This topic contains 4 replies, has 1 voice, and was last updated by  Going Postal 9 months, 1 week ago.

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  • #11322

    Going Postal

    I find it instructive periodically to look back on what I have written before – even several years before.

    It is instructive because it highlights my understanding of a particular issue at that earlier time, and raises the question of whether I still hold views previously expressed with such eloquence and conviction!

    Let’s take it step by step, with examples.

    1. Interfering with exchange rates
    2. Trade, currencies, exchange rates and debasement

    Full article here.

    Mr Woolf will answer questions related to the above article here as well as on the main site.

  • #11330

    Going Postal

    From 1642again.

    Thanks Emile,

    Aren’t there several fundamental issues facing any Italian or Greek government that wants to exit the Euro? For example,

    1. They and their companies have borrowed In Euros, which would appreciatee massively if they reverted to a national currency, so the exiting government would in effect have to impose a conversion and therefor partial default on all, say, Italian government, company and private borroowings in Euros?
    2. If there were any hint of (1) above, there would be mass capital flight from Italian banks which would make them insolvent.
    3. Italy or its citizens would need to offer very high interest rates for new borrowings to cover the risks going forward.

    The Euro was cleverly designed from a political perspective (not an economic one but that was not the motivation) as it’s the equivalent of locking an ailing prisoner in a cell, throwing away the key, welding the door up and stopping food and water supplies.

  • #11331

    Going Postal


    Thank you, Emile. Do you have any thoughts on Steve Keen? Leftist, but predicted the crash.

  • #11332

    Going Postal


    nice article, the true cause of our economic decline is firstly that the EU is holding us back from trading with the world, secondly mass immigration causing public service craving more and more cash yet less is going in and the demands on benefits increasing, thirdly is the mass printing of money devaluing the currency and stores of wealth. Doesn’t need a nobel prize in economics to see this. Bloke on LBC made a great point about Shariza yesterday and the fact being a vicar’s daughter she’d not have grown up in a household that would talk about or know how to turn a pound, compare and contrast to Maggie who understood what trade meant.

  • #11333

    Going Postal


    True, but by what measure?

    The problem Greece has is that it must physically reduce the rate per hour of Greek employees – by brute force. With a floating exchange rate you don’t need to do that. The market determines at what point your output becomes valuable and then you can export – the employees do not see that their wages have gone down – only that the price of imported goods has gone up.

    “If the Greeks (or the Italians, etc.) went off the euro in order to reinstate the drachma or the lira, would that stop them from debasing it?”

    No of course it wouldn’t. After all, the Euro is being debased as we speak and allegedly this is bound by rules that are, in fact, flagrantly ignored as you have suggested. Currency debasement is a separate issue – any fiat currency (or indeed any currency in principle backed by assets but where the rules could readily be broken without the creditors being aware) can be debased. The value of having your own currency is that it can only be spent in your country. This means every drachma somebody earns from a sale in Greece must at some point be returned to Greece by somebody. This doesn’t happen with the Euro – if BMW sells a car in Greece and is paid in Euros then the money earned can be spent on champagne from France – no guarantee that it will return to Greece ever. Consequently Greece slowly gets starved of cash, and there is no inherent balancing of trade as there would be in a free-floating currency exchange. Similarly in the single currency zone known as the £ sterling money tends to flow flow the regions to the HQs and banks in London, where it sloshes around for quite a while, making London very rich whilst the regions suffer – to a large extent this is resolved through various re-distributive tax mechanisms. The EZ could do the same thing – start taxing Germans more to fund Greeks, but it doesn’t go down as well when it’s a bunch of foreigners you are talking about.

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