If the Euro fails, are we all in for a bad shock?
Discussion
maix27 said:
Mojocvh said:
Osbourne had just stated that it is not for British taxpayer's to fund the bailout fund
I think the same should have applied to the banking system... let it fall, short(er) sharp shock, quicker return to normal, rather than the 10-15 years of rubbish we have to look forward to now. Do people think this holds true? If Europe failed and rebuilt, shock would be deep, but it would be quick. I suppose Iceland is an example to look at, if on a very small scale.
t and surely feel like a sunny day after a thunder storm in a year or so....
Happy82 said:
News is suggesting that if the Euro fails, then Europe will fall. Will it really be that bad? Or is it more that politicians fear the loss of their vision of a European super-state?
The EU project started out as a free trade zone. It had great benefits at the time. However, over the years, the World Trade Organisation has delivered almost the same thing globally. So membership does not bring very much economically at this point.The other reasons for the birth of the EEC were the result of WW2. They wanted to prevent any more wars, and they wanted to ensure that food rationing would never return.
If the EU were disbanded, would another war be more likely? I don't think so. Science and technology have produced vast gains in agricultural productivity - so we are in no danger of running out of food.
So, I don't see any downside in the collapse of the EU. There are huge potential benefits.
Don
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don4l said:
If the EU were disbanded, would another war be more likely? I don't think so.
My own view is that wars evolve, constantly.Cavemen clubbing one another, eventually eveloved into lines of cavalry running at one another, men in trenches shelling one another and advancing (still in horrific, doomed lines) on one another on foot, through to 21 century warfare.
However, ethnic cleansing and mad political ideals aside, the main incentive for war has always been the spoils - power and wealth. I beleive we are currently in the midst of WW3 - a huge power struggle between the fat lazy incument western powers and the lean, mean, newly emerging world economies.
We - and warfare - have eveolved to the extent that conventional, weapons-based wars are untenable and so now the fiercest global battles are now financial.
DonkeyApple said:
If it fails then in the first year of the calamity most of our exporting businesses in the UK will go bust, as will our banks and we will default and go to the IMF. We will almost certainly have the house price crash that has been stalled by the zero rates etc etc.
The simple reality is that we are in such a weak state that we cannot possibly survive the demise of the Euro.
The reason why some MPs are wanting us to pull out is not because they are anti the EU per se but because they believe it is doomed and don't want Britain paying billions into an IMF bailout that can't work thus leaving us with even less money to survive the collapse.
It really isn't a pleasant scenario.
At some point they will be left with the only choice which will be to print the PIIGS out of debt and for Germany to be crippled with massive inflation, which their people still remember the last time.
I do not see the partial demise of the Euro, provided that it is properly managed, as any kind of disaster at all, and all of the above seems to me to be mere scare mongering. A Euro can survive, involving those countries whose economies are genuinely in step, namely the core northern European members. Ireland has done well and could IMHO be sustained. The problem is that the longer the EU takes to accept reality the more untidy the collapse is likely to be. The simple reality is that we are in such a weak state that we cannot possibly survive the demise of the Euro.
The reason why some MPs are wanting us to pull out is not because they are anti the EU per se but because they believe it is doomed and don't want Britain paying billions into an IMF bailout that can't work thus leaving us with even less money to survive the collapse.
It really isn't a pleasant scenario.
At some point they will be left with the only choice which will be to print the PIIGS out of debt and for Germany to be crippled with massive inflation, which their people still remember the last time.
The PIGS could remain within the EU but revert to their previous currencies. Then the basic financial discipline which that would impose on them would both sort them out, and help them by encouraging tourism and inward investment. We cannot live forever in this world of colossal EU subsidies, which was, like the Dictatorship of the Proletariat, only supposed to be an interim phase, in this case until the markets got themselves in synch. Instead it has become a way of life.
The partial dismantling of the Euro is not some kind of David Martin Apocalypse scenario, it is the common sense way out. What has been achieved at the latest summit is precisely zero. Even if the perceived solution is to involve the entire world in inflating our debts away, and I don't think that it is any cleverer than that, it does nothing significant to prevent further debts being racked up. The EU have already proved that they cannot regulate the economic management of member states. An unlimited money supply combined with inefficient productive capacity can only result in catastrophic inflation. The Banks are still doing it and goodness knows Greece is still doing it. Even the public debt of the UK is still rising though it is predicted to fall. No one since the beginning of time has worked out a way to make money grow on trees, yet this is what European politicians are attempting to do rather than address the core problem, which is, in the words of Rudyard Kipling ' If you don't work, you die.'
Edited by cardigankid on Thursday 27th October 12:03
cardigankid said:
DonkeyApple said:
If it fails then in the first year of the calamity most of our exporting businesses in the UK will go bust, as will our banks and we will default and go to the IMF. We will almost certainly have the house price crash that has been stalled by the zero rates etc etc.
The simple reality is that we are in such a weak state that we cannot possibly survive the demise of the Euro.
The reason why some MPs are wanting us to pull out is not because they are anti the EU per se but because they believe it is doomed and don't want Britain paying billions into an IMF bailout that can't work thus leaving us with even less money to survive the collapse.
It really isn't a pleasant scenario.
At some point they will be left with the only choice which will be to print the PIIGS out of debt and for Germany to be crippled with massive inflation, which their people still remember the last time.
I do not see the partial demise of the Euro, provided that it is properly managed, as any kind of disaster at all, and all of the above seems to me to be mere scare mongering. A Euro can survive, involving those countries whose economies are genuinely in step, namely the core northern European members. Ireland has done well and could IMHO be sustained. The problem is that the longer the EU takes to accept reality the more untidy the collapse is likely to be. The simple reality is that we are in such a weak state that we cannot possibly survive the demise of the Euro.
The reason why some MPs are wanting us to pull out is not because they are anti the EU per se but because they believe it is doomed and don't want Britain paying billions into an IMF bailout that can't work thus leaving us with even less money to survive the collapse.
It really isn't a pleasant scenario.
At some point they will be left with the only choice which will be to print the PIIGS out of debt and for Germany to be crippled with massive inflation, which their people still remember the last time.
The PIGS could remain within the EU but revert to their previous currencies. Then the basic financial discipline which that would impose on them would both sort them out, and help them by encouraging tourism and inward investment. We cannot live forever in this world of colossal EU subsidies, which was, like the Dictatorship of the Proletariat, only supposed to be an interim phase, in this case until the markets got themselves in synch. Instead it has become a way of life.
The partial dismantling of the Euro is not some kind of David Martin Apocalypse scenario, it is the common sense way out. What has been achieved at the latest summit is precisely zero. Even if the perceived solution is to involve the entire world in inflating our debts away, and I don't think that it is any cleverer than that, it does nothing significant to prevent further debts being racked up. The EU have already proved that they cannot regulate the economic management of member states. An unlimited money supply combined with inefficient productive capacity can only result in catastrophic inflation. The Banks are still doing it and goodness knows Greece is still doing it. Even the public debt of the UK is still rising though it is predicted to fall. No one since the beginning of time has worked out a way to make money grow on trees, yet this is what European politicians are attempting to do rather than address the core problem, which is, in the words of Rudyard Kipling ' If you don't work, you die.'
Edited by cardigankid on Thursday 27th October 12:03
The problem is the instant halt, even loss by default, of key cashflow and that most UK firms would not be able to survive the waiting game. And it is not that they can go to the bank to tide them over this gap either.
This isn't that the clients will disapear or demand will go or supply struggle etc, just that the typical business is not sufficiently capitalised to tollerate what could be 3/6 month delays on outstanding monies owed.
The EU are fools. They only have to look at the UK to see exacly how a single currency works but they have ignored all the evidence because Germany and France were benefiting so hugely from the massive economic mismatch.
The only only solution is for Germany to actually leave as it is the odd one out and the member which is causing all the problems. It is the giant who turned up at the midget convention and now all the cakes are gone from the lower shelves the midgets are getting uppity.
Germany leaves and the EURO zone can print all the paper they need to inflate away their problems.
don4l said:
The EU project started out as a free trade zone. It had great benefits at the time. However, over the years, the World Trade Organisation has delivered almost the same thing globally. So membership does not bring very much economically at this point.
The other reasons for the birth of the EEC were the result of WW2. They wanted to prevent any more wars, and they wanted to ensure that food rationing would never return.
If the EU were disbanded, would another war be more likely? I don't think so. Science and technology have produced vast gains in agricultural productivity - so we are in no danger of running out of food.
So, I don't see any downside in the collapse of the EU. There are huge potential benefits.
Don
--
agreed.The other reasons for the birth of the EEC were the result of WW2. They wanted to prevent any more wars, and they wanted to ensure that food rationing would never return.
If the EU were disbanded, would another war be more likely? I don't think so. Science and technology have produced vast gains in agricultural productivity - so we are in no danger of running out of food.
So, I don't see any downside in the collapse of the EU. There are huge potential benefits.
Don
--
IMHO If we bail out the Euro it will only be a matter of time before we have to do it again and again.
Best cut our loses and take any pain now.
The EU serves no unique purpose other than to swallow huge amounts of our cash and provide nothing of substance in return.
If we have a stable (ish) currency in the £ and distance ourselves from the economic cluster f
k of the Euro zone then giving investors a safer option than the failing Euro might be good news for the UK.[monty python]
What has the EU ever done for us?
DonkeyApple said:
How many weeks/months do you think the average UK business could survive awaiting payment for goods/services while the country they have dealt in works out what their new currency will be called and its ratio to the Euro, or how easily will the firm be able to process Euro payments through their UK bank?
The problem is the instant halt, even loss by default, of key cashflow and that most UK firms would not be able to survive the waiting game. And it is not that they can go to the bank to tide them over this gap either.
I'm sorry - I don't see the problem. You print the money, you have a start date. At that point 1 Euro = 5 drachma. No different to when UK went decimal. That exchange rate is held for 3 months, thereafter it floats. Existing contracts should be fulfilled in Euro. It's not as if this is a surprise to anyone, and the PIGS currencies would soon stabilise at their correct level. Iceland didn't cease to exist. neither will Greece or anyone else. Furthermore, is there not an export credit guarantee scheme? Why not extend this to cover the transitional period. We are simply not going to wake up one morning and there isn't a Euro. Unless of course they just attempt to inflate the problem away in which case we will wake up one morning and there will be plenty of Euros but none of them worth anything.The problem is the instant halt, even loss by default, of key cashflow and that most UK firms would not be able to survive the waiting game. And it is not that they can go to the bank to tide them over this gap either.
DonkeyApple said:
Germany leaves and the EURO zone can print all the paper they need to inflate away their problems.
You cannot inflate away this kind of problem without solving the root causes. It is delusional to think that Governments can magically make any problem disappear, and that is partly why we are where we are. I am assuming that this was meant as a joke because it certainly has to be taken as one. The fundamental axis of the EU is Germany producing wealth and France consuming it. The rest is window dressing, and politicians believing their own hot air.cardigankid said:
DonkeyApple said:
How many weeks/months do you think the average UK business could survive awaiting payment for goods/services while the country they have dealt in works out what their new currency will be called and its ratio to the Euro, or how easily will the firm be able to process Euro payments through their UK bank?
The problem is the instant halt, even loss by default, of key cashflow and that most UK firms would not be able to survive the waiting game. And it is not that they can go to the bank to tide them over this gap either.
I'm sorry - I don't see the problem. You print the money, you have a start date. At that point 1 Euro = 5 drachma. No different to when UK went decimal. That exchange rate is held for 3 months, thereafter it floats. Existing contracts should be fulfilled in Euro. It's not as if this is a surprise to anyone, and the PIGS currencies would soon stabilise at their correct level. Iceland didn't cease to exist. neither will Greece or anyone else. Furthermore, is there not an export credit guarantee scheme? Why not extend this to cover the transitional period. We are simply not going to wake up one morning and there isn't a Euro. Unless of course they just attempt to inflate the problem away in which case we will wake up one morning and there will be plenty of Euros but none of them worth anything.The problem is the instant halt, even loss by default, of key cashflow and that most UK firms would not be able to survive the waiting game. And it is not that they can go to the bank to tide them over this gap either.
DonkeyApple said:
Germany leaves and the EURO zone can print all the paper they need to inflate away their problems.
You cannot inflate away this kind of problem without solving the root causes. It is delusional to think that Governments can magically make any problem disappear, and that is partly why we are where we are. I am assuming that this was meant as a joke because it certainly has to be taken as one. The fundamental axis of the EU is Germany producing wealth and France consuming it. The rest is window dressing, and politicians believing their own hot air.Plus, Germany is the odd one out in the EU. If any party is to leave the logical one to go is Germany.
The latest bailout will probably hold the fort into the NY and I guess they are gambling on a return of growth by then to try and dely the next bailout. Depends on how quickly the PIGS can carry on spending other peoples' money as no one has to date been able to stop them. Also, the EU shows no signs of enforcing uniform retirement ages etc etc across the zone so it's still more likely to fail than recover in my view.
The key is for UK Plc to get itself into a position whereby it can not just survive but prosper. We are not in that position at this moment in time and so it is in our best interests to help keep the EU going until such a time that we are, and then we can prove to the whole of the EU just how truly European we are and walk away.
Everyone seems to be doom-saying, but I really don't think it'll be that horrendous.
The EU economy won't collapse because the euro fails. Can anyone seriously imagine the German economy just falling apart? No, it's far to healthy and nearly every investor knows that. If the euro collapses then all that will happen is that it will split in two, with a Northern and Southern Euro. The Northern one will appreciate massively and the Southern One will be dirt-cheap, meaning the southern economies might pick up a little and the Northern ones will be held back slightly. Germany will flop about a bit because it's exports would fall, but it has a gigantic current account surplus anyway that it can easily reduce without damaging its economy.
The UK? well, first of all our biggest singly trading partner is the US, so our exports would not collapse. While around 40% of our trade is with Europe, this really could not suddenly disappear. It could decline a little, but who knows? The finance sector will lose money if (or should I say when) Greece defaults and probably when the eurozone readjusts, but British banks do have a lot of money floating around that they've been hoarding since 2008, and don't have a gigantic exposure to bad debt anymore.
We won't have to pay anything, because Germany will almost certainly have to pay for hte lionshare of any default. The IMF might have to come in, but there is enough contingency in the deficit reduction plan to pay a few billion pounds out to any IMF bailout. And, by the way, has anyone looked at UK bond yields? 1.2% or nearabouts, which is the same as German Bunds, so government finances are fine even when Europe is flapping about. What does this tell you? Investors are happy with the UK, and who knows? Maybe they will flock to us when Europe has to waste billions on readjustment.
The EU economy won't collapse because the euro fails. Can anyone seriously imagine the German economy just falling apart? No, it's far to healthy and nearly every investor knows that. If the euro collapses then all that will happen is that it will split in two, with a Northern and Southern Euro. The Northern one will appreciate massively and the Southern One will be dirt-cheap, meaning the southern economies might pick up a little and the Northern ones will be held back slightly. Germany will flop about a bit because it's exports would fall, but it has a gigantic current account surplus anyway that it can easily reduce without damaging its economy.
The UK? well, first of all our biggest singly trading partner is the US, so our exports would not collapse. While around 40% of our trade is with Europe, this really could not suddenly disappear. It could decline a little, but who knows? The finance sector will lose money if (or should I say when) Greece defaults and probably when the eurozone readjusts, but British banks do have a lot of money floating around that they've been hoarding since 2008, and don't have a gigantic exposure to bad debt anymore.
We won't have to pay anything, because Germany will almost certainly have to pay for hte lionshare of any default. The IMF might have to come in, but there is enough contingency in the deficit reduction plan to pay a few billion pounds out to any IMF bailout. And, by the way, has anyone looked at UK bond yields? 1.2% or nearabouts, which is the same as German Bunds, so government finances are fine even when Europe is flapping about. What does this tell you? Investors are happy with the UK, and who knows? Maybe they will flock to us when Europe has to waste billions on readjustment.
Exactly. West Germany annexed East Germany at an exchange rate of 1:1, and it was a bit stormy for a while but the world didn't come to an end. The worst thing that could happen is that German industry is overpriced because the 'Northern Euro' strengthens and has a mini recession, taking the EU with it. I can't see the Northern Euro strengthening that much with the likes of the Irish and French on board.
Talk of a Southern Euro is idle, the PIGS could never agree with each other and all you would get is competitive inflation. They are best independent.
Talk of a Southern Euro is idle, the PIGS could never agree with each other and all you would get is competitive inflation. They are best independent.
cardigankid said:
Exactly. West Germany annexed East Germany at an exchange rate of 1:1, and it was a bit stormy for a while but the world didn't come to an end. The worst thing that could happen is that German industry is overpriced because the 'Northern Euro' strengthens and has a mini recession, taking the EU with it. I can't see the Northern Euro strengthening that much with the likes of the Irish and French on board.
Talk of a Southern Euro is idle, the PIGS could never agree with each other and all you would get is competitive inflation. They are best independent.
True, but the Irish, in the Northern Euro, would and could never have a massive drag effect on the Northern Euro. With Germany and the Netherlands in it, Ireland is just a fly on the windscreen. It's economy is too minor to effect the Euro in the same way Germany's can. Talk of a Southern Euro is idle, the PIGS could never agree with each other and all you would get is competitive inflation. They are best independent.
Some people have suggested that France lead a southern euro, which could theoretically work, but I agree they could never really agree, if anything France would take over and annoy Spain and Italy, with Greece and Portugal just left to fall apart.
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