Sterling/Euro

Old May 9th 2012, 9:17 am
  #31  
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Default Re: Sterling/Euro

The problem for Greece (and Spain, Portugal et al, including France) is that they run a substantial primary deficit (the amount they raise in taxes etc is far less than state spending). (As does the UK).
As it stands, they are being financed by a mixture of ECB money through the LTRO, and IMF loans, with a very small amount coming from the international money markets
So while leaving the Euro means defaulting on all their loans, they still have to borrow that money from somewehere to finance their budget deficit, or stop paying pensions and public sector wages entirely. Debt forgiveness would not help, as they would be in much the same position as defaulting. But the money markets would be closed to them, except at really punitive rates and they will already have walked away from the IMF which is headed now by the former French Finance minister, who will not look kindly on anyone endangering the European project.
Eventually, they could restart the central bank, and print lots and lots of shiny new drachmas (just by chance, Mervyn King will be looking for a new job next summer), but then hyperinflation is a stone cold certainty.
The only real solution is for Germany, Holland, Finland etc to accept that they must indeed accept a European treasury system, but the consequence is the death of democracy in much of Europe. Which, despite what some commentators suggest, is one of the reasons Germany is opposed to pooled TBills and Bonds.
No happy answers, I am afraid. All terrifyingly predictable when they started down this road, but that does not stop it being a truly terrifying scenario. And although Europe is an ever shrinking market for the UK, they are still some of our more important trading partners, and taken together somewhere in excess of 35 percent of end user exports.
And yes they did lie to get into the Euro - but so did Italy and many others. And the first people to break the Stability and Growth Pact, which underpins the Euro, were in fact .....
Germany and France
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Old May 9th 2012, 11:02 am
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Default Re: Sterling/Euro

More of the same isn't going to make it better.

Few seem to consider the fact that despite the high taxation in the EU (amongst the highest in the world), spending still outpaces tax collection.

Few also question whether this level of spending is fiscally responsible at all (in my opinion, completely irresponsible).

Instead, many seem to believe that if you're running at a deficit, then it's not spending you need to curtail, just raise taxes and or find other ways to collect more in the form of licences, fees, fines, etc.

Well, it's no secret that as you raise taxes in a weak economy, you further weaken the economy. The very economy that sustains tax collection. Yet, there doesn't seem to be much interest in fueling the economy, leading to increased tax collection (many examples in history where lowering taxes have resulted in increased tax collection). I reckon it would be contrary to the popular notion that prosperity is a bad thing.

The focus seems to be (rationally) on increased tax collection and spending cuts, but IMHO, spending should never have been alowed to get to this level, nor should the population have been promised so much in the first place, but it's the predictable result of starry-eyed dreamy idealistic liberals not thinking through it, wholly dismissing fiscal reality and human nature. Now it's going to be political suicide to demand that the population give up some of their nice entitlements and state spending on 1000's of other "nice" programs.

One quick glance at the state of things clearly shows that the prevailing "wisdom" is only making the population poorer, and further encourages those that have some left to take all neccessary steps to avoid increasingly draconian regulation and taxation, leading to even further decline in tax revenues.

If lowering taxes and fueling the economy were (could be) the focus, I reckon there would be a hell of a lot more tax to collect. But as it stands, the current ideology just seems to put even more pressure on the economy and the population - and that's certainly not going to increase tax revenues.

Worse yet, popular sentiment is becoming increasingly negative toward more responsible policies which encourage economic growth. Many would rather see more spending and more social entitlements, yet as usual, dismissing how they are paid for, which is how this all began in the first place.

More of the same isn't going to make it better.

Last edited by amideislas; May 9th 2012 at 12:50 pm.
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Old May 9th 2012, 2:20 pm
  #33  
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Default Re: Sterling/Euro

Quite interesting in the UK, every time the pound gets over 1.20 euro they starting the printing presses, give the money to the banks to buy govrn bonds (effectively paying off debt out of thin air) and then let sterling get down towards 1.10... if they keep doing this they will end up writing off the trillion quid's debt! They get away with it because the govn promises to get spending balanced relatively quickly. So don't get your hopes up for 1.3-1.4 euro.

The only way out for Greece is to run a budget surplus and default on its debts, which only works when most of their spending is on debt payments - which it probably will be by the time they have finished cutting. Argentina is still here after doing the same, and thriving. Of course Greece would have to exit the Euro to do that.

Love to see the UK cut fifty percent of the bloated state sector but if they did that the torries would not get elected for the next twenty years, by which time about ninety percent of the populace would be working for the govern in a new socialist paradise (NOT). It is all John Major's fault as he had the chance to turn the UK into the SIngapore or Hong Kong of Europe but just went into time-server mode.
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Old May 9th 2012, 2:39 pm
  #34  
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Default Re: Sterling/Euro

Originally Posted by HBG
There is no mechanism for countries to leave the Eurozone, and we are controlled by the markets. If the markets don't like it, they will collapse, like they did in the thirties, and bankers will be leaping out of windows again.

I watched some fat Greek, the leader of the Greek neo Nazis, say on TV something like, 'Foreigners, get out of my country.' The nationalists all over Europe, including the UK, are saying the same thing.

A little man with a funny moustache said it in Germany the last time the markets collapsed, and everybody thought he was just a nutter with only some ten percent of people voting for him, but the ten percent soon turned into eighty percent when the unemployed people became hungry.
How true. Personally I can see the military taking over in Greece again.
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Old May 9th 2012, 2:54 pm
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Default Re: Sterling/Euro

Originally Posted by Chiclanagir
How true. Personally I can see the military taking over in Greece again.
I would have thought that Europe will put its own people in there to run it and to clear some of the corruption. That'll go down well!!!

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Old May 9th 2012, 3:28 pm
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Default Re: Sterling/Euro

I agree the public sector is a monster...in all countries. However, the cuts should be gradual. How Cameron...well Clegg! have done it is too much, too soon. They have caused the double dip recession.
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Old May 9th 2012, 3:31 pm
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Default Re: Sterling/Euro

Originally Posted by jojojojojo
I would have thought that Europe will put its own people in there to run it and to clear some of the corruption. That'll go down well!!!

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I do not think the greeks would stand for that. They have realised the euro bureuacrats have been working their government like glove puppets.
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Old May 9th 2012, 4:06 pm
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Default Re: Sterling/Euro

Originally Posted by missile
I do not think the greeks would stand for that. They have realised the euro bureuacrats have been working their government like glove puppets.

Quite right.
There would be open rebellion on the streets, much much worse than of late and possibly as previously mentioned the military would then take a serious hand in proceedings or even take full control.
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Old May 9th 2012, 4:43 pm
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Default Re: Sterling/Euro

Originally Posted by Dick Dasterdly
Quite right.
There would be open rebellion on the streets, much much worse than of late and possibly as previously mentioned the military would then take a serious hand in proceedings or even take full control.
I'm sure you're right. I dont think I'd want some bunch of Eurocrats marching in, overthrowing a government and taking over - thats not democracy, thats likely to be the start of world war 3!

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Old May 9th 2012, 4:48 pm
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Default Re: Sterling/Euro

http://www.reuters.com/article/2012/...8G99XG20120509

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Old May 9th 2012, 5:09 pm
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Default Re: Sterling/Euro

Originally Posted by jackytoo
I agree the public sector is a monster...in all countries. However, the cuts should be gradual. How Cameron...well Clegg! have done it is too much, too soon. They have caused the double dip recession.
Wow! That's a real road to Damascus moment.

Reducing the deficit, reforming the benefits system, raising the state pension age and reducing the number of public sector jobs - but more slowly - was actually the Labour Party manifesto going into the last General Election (when the country was not in recession, despite the banks having to be bailed out).
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Old May 9th 2012, 5:45 pm
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Default Re: Sterling/Euro

Originally Posted by jackytoo
I agree the public sector is a monster...in all countries. However, the cuts should be gradual. How Cameron...well Clegg! have done it is too much, too soon. They have caused the double dip recession.
Let's hope the world never discovers just how wrong you are.
The position the UK is in is very real, very desperate and VERY urgent. How anybody, seeing the terrifying speed with which the deficit continues to increase, can believe that Britain is cutting borrowing too SLOWLY is utterly beyond me. The double dip has certainly not got anything to do with the speed of cuts - if only it did.
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Old May 9th 2012, 6:52 pm
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Default Re: Sterling/Euro

Originally Posted by bigglesworth
Let's hope the world never discovers just how wrong you are.
The position the UK is in is very real, very desperate and VERY urgent. How anybody, seeing the terrifying speed with which the deficit continues to increase, can believe that Britain is cutting borrowing too SLOWLY is utterly beyond me. The double dip has certainly not got anything to do with the speed of cuts - if only it did.

Exactly, balancing the books and clearing up the serious mess that the last shower left behind by drastically over-borrowing is an Urgent Matter.
Remember the note they left behind when they got chucked out ?
"Sorry there's no money left".
Actually it was much worse than that because of the huge debt they'd created.
Major surgery is required and a fair bit of pain is inevitable to get the patients condition stabilised at the very least, otherwise the UK is going down the tubes pretty darned fast.
Problem is that no sooner will they improve things, than the public will react badly to the cuts thus allowing the previous shower to come back in again and bleed the patient to death.
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Old May 9th 2012, 7:42 pm
  #44  
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Default Re: Sterling/Euro

I'm not a left-leaning socialist, but somebody has to correct the notion that this awful recession was caused by the Labour party. It was caused by bankers the world over who parcelled up US sub-prime mortgages and sold them to each other to make huge bonuses.

None of the financial regulators spotted the dangers until it was too late, and Gordon Brown actually got the world leaders together to bail out their banks after Lehmans went down, not that they had much choice.
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Old May 9th 2012, 7:43 pm
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Default Re: Sterling/Euro

iv got quite alot of readies/cash in euro's should i be worrying or not dont beat around the bush please lol
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