Is the end nigh for the Euro? [vol. 3]

Is the end nigh for the Euro? [vol. 3]

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Discussion

avinalarf

6,438 posts

141 months

Monday 5th December 2016
quotequote all
r11co said:
£ was trading around 3000L at the time and had been fairly stable for around two decades before then. Puts things into perspective a little.

Edited by r11co on Monday 5th December 13:35
Some 30 years ago I remember the lira flactuating 2200 to 2500.
I'm a retailer and at that time I was buying clothing and footwear at competitive prices from Italy,Spain and Portugal.
The euro I believe has exacerbated the problems for those countries at least with control over their own currencies they were able to adjust the rate to improve their competitiveness and also encourage tourism.
However I was also able to get stuff made up in GB that was also competitive.
All that has changed over the past 30 years,all gone to China and India etc.
So much for globalisation,never understood how GB and Europe could compete with those countries with huge populations willing or having to work for tuppence an hour.


Edited by avinalarf on Monday 5th December 15:56

Digga

40,206 posts

282 months

Monday 5th December 2016
quotequote all
avinalarf said:
So much for globalisation,never understood how GB and Europe could compete with those countries with huge populations willing or having to work for tuppence an hour.
I can remember wondering, as prices of clothing plummeted when the Far Eastern supply lines really came into force in the UK, for how long their advantage would last? How long would wage and overhead differentials be enough to defray logistics costs. We're nowhere near there yet, but you can gradually perceive the changes. No empire lasts forever.

avinalarf

6,438 posts

141 months

Monday 5th December 2016
quotequote all
Digga said:
avinalarf said:
So much for globalisation,never understood how GB and Europe could compete with those countries with huge populations willing or having to work for tuppence an hour.
I can remember wondering, as prices of clothing plummeted when the Far Eastern supply lines really came into force in the UK, for how long their advantage would last? How long would wage and overhead differentials be enough to defray logistics costs. We're nowhere near there yet, but you can gradually perceive the changes. No empire lasts forever.
You can buy perfectly reasonable,value for money,clothing in Primark for the same price as I was selling it 30 years ago.
Most of the Branded clothing is not much better quality only sells for 6 times the price because of perceived "quality" and millions the companies spend in advertising and marketing to promote "lifestyle " appeal.
I was using the same factories as these Brands but my stuff sold for far less as mine was a "value" product.

avinalarf

6,438 posts

141 months

Monday 5th December 2016
quotequote all
We know that the financial institutions in the City wanted to stay in the EU.
The pound has devalued,that was to be expected due to uncertainty caused by Brexit.
However the devaluation has been overdone,especially in relation to the Euro.
One has to wonder if the City is giving us a spanking for voting the "wrong" way.

Jockman

17,912 posts

159 months

Monday 5th December 2016
quotequote all
avinalarf said:
You can buy perfectly reasonable,value for money,clothing in Primark for the same price as I was selling it 30 years ago.
Most of the Branded clothing is not much better quality only sells for 6 times the price because of perceived "quality" and millions the companies spend in advertising and marketing to promote "lifestyle " appeal.
I was using the same factories as these Brands but my stuff sold for far less as mine was a "value" product.
You still selling these, Steven?


FN2TypeR

7,091 posts

92 months

Monday 5th December 2016
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B'stard Child said:
FN2TypeR said:
Why is the pound now down on the euro compared to yesterday? confused

I appreciate that there is a risk to the UK if any potential fallout/collapse takes place but that's a surprise, to an uninitiated numpty like me.
Oh I don't know - any significant activity happening in the UK which is likely to have an input regarding markets??

I couldn't think of one but markets seem to have decided to plan for the worst case senario result regardless of the predicted result since they got Court out on June 24th

I'm not saying it's true for all Case but Prior to June 24th they appeared to take their lead from polling data.....
I'd have thought that potential obstacles towards article 50 being triggered would have been seen as a soothing thing to be honest.

Unless the high court rules in favour of the Government, it may, I doubt it though.

*shrug* no biggy I guess.

philv

3,912 posts

213 months

Monday 5th December 2016
quotequote all
Digga said:
avinalarf said:
So much for globalisation,never understood how GB and Europe could compete with those countries with huge populations willing or having to work for tuppence an hour.
I can remember wondering, as prices of clothing plummeted when the Far Eastern supply lines really came into force in the UK, for how long their advantage would last? How long would wage and overhead differentials be enough to defray logistics costs. We're nowhere near there yet, but you can gradually perceive the changes. No empire lasts forever.
That's tne whole poiint of free trade.
Living standards may decline for some in tne short term.
But long term, everyone should benefit.

But of course noone wants to lose out short term (especially as short term could be decads).

avinalarf

6,438 posts

141 months

Monday 5th December 2016
quotequote all
Jockman said:
You still selling these, Steven?

Fashion .......what goes round comes around.
I always have a wry smile when every 15 years a new bunch of kids are wearing Dr Martens,MA1 pilot jackets and flares.
A heads up...you always know when the fashion game runs out of ideas when you see the military or navy "look".

motco

15,919 posts

245 months

Monday 5th December 2016
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I was visiting Japan for much of the 1970s and the first time I went the Yen was about 700 to the pound. All Japanese goods were, therefore, phenomenal value for money and they were seen as a serious threat to the west's industries. Move on forty years and the Yen is worth 145 to the (weak) pound and Japanese goods are now far from cheap. The exchange rates self-adjusted to the benefit of the west and allowed another country to try it on, Taiwan, then China. Now the Chinese prices have moved up nearer the Japanese levels and so on. This is why I thought a common currency across such a diverse group of countries as the EU was doomed because it cut out this almost natural mechanism. History will show if this is correct or not fairly soon I suspect.

Carl_Manchester

12,103 posts

261 months

Monday 5th December 2016
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FN2TypeR said:
Why is the pound now down on the euro compared to yesterday? confused

I appreciate that there is a risk to the UK if any potential fallout/collapse takes place but that's a surprise, to an uninitiated numpty like me.
a currency trader might hand me my arse here. the computer trading systems won't allow a rise in a straight line. short positions in the £ will keep it buried until there is a weight of short positions being unwound. they call it a relief rally.

what happens before fridays trading close is more telling.

6 month short positions on the pound unwind near the end of this month first week in Jan could see bounce.

Digga

40,206 posts

282 months

Tuesday 6th December 2016
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Carl_Manchester said:
FN2TypeR said:
Why is the pound now down on the euro compared to yesterday? confused

I appreciate that there is a risk to the UK if any potential fallout/collapse takes place but that's a surprise, to an uninitiated numpty like me.
a currency trader might hand me my arse here. the computer trading systems won't allow a rise in a straight line. short positions in the £ will keep it buried until there is a weight of short positions being unwound. they call it a relief rally.

what happens before fridays trading close is more telling.

6 month short positions on the pound unwind near the end of this month first week in Jan could see bounce.
Plus there's the old "buy on the rumour, sell on the news" short-term phenomenon.

Art0ir

9,401 posts

169 months

Thursday 8th December 2016
quotequote all
David Mcwilliams sounds the alarm.

Dmcw said:
It is almost certain that there will be another euro crisis in 2017. The last time we had a euro crisis, the focus of attention was Greece; today the vortex is Italy.

Italy is not Greece. Italy is the third-largest economy in the Eurozone. Italy is the second-largest manufacturing nation in the EU after Germany. Italy is the largest debtor in Europe. The third-largest Italian bank is irredeemably bankrupt. Italy has no government and the people who are likely to win the next election want to take Italy out of the euro and replace the euro with their own currency, the lira.

These are the facts.

Our Finance Minister has said there is no problem in the Eurozone. I really don’t know what planet he is living on.

Unfortunately for the EU, if Greece was a tricky issue to deal with, Italy is — in economic terms — a massive Greece.

Unlike Greece when it was going bust, Italy can’t be patronised, isolated and vilified by the likes of Slovakia, Finland and — shamefully — our own Government. Italy is a country of close to 60 million people and unlike the British, who were always semi-detached Europeans, the Italians are founding members of the EU and original signatories of the Treaty of Rome, which is 60 years old in March.

By March, it is likely that Marine Le Pen will be the frontrunner in the French presidential election. Could she win? Of course she could. And if she wins, the euro is toast.

There is already a massive capital flight from Italy. This flight of money will extend to France in the months ahead.

The euro is the problem and if the EU wants to save itself, it may have to abandon the euro. Quite what that looks like is anyone’s guess, but here are the political facts: the two main Italian opposition parties, the people who won on Sunday, want Italy to hold a referendum on leaving the euro. Furthermore, Le Pen has explicitly stated that the day she wins, if she does, she will pull France out of the euro and reinstate the French franc.

Le Pen currently has 40pc of the electorate. All she needs is the same type of momentum that propelled Brexit, Donald Trump, and the vote in Italy, where the government lost — not by a few per cent, but by a whopping 60pc to 40pc.
After Italy, the chances of Ms Le Pen winning in France have increased yet again. We are talking about a political movement that is jumping across borders, across continents. It is nothing short of a democratic insurrection against the establishment and it is happening all over the world. Every time the outsider wins in one country, it emboldens the next outsider in the next country to have a go.

We are not immune. Arguably, Ireland was the canary in the coal mine. This time last year, Fine Gael strategists — and almost everyone else — were confident that the recovering economy would be enough to propel them into government. In the end, Fine Gael lost 25 seats.

Similarly, in the UK the Remain side was confident that the British people wouldn’t make a leap in to the dark and vote to leave the EU. The Remain side made Fine Gael-style arguments about how well the economy was doing, how low unemployment was and how “looney” the opposition was; the electorate didn’t buy it.

The same happened with Mr Trump. Hillary Clinton argued that things in America were essentially good and Mr Trump was mad. The electorate backed Mr Trump.

The same thing happened in Italy and the electorate went for the disunited opposition, rather than the so-called sensible, safe-pair-of-hands government.

I think the same will happen in France.

So 2017 will be the year the British leave the EU, the year Italian banks go bust and Italy’s new government is headed for the first time ever by people who want to break up the euro, and it could be the year that Le Pen wins in France.

In term of the crisis in the euro, Italy will be the epicentre, so let’s focus on it. Three weeks ago, I wrote this column from Rome and suggested that a No vote was likely. But let’s gain a bit of altitude and put the problem of Italy and the rest of southern Europe in context.

At its most basic, Italy has the same problem that Greece, Spain, and Portugal have. It’s a familiar story.

People in the south of the Eurozone borrowed to buy goods from the wealthier north, mainly from Germany. This type of prosperity is rented, not earned. The economic growth they anticipated failed to occur. So there was a repayment problem.

The goods the southerners bought were mainly things like cars and nice goodies, so for the banks that lent to the people, there is no collateral to recover.

Writing off a massive loan as a loss will render the bank insolvent, so instead it goes into “extend and pretend” mode. The banks decide not to call in loans and try to extend repayment terms. But as growth evaporates, these loans just get worse with time, not better. And the sense of crisis spreads amongst the people like a virus in a crèche.

That’s what is happening in Italy and indeed throughout Southern Europe.

Eighteen percent of the total loans made by Italian banks are now considered to be non-performing and Italian banks have no extra capital.

Estimates are that Italian banks may need €40bn just to remain solvent.

Now with no government there is no plan as to how to raise the money to plug the hole in the Italian banks’ balance sheets.

It was announced yesterday that Banca Monte dei Paschi di Siena, the world’s oldest bank and the third largest lender in Italy, will be bailed out by the government this weekend.

This is the beginning. In fact, the Italian State may well have fired the gun for capital to leave the country and head to Germany.

Contagion will spread to France and it is against this background that France will host its presidential election.

What odds on President Le Pen now?

FN2TypeR

7,091 posts

92 months

Thursday 8th December 2016
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Hold onto your hats folks, it could be soon!

getmecoat

avinalarf

6,438 posts

141 months

Thursday 8th December 2016
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Regarding the article posted by Artoir by David McWilliams.
I have often pondered how the banks treat debt owed by their customers,whether an individual a company or a country.
If we make the reasonable assumption that a person or business or country cannot pay the debt as arranged ,what does the bank do ?
Well it sends countless letters regarding that debt for which it charges exorbitant fees .
It then increases the interest rate on that debt,as it becomes a "bad " debt and therefore more risky.
Now what this does,with the help of compound interest,is to put the debtor in a position where he is incapable of repaying that debt.
The debtor then goes bankrupt or into liquidation and the banks get nothing or little of their money back.
If the banks froze that debt and worked out ,with the debtor an equitable term of repayment surely there would be more chance of that debt being,in time,repaid ?

Digga

40,206 posts

282 months

Thursday 8th December 2016
quotequote all
avinalarf said:
If the banks froze that debt and worked out ,with the debtor an equitable term of repayment surely there would be more chance of that debt being,in time,repaid ?
Good question, but WRT to Italy it ignores awkward facts; ability to pay (anything), value of underlying assets - property may be worth less than loan value and mortgages may even be upside down - and that's before we get to the awkward issue of requested loan amounts being inflated with the quid-pro-quo that the customer uses the 'extra' to buy bank shares or bonds. It's messy.

Then consider the next domino; that French banks have around 300bn Euro exposure to Italian banks.

anonymous-user

53 months

Thursday 8th December 2016
quotequote all
As I am currently paid in Euros and pay most of my debts in GBP it will be an interesting few months ahead for me.

Being based in German "may" hold some advantages if the Euro breaks up as I would expect the new German currency to be a relatively strong one and probably comparable to the GBP... maybe stronger smile

s2art

18,937 posts

252 months

Thursday 8th December 2016
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Trexthedinosaur said:
As I am currently paid in Euros and pay most of my debts in GBP it will be an interesting few months ahead for me.

Being based in German "may" hold some advantages if the Euro breaks up as I would expect the new German currency to be a relatively strong one and probably comparable to the GBP... maybe stronger smile
If the Euro breaks up, all bets are off. The economic fall out will be horrendous. How big is the exposure to German banks?

avinalarf

6,438 posts

141 months

Thursday 8th December 2016
quotequote all
Digga said:
avinalarf said:
If the banks froze that debt and worked out ,with the debtor an equitable term of repayment surely there would be more chance of that debt being,in time,repaid ?
Good question, but WRT to Italy it ignores awkward facts; ability to pay (anything), value of underlying assets - property may be worth less than loan value and mortgages may even be upside down - and that's before we get to the awkward issue of requested loan amounts being inflated with the quid-pro-quo that the customer uses the 'extra' to buy bank shares or bonds. It's messy.

Then consider the next domino; that French banks have around 300bn Euro exposure to Italian banks.
I do realise that my argument is simplistic and that some debt may never be repaid regardless of the time scale .
However If ,as is often the case now,the debtor is facing ever increasing charges and higher interest rates that mean the chances of repayment, of some if not all the debt ,are diminished.
I don't see that being in anybody's interest.

loafer123

15,404 posts

214 months

Thursday 8th December 2016
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s2art said:
Trexthedinosaur said:
As I am currently paid in Euros and pay most of my debts in GBP it will be an interesting few months ahead for me.

Being based in German "may" hold some advantages if the Euro breaks up as I would expect the new German currency to be a relatively strong one and probably comparable to the GBP... maybe stronger smile
If the Euro breaks up, all bets are off. The economic fall out will be horrendous. How big is the exposure to German banks?
More to the point, Germany's economic prosperity has been driven by a currency which has been artificially depressed in value by weaker and less competitive countries which share it.

If Germany has its own currency again, it will be strong and the cost of German goods will be a lot more expensive for non-domestic buyers.

Digga

40,206 posts

282 months

Thursday 8th December 2016
quotequote all
loafer123 said:
If Germany has its own currency again, it will be strong and the cost of German goods will be a lot more expensive for non-domestic buyers.
Oh fk! Not another classic Porsche values thread! wink