to ordinary man on street with his mortgage??
Is it taken over by someone else and can they then charge whatever rate they want on the mortgage??
What happens to your savings ?

Fair enough - as another poster has already stated - not sure anyone could really answer any of your questions with absolute certainty - DMcW makes fair points - but I think he glosses over the many benefits Ireland inc has obtained from EU membership (part of which is our membership of the euro) - infrastructural funding, agri support - lower interest rates etc - as with all things in life there's always another side - and I think he's hit on most - obviously our adoption of the euro means we have lost monetary control (e.g. we can't move interest rates to suit our economy - but must adopt what suits our 'bigger' neighbours - but we knew this going in...).

Personally - I think the debate is somewhat academic - as I can't really see us leaving it at this stage - given the wider worlds view of Ireland at the moment would anyone really want to purchase our currency? I think not - and if that were the case I think we can all work out what the consequences would be.

That's my 'tuppence worth - for what worth ...

Regards,

BM

 

[darag]

Re: todays indo - Ireland should drop out of the Euro

It's a silly suggestion. I know he is smarter than that so I suspect the "controversialist in the entertainment industry" is a fair call. He probably can expect a few spots on TV from the piece.

He ignores its immediate effect of effectively excluding the government from the bond market. This is in a year when when it needs to raise at least 25 billion. The majority of the benefits he extols are only as a result of the forced conversion of Euro denominated government bonds into bonds denominated in rapidly devaluing new punt. This would be considered nothing less than default and would have Ireland included in the dubious company of failed South American economies and Russia.

The country would simply collapse like Zimbabwe. Unable to borrow the 25 billion the government would have to stop paying public sector salaries and forget about maintaining schools, hospitals, roads, etc. or else they would have to print money. Everyones savings would be denominated in a rapidly devaluing currency. Inflation would be rampant since we are such an "open" economy (i.e. we import so much), etc.

 

[Askar]

Re: todays indo - Ireland should drop out of the Euro

The government currently spends €2 for roughly every €1 it receives. Its spending is going up and its income is going down in this deflationary spiral. Perhaps a bit of competitiveness through devaluation and inflation is what is needed. It would lower cost base for FDIs who could still sell in euro as well as $ and £. I cannot see government imposing and public sector accepting the necessary wage cuts (as Ministers themselves are unable to take any more cuts).

I do not see the evidence that the existing measures i.e. increasing tax is working or has every worked previously. Incidentally, Irish governments have afaik never being able to reduce nominal spending. Last mini budget was completely vague about where savings could be realised.

However, while McWilliams may have overlooked the borrowing and repayment of borrowing issue, presumably this was a problem also faced by Finland and Sweden. Also, is our cost of borrowing almost priced at default levels as matters currently stand? What happens if we are squeezed out of the bond market by larger countries looking to borrow?

 

[Padraigb]

Re: todays indo - Ireland should drop out of the Euro

... However, while McWilliams may have overlooked the borrowing and repayment of borrowing issue ...

Even though I said that he used to be an economist, I can't imagine that he would have forgotten so much as to make such a silly mistake. Especially as (disregarding government debt, which is not at present particularly large) we as a people have the some of highest levels of foreign debt in the world.

 

[darag]

Re: todays indo - Ireland should drop out of the Euro

I sort of gave up after the "Many investors who owed the Irish banks or invested in Irish government bonds would get burned. But that is the nature of markets. They would be paid back in the new currency, which would have to find its value." bit in his article which is simply rubbish. Bonds getting redenominated into another currency is not "the nature of markets" but is (rightly) considered to constitute default.

The idea - as described by McWilliams - is simply daft. Even modifying his idea - if the government were to honer existing bonds by continuing to pay the coupons in euros, a devaluing currency will mean that the cost of servicing the national debt would explode. That's even thinking about the quagmire that is personal debt and savings; would mortgages be redenominated into punts, thus pushing the banking system over the brink (as the banks would have to pay the cost) or leave it as is and have peoples mortgage payments balloon as the punt loses value? How would the banking system survive the stampede of longterm savings out of punt accounts into euros to protect value? How would the financial system survive without the 10s of billions of cash the banks have repoed from the ECB which it can access using Irish government euro bonds as collateral?

The piece reminds me of late night talk-show local radio hosts who start the show asking for opinions on something ludicrous - for example, should we be more understanding of asylum-seeking drug-dealing convicted pedophiles and let them out of jail early, welcome them back into society and lavish them with welfare money. It's purpose is to provoke discussion which presumably will improve McWilliams' public visibility.

 

[Ruam]

Re: todays indo - Ireland should drop out of the Euro

11

 

[Ruam]

Re: todays indo - Ireland should drop out of the Euro

11

 

[Purple]

Re: todays indo - Ireland should drop out of the Euro

McWilliams used to be an economist.

Now he is a controversialist in the entertainment industry.

Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.

LOL some excellent wit and repartee on this thread even if the topic, and posters view on Mc Williams, (and I agree with Padraig) is a bit thread bare at this stage.