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Topic Title: Future of the Euro and the Eurozone
Topic Summary: Can all 17 countries stay in the Eurozone? (discussion from an Engineering perspective)
Created On: 18 November 2013 03:24 PM
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 18 November 2013 03:28 PM
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jarathoon

Posts: 1043
Joined: 05 September 2004

As everyone now realises the 2008 financial collapse has put huge strains on all European countries, and these strains have been amplified for a few Eurozone countries that cannot devalue their currency relative to others. Interest rates are an important factor as well, but don't always work in the right way in the midst of financial decline. even if an individual country has control of them.

At the present time several Eurozone countries are doing reasonably well economically, the most important and prominent of these being Germany. There are also countries doing very badly, especially in terms of youth unemployment, which include Greece, Spain and Portugal. And there are countries in between like Italy and France.

Countries like Greece, Spain and Portugal have had to deflate the wage levels in their economies, as well as the cost of the main essentials such as food, energy, water and housing. This causes problems for people who have invested in those countries using borrowed money.

At the moment these deflationary pressures are causing widespread suffering, so if the Euro is not to break up, instabilities of the single currency (in terms of the value of debt) must be fixed.

One way to do this is to invent automatic monetary stabilisers which act across the Eurozone area.

One example is if debt payments made by an individual or company on interest and capital invested in a particular country varied in a way that was linked to the relative GDP performance of that same country within the Eurozone. Therefore anyone who invested borrowed Euros in a country such as Germany (including Greeks) would pay a centrally determined supplement on their loan repayments, when the German GDP growth was higher than average, and anyone who invested borrowed Euros in countries such as Greece (including Germans) would receive discounts on their loan repayments when the Greek GDP growth was lower than the average.

Such a mechanism might help a country within the Eurozone deflate the wages and prices in their economy without forcing businesses with large outstanding loans from going bankrupt. If designed correctly stabilizer mechanism would effectively vary the exchange rate on euro debt associated with investments made in a particular country, also vary the interests rates paid on that same debt.

Economists may be able to improve on this example; they will have to come up with something new, the Euro cannot survive into the medium and long term without some sort of reform that is for sure.


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James Arathoon
 19 November 2013 01:46 AM
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jarathoon

Posts: 1043
Joined: 05 September 2004

If we regionalise our UK GDP growth we could think about investment in the Stirling Zone, regions of England, and Scotland Wales and Northern Ireland, in much the same way as I have proposed for the larger Eurozone.




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James Arathoon
 22 November 2013 03:23 AM
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kengreen

Posts: 400
Joined: 15 April 2013

Dear James,

I will readily confess that I am unable to comprehend as much as one-half of your posts but I note your use of the first-person plural - namely "we".

Most of the intelligent thinkers with whom I have exchanged opinions have accepted my proposal that the only committee that has ever worked, that has any chance of working either now or in the future, was the committee of 1. Unless there is a strong chairman of character most committees simply bumble their way to the tea-trolley and then depart to leave the committee secretary to decide the issue in his minutes. Regrettably such leaders, of the calibre of Churchill and Mrs Thatcher, have throughout history been thin on the ground and widely displaced in time; furthermore they inspire fear amongst their "supporters" which too often has led to treachery.

I stick to my original opinion that the Euro and its parent the European Union was doomed from the start. The self-worshipping ego and Man's greed for power will forever forbid the amalgamation of disparate communities.

And please, before anybody trots out the usual denigrations of Mrs Thatcher they would do well to remember that she did not seek the office of Prime Minister; rather was she pushed forward by seniors of the political party in the belief that they would have a puppet.

Ken Green
 22 November 2013 12:19 PM
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jarathoon

Posts: 1043
Joined: 05 September 2004

Ken,

A currency requires trust across the whole of society and between societies to operate. It is entirely appropriate to use the first person plural when talking about money.

The future of the European Union has to be considered as a completely separate issue to the future of the Eurozone.

In his 1924 budget Churchill (as Chancellor of the Exchequer) took us back to the Gold Standard. It was a disaster, leading to deflation, unemployment and eventually the General Strike of 1926.

The lesson from Churchill's return to the Gold Standard (and many other examples) is that disastrous policy mistakes can and do happen in the field of economics.

The issue I am trying to raise is: can common currencies (such as the Euro, Dollar or Sterling) be repaired such that automatic stabilizers keep the growth of weaker regions in touch with the stronger regions, instead of ad-hoc measures decided by politicians that don't end up helping in the right way or in a timely way.



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James Arathoon
 22 November 2013 12:54 PM
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kengreen

Posts: 400
Joined: 15 April 2013

James,

Surely confidence is the one thing missing in so-called economic policies even if we did have whole societies with but a single mind.

Whenever I see the word "economics" I am reminded of our bakers roundsman who held an economics degree; later he transferred into the local butchers emporium which, ultimately, he came to own - but I fear not for very long.

Just what is this modern creation called "economics" ?

Ken Green
 22 November 2013 01:06 PM
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Zuiko

Posts: 521
Joined: 14 September 2010

Originally posted by: kengreen

Most of the intelligent thinkers with whom I have exchanged opinions have accepted my proposal that the only committee that has ever worked, that has any chance of working either now or in the future, was the committee of 1. Ken Green


yes

A compromise means you get a result that everybody disagrees with equally.
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