Is the end nigh for the Euro? [vol. 3]
Discussion
stongle said:
DeejRC said:
Oh well, good for you. Enjoy rehashing 2011/12, I’ll stick with now and working out the future.
With Nagel the continuity candidate in at the Bundesbank, do you think much will change? I've voiced previously that Central Bankers make quite good opposition (to governments), I can see the Bundesbank being at odds with the ECs political ambitions for sometime.I think the supervisory side of the ECB (one of things it actually does do - not made up s
t), is going to have to step up it's game. It might be an area Germany could push an agenda. Its a bit of a backdoor.Anybody who thinks fighting inflation isn’t the Bundesbank’s over riding paranoid obsession, then they are absolutely in for a rude awakening.
Interesting times.
DeejRC said:
stongle said:
DeejRC said:
Oh well, good for you. Enjoy rehashing 2011/12, I’ll stick with now and working out the future.
With Nagel the continuity candidate in at the Bundesbank, do you think much will change? I've voiced previously that Central Bankers make quite good opposition (to governments), I can see the Bundesbank being at odds with the ECs political ambitions for sometime.I think the supervisory side of the ECB (one of things it actually does do - not made up s
t), is going to have to step up it's game. It might be an area Germany could push an agenda. Its a bit of a backdoor.Anybody who thinks fighting inflation isn’t the Bundesbank’s over riding paranoid obsession, then they are absolutely in for a rude awakening.
Interesting times.
We talk interest rates, they talk about "the cost of money". It's a subtle difference on the surface of things, but reveals a lot IMHO.
dxg said:
speedy_thrills said:
Many nations, including the UK, are carrying huge debt as a result of COVID.
No problem - just inflate it away!!!Digga said:
DeejRC said:
stongle said:
DeejRC said:
Oh well, good for you. Enjoy rehashing 2011/12, I’ll stick with now and working out the future.
With Nagel the continuity candidate in at the Bundesbank, do you think much will change? I've voiced previously that Central Bankers make quite good opposition (to governments), I can see the Bundesbank being at odds with the ECs political ambitions for sometime.I think the supervisory side of the ECB (one of things it actually does do - not made up s
t), is going to have to step up it's game. It might be an area Germany could push an agenda. Its a bit of a backdoor.Anybody who thinks fighting inflation isn’t the Bundesbank’s over riding paranoid obsession, then they are absolutely in for a rude awakening.
Interesting times.
We talk interest rates, they talk about "the cost of money". It's a subtle difference on the surface of things, but reveals a lot IMHO.
I think that is quite revealing about the different attitude to money in D/A/CH
You have to live down there to understand it and you have to live in Zurich to really really really understand it. There is more gold underneath Bahnhoffstrasse than the entire rest of Europe combined. The mentality is very very very different.
For once Deltona isnt being a prick, he is correct in pointing out it is also a US problem, but frankly only in the sense that its a world-wide problem. In this context though that isnt so much our problem, frankly there is absolutely jack we can do about that or worry about it. What goes down in mainland Europe is my personal major concern.
For once Deltona isnt being a prick, he is correct in pointing out it is also a US problem, but frankly only in the sense that its a world-wide problem. In this context though that isnt so much our problem, frankly there is absolutely jack we can do about that or worry about it. What goes down in mainland Europe is my personal major concern.
Digga said:
The issue for both Fed and BoE is much, much simpler, because they have a single nation to look after. Okay, so the USA is very large and has states with very different economies, but overall it is able to redistribute tax revenues easily between them.
For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with fked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.
For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
Absolutely agree with all of this.For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with f
ked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
The danger in the Eurozone is that if there is a sniff of default risk/countries leaving the Euro, the bond rates will blow out. The ECB could, in theory, use purchasing to support, for example, Italy's bond prices and keep yields down, but the Germans have shown they are not willing to allow that mutualisation of risk.
I don't know how it will end up, but stepping back, the Euro remains unstable without fiscal mutualisation, and that isn't going to happen.
loafer123 said:
Digga said:
The issue for both Fed and BoE is much, much simpler, because they have a single nation to look after. Okay, so the USA is very large and has states with very different economies, but overall it is able to redistribute tax revenues easily between them.
For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with fked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.
For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
Absolutely agree with all of this.For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with f
ked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
The danger in the Eurozone is that if there is a sniff of default risk/countries leaving the Euro, the bond rates will blow out. The ECB could, in theory, use purchasing to support, for example, Italy's bond prices and keep yields down, but the Germans have shown they are not willing to allow that mutualisation of risk.
I don't know how it will end up, but stepping back, the Euro remains unstable without fiscal mutualisation, and that isn't going to happen.
and supporting the likes of italy
housen said:
loafer123 said:
Digga said:
The issue for both Fed and BoE is much, much simpler, because they have a single nation to look after. Okay, so the USA is very large and has states with very different economies, but overall it is able to redistribute tax revenues easily between them.
For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with fked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.
For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
Absolutely agree with all of this.For the ECB, they have a disparate set of nations. Some wealthy and prudent (Germany), some wealthy but profligate (France), some very much struggling to get economies moving and with less sound fiscal prudence (Italy, Spain), some with f
ked economies and equally fked public spending (Greece). And in theory, they have to share a common interest rate. However, each nation's bonds have their own, individual rates and this is less easy for the ECB to influence.For each nation, post COVID, the affordability of the interest repayments is going to be the crucial issue moving forward. I agree the USA is by no means home clear in this regard either.
The danger in the Eurozone is that if there is a sniff of default risk/countries leaving the Euro, the bond rates will blow out. The ECB could, in theory, use purchasing to support, for example, Italy's bond prices and keep yields down, but the Germans have shown they are not willing to allow that mutualisation of risk.
I don't know how it will end up, but stepping back, the Euro remains unstable without fiscal mutualisation, and that isn't going to happen.
and supporting the likes of italy
Anyway else following the fx?
We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
DeejRC said:
Anyway else following the fx?
We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
Yes I have Eeyore income and £ liabilities, so indeed this a concern. Still we have been here before and at 1.25 so let’s see how it plays.We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
Gargamel said:
DeejRC said:
Anyway else following the fx?
We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
Yes I have Eeyore income and £ liabilities, so indeed this a concern. Still we have been here before and at 1.25 so let’s see how it plays.We hit 1.2 again yesterday, but dropping a bit today on the latest economic data.
The trend will have that above 1.2 again soon.
1.2 is the natural level that many of us play with. By us I don’t mean the ph crowd, I mean those who straddle the channel and have to balance the currencies.
Unfortunately most of us are fairly convinced it won’t be stopping there. So, 1.3 is already being priced in for forward projections to cover the next 3-5yrs. I’d like to think that is overly pessimistic, but I wouldn’t bet against it. Anyway for me, it’s a critical driver/almost the critical driver in how I split the business between European based and UK based. As it is, compared to last year when I was quoting European based work on 1.15, the fx at 1.2 and above starts to make the European work much much less attractive. As it does for all of us with income streams either side of the channel and costs mainly based in the UK.
Anyway, just thought I’d bring this into discussion and see what we think. There are some very “interesting” implications that start to happen once the rate starts going above 1.2 and they snowball hugely above 1.3.
I will almost certainly withdraw the business from Europe this year and rebalance inside the UK unless I can offshore a lot
more of the costs into Europe. But that fx rate will really start to reduce available human resources abroad as it drives them back to the UK.
The £ v € rate has been pretty painful
Like you I follow the fx rates closely what do you think is driving the recovery of Sterling v Euro ?
The same thing that drove it upto 1.45 prior to 2016. This is what my previous posts were on about, nothing has changed structurally that determines the current system. The market currently determines the UK and the European economies are out of balance at a systemic/structural level. Now, at that point you are getting into Stongle technical stuff and as far as I can see everybody gets to explain everything in lots of different ways that seem to involve using the word quantum.
DeejRC said:
The same thing that drove it upto 1.45 prior to 2016. This is what my previous posts were on about, nothing has changed structurally that determines the current system. The market currently determines the UK and the European economies are out of balance at a systemic/structural level. Now, at that point you are getting into Stongle technical stuff and as far as I can see everybody gets to explain everything in lots of different ways that seem to involve using the word quantum.
It was originally at 1.40 and the 8 or so years it sat between 140-150 mostly and I think hit over 1.70 at one point It’s only in recent times it’s dropped low as maybe 1.06 ish
Maybe 1.40 would be it’s natural level ?
Earthdweller said:
....
It’s only in recent times it’s dropped low as maybe 1.06 ish
Maybe 1.40 would be it’s natural level ?
The amount of squawking there was a couple of years ago due to the rate being nigh on parity and how disastrous it was and how demonstrative it was that Brexit was a big mistake.....who knows what the "correct" rate should be It’s only in recent times it’s dropped low as maybe 1.06 ish
Maybe 1.40 would be it’s natural level ?
Earthdweller said:
DeejRC said:
The same thing that drove it upto 1.45 prior to 2016. This is what my previous posts were on about, nothing has changed structurally that determines the current system. The market currently determines the UK and the European economies are out of balance at a systemic/structural level. Now, at that point you are getting into Stongle technical stuff and as far as I can see everybody gets to explain everything in lots of different ways that seem to involve using the word quantum.
It was originally at 1.40 and the 8 or so years it sat between 140-150 mostly and I think hit over 1.70 at one point It’s only in recent times it’s dropped low as maybe 1.06 ish
Maybe 1.40 would be it’s natural level ?
There was a reason every Brit I know who worked in the EU with family back in the UK voted for Brexit!
This is why I always hark back to the peg, my personal view is that reset the system and since then it was shaking out from that. Unfortunately Brexit happened 5yrs later and threw another pebble in the pond. So, to my mind, those ripples are only now subsiding and the system and drivers that were in play during 2011-2015 are the same as now. I know Stongle has a different view on the underlying technical aspects of all this, but that is where I stake my hat. Not for any ideological purpose, just business.
My fear with all the above is that because the system got reset, then got another shock in the middle of it - now 10 yrs later we still don’t know where the system lies. Where Stongle and I do sort of align (I think) is in the context of the markets “pricing in” European political economic instability, ie the Euro keeps slipping because the markets thing more turmoil is heading its way due to the underlying fault cracks in the system. Stongle is a lot more hawkish on that than me though - I think.
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