Brexit

[Graham Breeze]

For sure, the Greek and Italian problems were not made in Berlin, and Berlin has a point in saying they were feckless. The problems were made at home. But the euro makes it impossible for them to recover, and Berlin refuses any help of any meaningful kind. It wants the advantages of the club, not the problems. Berlin always did want its cake and to eat it.

Are you suggesting that subsequent events (in Italy, Greece...)have turned what was a good idea at the time into a catastrophe rather than that the governments of countries outside the Paris/Berlin axis were at fault in not seeing ahead?

[Oracle]

Are you suggesting that subsequent events (in Italy, Greece...)have turned what was a good idea at the time into a catastrophe rather than that the governments of countries outside the Paris/Berlin axis were at fault in not seeing ahead?

I dispute it was ever a good idea, come as it did after the failure of every currency union preceding it! for example the Latin, Austro Hungary, Scandinavian, Currency Snake, ERM. All the currency unions have one thing in common - they all failed for over a century! One of the closest analogies was the rouble zone, in the sense the clearing structures were similar to the Euro. That failed as well!

The fundamental problems are there are few controls over an economy. Take Interest rates / money supply and the self adjusting relief valve of the exchange rate. Now imagine taking a dozen aeroplanes, and linking their throttles and elevators on a single remote controls despite massive differences in engine size and efficiency and dead weight pay load (in this case debt). In order to stop one going too high, or another stalling, a third will crash into the ground. Only if the aeroplanes are very similar will they even stay aloft for any significant time Even then they will crash in time. There is no relief valve. The analogy is very real. The interest rate that is killing Italy because of debt, is creating a property bubble in Germany. One size simply cannot fit all.

What is supposed to happen is exchange rates reset values, so the consequence of German export dominance is demand for Marks grows, so does the price, so the price of importing from Germany becomes prohibitive, meanwhile the exchange rate of the other country makes their goods seem far cheapr so manufacturing locally becomes cost effective and local industry and employment gets a boost.
It is relatively self regulating, so long as you dont invite a business and job destroyer like Corbyn into power. The alternative to exchange rate drift involves slashing local wages in real terms which is politically impossible (remember Greece?), and invites a mass exodus. So the combination of fixed exchange rate and free movement is completely unstable. A disaster inevitably happens. With free movement of capital it deserts the struggling economies too.

The problem of forcing countries to balance budgets has massive consequences too. Less productive countries are forced to put up taxes to balance their books, which is why the poor countries not only have low wages, but also tax the least well off, where we and Germany have substantial zero tax bands. That encourages two other things. First the destructive migration, but also the black economy. In places like portugal and italy "cash under the counter" is the normal way of doing business, which further erodes the economy, and in southern italy encourages organised crime to flourish. You cannot blame the countries. The wages are half ours before they are taxed! The poor countries are forced to tax the wealthy and business excessively, so they all leave too.

Germany is at least in part an architect of the problem. They allowed Greece to join with an economy that was simply not good enough. They then blame Greece for their own bad decision in allowing greece into the Euro in the first place. I still dont understand why Greece didnt bail. I suspect varoufakis would have done it if he could.

[Graham Breeze]

I dispute it was ever a good idea, come as it did after the failure of every currency union preceding it! for example the Latin, Austro Hungary, Scandinavian, Currency Snake, ERM. All the currency unions have one thing in common - they all failed for over a century! One of the closest analogies was the rouble zone, in the sense the clearing structures were similar to the Euro. That failed as well!

The fundamental problems are there are few controls over an economy. Take Interest rates / money supply and the self adjusting relief valve of the exchange rate. Now imagine taking a dozen aeroplanes, and linking their throttles and elevators on a single remote controls despite massive differences in engine size and efficiency and dead weight pay load (in this case debt). In order to stop one going too high, or another stalling, a third will crash into the ground. Only if the aeroplanes are very similar will they even stay aloft for any significant time Even then they will crash in time. There is no relief valve. The analogy is very real. The interest rate that is killing Italy because of debt, is creating a property bubble in Germany. One size simply cannot fit all.

What is supposed to happen is exchange rates reset values, so the consequence of German export dominance is demand for Marks grows, so does the price, so the price of importing from Germany becomes prohibitive, meanwhile the exchange rate of the other country makes their goods seem far cheapr so manufacturing locally becomes cost effective and local industry and employment gets a boost.
It is relatively self regulating, so long as you dont invite a business and job destroyer like Corbyn into power. The alternative to exchange rate drift involves slashing local wages in real terms which is politically impossible (remember Greece?), and invites a mass exodus. So the combination of fixed exchange rate and free movement is completely unstable. A disaster inevitably happens. With free movement of capital it deserts the struggling economies too.

The problem of forcing countries to balance budgets has massive consequences too. Less productive countries are forced to put up taxes to balance their books, which is why the poor countries not only have low wages, but also tax the least well off, where we and Germany have substantial zero tax bands. That encourages two other things. First the destructive migration, but also the black economy. In places like portugal and italy "cash under the counter" is the normal way of doing business, which further erodes the economy, and in southern italy encourages organised crime to flourish. You cannot blame the countries. The wages are half ours before they are taxed! The poor countries are forced to tax the wealthy and business excessively, so they all leave too.

Germany is at least in part an architect of the problem. They allowed Greece to join with an economy that was simply not good enough. They then blame Greece for their own bad decision in allowing greece into the Euro in the first place. I still dont understand why Greece didnt bail. I suspect varoufakis would have done it if he could.

Thank you.

I have never forgiven Greece its hubris (or rather hybris) in mounting the Olympics. I think only the Coca-Cola Games hasn't lost vast sums of money for the host nation.

Your replies do rather suggest that the other EU members are just vassal states of Germany; but then "all animals are equal but some animals are more equal than others".

[Witton Park]

You're right there is little enthusiasm for a fiscal union among the member states, and am I right in saying it would take a unanimous decision? So is it scaremongering to say that the EU is moving towards a superstate? Or are there other moves afoot to which you leavers are against?

And this is why I believe the EU regardless of Brexit stands at a cross roads.

We often hear in the UK talk about what we signed up to in the 70s when we accepted membership of the Common Market.

How will the wealthier Euro nations react if they are now told that to maintain the Euro they will have to agree to fiscal transfers to the less well of regions and nations?
I suspect they will say "we didn't vote for this...."

On the unanimity, I'm not sure. I have read that the reason there hasn't been another treaty since Lisbon (they used to be every 4-5 years) is that Lisbon had the tools already within it for the EU to draw in competence in areas it didn't previously have and also for the ability of a nation to veto to be gradually eroded.
Now that might be untrue, or exaggeration, but I have seen it from some serious journalists, not just the regular space cadets you find on social media.
Certainly there are levers the EU can pull to put (say) a small nation like Ireland under pressure over it's Corporation Tax rates that might render the Tax Veto Ireland has useless.

[Wheeze]

I get all these arguments. its a shame the occasional robust nature of their presentation has caused the remain debaters to shy away...or perhaps its an uncomfortable truth that couldn't be tolerated. In hindsight, even for someone without a degree in economics, it was evident the wheels were coming off with Grexit (remember that??). The Greek economy could not stand the strain of being hitched to a high octane currency like the Euro.

So, after doubting my position as a leave voter (the remain arguments tugged at my conscience) this greater exposition of the money game explains of the sense of unease I was feeling about the whole thing and has settled my mind. It helps me to see the EU negotiating position for exactly what it is. They (Germany and France) will go to any lengths to keep us in otherwise they will lose a major contributor to picking up the tab for a failed Italy/Euro.

Now, can you financially aware commentators say succinctly why we kept the pound?

[Muddy Retriever]

Are you suggesting that subsequent events (in Italy, Greece...)have turned what was a good idea at the time into a catastrophe rather than that the governments of countries outside the Paris/Berlin axis were at fault in not seeing ahead?

As Oracle said it was never a good idea. And yes they should have seen ahead. After all they were given plenty of warnings. Do you remember William Hague calling the euro a burning building with no exits?

This article replaying an interview with Nigel Lawson from 1998 is amazingly prophetic.

https://blogs.spectator.co.uk/2011/0...n-on-the-euro/

Lawson states that the single currency has to be "buttressed by very substantial fiscal transfers, which happens automatically under a federal system."

‘People say that the shocks will force these countries to make the supply-side reforms that will be needed. That must be a gamble and a politically naive one at that. Moreover,it’s
putting the cart before the horse. All history shows that if you want to create a political union, you do that first and the single currency follows. America’s history shows that, and so does Germany’s

And how about this for a prediction:

‘It’s very difficult to say what an optimal currency area is, but the bigger you get – and this one’s set to be very big and intended to get bigger – a one-size-fits-all monetary policy becomes less and less probable. It produces problems, even in the United States. This danger will be particularly acute when the first recession comes along. It’s going to be very nasty indeed, I fear. The Germans are very concerned that the phase of budgetary discipline will break down.

I always remember at the time opponents of the euro in this country were dismissed as "little Englanders". But they were spot on weren't they.

[Muddy Retriever]

You're right there is little enthusiasm for a fiscal union among the member states, and am I right in saying it would take a unanimous decision? So is it scaremongering to say that the EU is moving towards a superstate? Or are there other moves afoot to which you leavers are against?

Germany and France are the main power players within the eurozone and at the moment they disagree on the best way forward. Come the next recession (which may not be far away) the need for political/fiscal union will probably become more acute. Failing that I think there is a good chance that the eurozone will break up. One possible solution might be for a small group of northern states led by Germany to break away and form their own currency zone. The value of the rump euro would inevitably fall bringing instant relief. This is better than countries like Italy or Greece reverting to their own currencies since their debts would still be denominated in euros and therefore be much higher as their own currencies devalued.

I was surprised by your assertion that it might be scaremongering to say that the EU is moving towards a superstate. The Commission makes no secret of it, it has been the stated intention of ever closer union since the days of the EU's founding fathers. So bit by bit the EU is inching towards that goal. The latest example is the calls for a European army.

[DrPatrickBarry]

I get all these arguments. its a shame the occasional robust nature of their presentation has caused the remain debaters to shy away

Noel and Graham, seem to quite enjoy working Oracle, etc. into a frenzy, I am bored by it. Is the EU a perfect organisation, not even close, is the Euro a perfect currency, not even close. So with the problems with each it is so easy to concentrate on all of the bad aspects to reinforce your opinions. Even experts disagree on the merits of these endeavors, so what chance do a few anonymous cowards on social media have?

All I can say is I listen to/read Irish media a lot and I never hear anything there about how the Euro and EU have been a absolute disaster for the country.

[Oracle]

Noel and Graham, seem to quite enjoy working Oracle, etc. into a frenzy, I am bored by it. Is the EU a perfect organisation, not even close, is the Euro a perfect currency, not even close. So with the problems with each it is so easy to concentrate on all of the bad aspects to reinforce your opinions. Even experts disagree on the merits of these endeavors, so what chance do a few anonymous cowards on social media have?

All I can say is I listen to/read Irish media a lot and I never hear anything there about how the Euro and EU have been a absolute disaster for the country.

My posts are informative. Not emotive. Unless you had not noticed we are not actually in the euro!!! Which could be why it hasnt caused us problems, despite the same project fear before that decision. Ireland is about to get a dose of reality when EU tears up its tax rates and deals with such as apple. Then let us see how it gets on.

And the growth of the EU and eurozone economies has not kept pace with the other advanced economies. It is a protection zone. So the evidence is there in growth it does not help: all you have to do is look.

I notice you quoting remainer media. So now you try and list benefits instead.
Cameron and Osbourne lamentably failed. How do you get on with it?

You cannot use...
-Euro. Currency unions always have been a disaster.
-Trade. We can trade anyway. EU cannot keep china out or us. We could do a free trade deal. EU wont negotiate it. Dead loss they are.
-Holidays Abroad. They still want our money spent in their countries and if they get arsy we go elsewhere..
-Agriculture. The EU policy is a well known disaster that props up french inefficiency. And funds such as Heseltine to own land.
-Academic or institution cooperation, we do international cooperation and projects anyway. Dont need EU, just goodwill.
-Academic excellence. The EU is certainly not.
-Transparency. EU is not.
-Value for money. EU wastes it hand over fist. Remember strasbourg?
-Democracy. It is not a democracy. Laws do not start with elected persona and the parliament is essentially impotent. A joke. Even Juncker said so.
-Decision making. Far too many cooks and you dont have any broth. It doesnt take 7 years to negotiate trade deals. EU takes it because it is far too labyrinthine and slow with too many opposing voices. that is why it takes seven years.
- Deals. So many involved they become the lowest common denominator, not the highest.
- Laws. One size does not fit all.


So what BENEFITS are there? The "good aspects" you claim, I am waiting. You never have contested a single point I made successfully. I am genuinely interested in what you think the benefits are of being in the EU?

[DrPatrickBarry]

So what BENEFITS are there? The "good aspects" you claim, I am waiting. You never have contested a single point I made successfully.

I am breaking my rule here but only once. I either ignore or just skim your comments and have a policy of not replying to them, because it is pointless.

The is a certain masochistic fascination in reading them