The single dollar works for the US because it's one country. Even the Federal structure of the US was created with the knowledge that each individual State was part of a greater whole. One people, one language, etc etc.
The Euro won't work for Europe because it is many countries; many languages, many histories, many different values, and many peoples who never had the intention of being one people, despite what some grubby, empire-building, bureaucrats, bankers and politicians might prefer.
And the Euro won't last because when you have basket-case countries issuing the same currency as sensible ones, the value of the said currency must, by definition, fall to the standard of the lowest common denominator. Thus it will lose value both for the peoples of the sensible countries, and to those outside nations with whom they seek to trade.
Once it loses value for the wealth-producing nations, the Euro will no longer be viable, and that will very probably happen sooner rather than later.
What really puzzles me is how so many otherwise ostensibly intelligent people fell for the myth of the Euro in the first place...but then Europe has embraced some other fairly weird ideas this past century, so perhaps it's not so surprising after all.
Spot on Blue Wolf. I´m surprised no one has mentioned the ongoing pensions fiasco that is looming here on the continent. Unfunded pensions of up to 90% Final Salary for unproductive civil servants, as well as massive public infrastructure spending is going to cause BIG problems in the near future. This will all be reflected in the currency. One of the few countries without these problems? The U.K ,of course.
Having said all that, I choose to live here in Spain precisely because of the improved standard of living and better infrastructure. The Euro has helped me because I "think " in Pounds and then convert which is a lot easier now I dont have to divide by 225-250 (depending) ´
Is it a good idea? Yes ! Is it good for the U.K ? I don´t know
This has developed into one of the most cerebral threads I've seen on JB!
As has been noted, initially by Ms. Picker, one of the most
important aspects of the U.S. economy is mobility of labour.
Whenever you drive the Interstates, you are constantly
overtaking U-Haul punters.
The language in California is the same as in New York. OK
the accent is different but the unifying bond is a) language and
b) nationality. The distance from London to, say Madrid, is far
shorter, but the culture change -- not to mention the language
change! -- is profound.
Essentially Europe does not have the same mobility of labour
which can be hugely important for an economy. This does not
apply to many blue collar jobs such as the building trade etc.
Hearing an Eastern European accent on a building site is not
uncommon nowadays....
Ask civil servants who work in London to move to Leeds (a
distance of under 200 miles) and the bulk will refuse. Mobility
helps economies. But In Europe it is not prevalent.
As I said before I fully agree with the concept of the euro
being the national currency of Europe. But, the rub is that
economic cycles and economies are different.
In the UK some 70 percent of people own their own homes. The
figure for Germany -- a larger economy -- used to be around 50
percent (not sure what it is now). Therefore interest rate
movements tend to be more important for a Briton than a German.
Brits also account for around two-thirds of ALL credit card
debt in the EU. Brits are far more likely to spend on the
never-never than other European nations. So again, interest
rates -- and national cultures -- come into the equation.
The current ECB rate for the euro zone is two percent. The
next move may well be down since the German, Italian and French
economies are stagnating.
In the UK the Bank of England rate is four percent and is
almost certain to rise very shortly -- in May is our house view,
and probably that of Ms. Pickers' shop as well.
Sorry for the disjointed nature of this post, but it's taken
me an hour off and on. French consumer spending was down a
whopping 1.4 percent m/m in March, another sign that it's not
only the Channel (La Manche) that separates the UK and France
and rather proves my point I feel.
It is excellent to read this and the referundum debate. I have a limited understanding of the economic arguments and am very keen to broaden my knowledge of pros and cons for both the single currency and the constitution (I am currently reading the draft treaty). This kind of debate gives the lie to those people who say that the british public lacks the intelligence to understand or vote on the issue.
Most of the people I talk to are united in the view that it is crucial for the progress of this country that we get involved in the debate. Based on my upbringing I am pre-disposed to be Euro sceptic, however, I am determined to examine all the issues and come to a balanced decision based on the facts. I would certainly not rule out voting for if the arguments stack up.
I just hope that the question that we get to vote on is not some fudge to meet political ends.
The new constitution does not mean much for the Euro.
angels
A interesting post but a few remarks are in order:
You wrote:
'Ask civil servants who work in London to move to Leeds (a distance of under 200 miles) and the bulk will refuse. Mobility helps economies. But In Europe it is not prevalent. '
Indeed. Is this an argument for having different currencies in London and Leeds?
Mobility is useful to a single currency area but I'm not sure what level of mobility Europe needs for a single currency. Perhaps the level required is fairly low.
'But, the rub is that economic cycles and economies are different. '
Two different points here.
economic cycles: generally agreed (see ORAC's link) that regional economic divergences within countries are as significant to currencies as between EU countries. If Sterling works, then so will the Euro. This argument holds for interest rate movements - parts of the UK economy would benefit from rates going down or staying the same.
Structure of debt. I think that your fact on the amount of credit card debt may be a little out of date but yes, the UK has much more credit card debt than Germany for example. There are differences in the structure of assets (houses in the UK; bonds in Germany) and debts (UK: mortgages and credit cards; Germany bank loans). But the UK is not very different from the rest of Europe in terms of the overall amount of personal debt. Consumer debt is more developed in Denmark, Sweden, Finland; France and the UK are about the same (as they always are!!!); somewhat less debt in Germany, Belgium and Ireland and a much less developed consumer debt market in Greece, Portugal, Spain and Italy. But Spain is changing fast. Dunno about the Dutch.
So the ol' UK aint so unique after all.
maxy
You are right to say that there is a problem of pensions in many continental countries, especially Italy and Belgium, then Germany and France.
There is also a problem in the UK - state pensions are 100% unfunded. It is not quite so urgent as it is in some other countries. However, because it is less evident, the political pressure to do something about it is less.
The reason why the UK is in a slightly better position is, ironically, because of the large numbers of young EU persons working there and paying Nat Insurance. Leave the EU, they leave and woomph, the situation would get much worse (but still not as bad as Italy).
answer - fair enough, but I would argue the UK has a typically different economic cycle to that of mainland Europe. This was why I pointed out the disparity in interest rates.
Just today we've had Richard Lambert (a voting member of the Monetary Policy Committee at the Old Lady) saying the housing market is the biggest domestic uncertainty facing the Bank right now.
The Bank has tried to cool the housing market by using the interest rate weapon. But what's happened? Data published by the BBA shortly after Lambert spoke shows that mortgage lending rose six billion sterling in March. The two rate rises haven't filtered through yet! There's more on the way.
Just imagine what mortgage lending would be like if rates were at two percent!
Re mobility, my point was the yanks are good at it, the Europeans not so. Price and wage disparities also play a role here. 300k sterling will get you my house in London, SE7. It'll get you a darn sight more in Calais, which is closer to me than Manchester. But am I going to move to Calais?
The UK has had property booms and busts for as long as I can remember: the Barber boom, the Lawson boom and so on. Now that the Bank of England is independent, maybe they'll manage to slow the boom down before it gets out of hand.
To link the two points together: there is a housing boom in France. For example, house prices are going up in Calais, partly fuelled by French people who want to live in France but work in London. Mobility is just starting in Yoorp.
'Buy to let' in the UK will eventually make the housing market more like elsewhere in Yoorp. Just because interest rates or exchange rates right now don't fit doesn't mean that there won't be a point - even in the fairly near future - when they do.
In sum, the UK's economic cycle has been different but there are good economic arguments - not linked to the Euro - for making it less different.
answer=42 The other thing about pensions here on the continent is that virtually nobody has a private one. It is only recently that some countries changed their laws banning them. They are 20 yrs behind the UK in that respect. Unfortunately , for them, with the demographic time bomb ( i.e it takes 18 yrs to grow a taxpayer) they wont have enough time to do anything about it except borrow. This assumes that immigration policies stay as they are. One of the few EU countries to allow freedom of movement welcolme newcomers? The U.K , of course. I think successive UK governments have seen this coming for years , hence the encouragement for private pensions and the willigness to allow both legal and illegal immigration into the U.K.
Been busy today and didn't have the time to discuss what is rightly called the pension time-bomb which maxy talks about.
There have already been strikes in Italy about proposals to water down their (highly generous) pension system.
When I worked in Singapore I was shown a private piece of research from within a major U.S. investment house which (and I obviously precis here) essentially said: 'To keep pension provisions at their present level GDP will have to quadruple in the next 30 years. The Japanese aren't having children -- who are the one's that pay for pensions.' The last I saw each married couple had something like 0.7 kids (please don't take the mickey, this is stats).
Since then GDP in Japan has contracted.
The UK is just about okay with pensions. The rest of Europe is in deep shite.....
Partly some clarification for other readers, partly some differences of opinion.
Yes, you're right to say that private pensions are generally speaking much rarer on the continent. But once again, this is generally a difference in how assets are held: not in the level of assets held by individuals.
For example, it's been a long time since anyone trusted the Belgian governments (note plural!) to maintain the value of the state pension. But there is very widespread asset ownership - indeed much more than in the UK; and the value of the assets held by individuals is quite high (This observation is not based on government statistics). I'm not saying that this is the right way to do things, just that both the assets and the intended use are there.
I note that angels mentions Singapore, which has one of the few funded pension systems in the world. Am I right to say that the population is falling?
There is a shortfall in the UK's projected balance in pensions, so things are not entirely tickety-boo there. Both Major and Blair have recognised this, though neither has done anything serious. The solution is not borrowing but saving (comes to the same thing in the end). I suppose I should have a look at personal savings data across the EU. I know that outside scandinavia, there is no data on personal assets.
Of course in the EU there is freedom of movement of labour. And the UK pensions system has gained from that by attracting more migrants from other EU countries proportionate to its size than most other countries, Luxembourg being an exception. And as Maxy was brave enough to point out, immigration from outside the EU has also helped the UK's pensions situation.
I don't believe that there will be a melt-down, even in Italy (which also has a very low birthrate, not coincidentally). Instead a combination of increased savings and lower pensions. Both of which are recipies for slow growth.
Bletchley, where did you quote that from? I smell brochure.
BTW, I rather like the idea of imperial measurement "leading the world" - was - say - a 2ft piece of wood better than a 900mm one? Isn't it a little petty to base our economic and foreign policy on nostalgia about fluid ounces? What are the "future EU plans" that are jeopardising what's left of our economy? By'eck, if they were that evil and that certain you'd think they'd quote one!
Can you give any reason why "bureaucracy, corruption and fraud" should be ever-expanding?
I think it is a irresponsibly optimistic statement to say that we could "easily renegotiate sensible trade and export agreements with all countries". How do you know? What is "sensible"? Would these be anything like the US steel tariffs?
Quote:
At the moment the U.K. belongs to the U.N, NATO, the G8 Group and many other international organisations. E.U. common economic, foreign and defence policies, where we are constantly outvoted and outmanoeuvred by other E.U. states, are already seriously undermining our influence and interests in the rest of the world.
Really? I wasn't aware that we are "constantly outvoted" in the EU whilst, apparently, we always get our way in Nato, the UN and the G8. That will be why the UN was so keen on invading Iraq, will it?
Quote:
The Euro is showing signs of being a failing or "soft" currency. It has gone down 10% or more against most world currencies since its launch.
Whoops!
Quote:
Joining the Euro would mean the end of our economic independence. We would not set our own interest rates. We would have to transfer 80% of our gold reserves to the European Central Bank, which we would never get back.
Why would we want gold reserves without a currency to back? What would be the point? They would still be just as useful as they are now, providing the same function for our new currency - they would not somehow magically vapourise out of the ECB's vault to be spent on beer by evil foreigners
Quote:
We would have taxation rates set by the E.U, not by the British Chancellor of the Exchequer.
Simply not true.
All in all, nonsense, and I think I know where from. This is a UKIP leaflet, isn't it?
well done. he also quotes from the Daily Mail by the way. I have actually been to Bletchley, many years ago. There is a minor Slitherin in the Harry Potter novels by that name.
By the way, you forgot that the G8 isnt an international organisation, just a meeting. There, that's the cherry on top.
Answer=42 I fear you may be right re: no meltdown in Europe. However, I do think it will be the financially prudent North European countries that will pay for the less prudent. In essence, the Scandis and ourselves will end up subsidising the overbloated civil services of Southern Europe where such jobs are a cushy number for life. (In Spain, they knock off at 1300. Many have second jobs)
It will be done , by giving away more fish, agricultural subsidies, VAT transfers, and eventually , some kind of direct taxation paid straight to the EU for them to dole out "where it is needed". Call it a "cohesion " fund.
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