frmrCapCadet
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Re: Brexit - EU position

Wed Jan 17, 2018 4:24 pm

If Greece had its own currency it would have had to devalue. And as in England the recent devaluation increased exports. More people go to work, debt is devalued and easier to pay back, but more importantly it is paid back. Nothing would have stopped rescuing French and German banks. Look how Iceland recovered, it would not have been possible if it had been in the Euro. My point in all of this is that a Euro currency without fiscal unity does not work. The Euro should not have taken the place of the various currencies of Europe.

And unfortunately the banks making quasi-illegal loans to Greece should have been sanctioned, and senior officers should be facing prison time - but that does not happen anywhere for the most part.
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seahawk
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Re: Brexit - EU position

Wed Jan 17, 2018 4:32 pm

Debt is only devalued if the debt is in your local currency. The question is if said banks would have given credits in Drachma and if yes under which conditions. If they would have, the interest would have been much much higher. So in your scenario it is very likely that the foreign banks would have seen little impact, but the institutions in Greece like pension fonds and so on would have been hit much harder.
 
tommy1808
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Re: Brexit - EU position

Wed Jan 17, 2018 5:21 pm

seahawk wrote:
Debt is only devalued if the debt is in your local currency. The question is if said banks would have given credits in Drachma and if yes under which conditions. If they would have, the interest would have been much much higher. So in your scenario it is very likely that the foreign banks would have seen little impact, but the institutions in Greece like pension fonds and so on would have been hit much harder.


Exactly.

frmrCapCadet wrote:
If Greece had its own currency it would have had to devalue.


That is a pay cut, and and actual pay cut would have had exactly the same effect.

And as in England the recent devaluation increased exports.


So do pay cuts, with exactly the same effect to the average Joe.

More people go to work,


Just like with pay cuts.

Debt is devalued


Debt increases. If the Drachma lost 20% value vs the Euro, debt simply is 25% more if the debt is in EURO. If debt is in Drachma, nothing changes, because so is income. Counties with weak currencies usually don't get large loans in their home currency, so they would have been in EUR, CHF or USD.

and easier to pay back,


Because more money is easier to pay back, right? Especially since that would mean to convert even more Drachma to EURO, which would put even more pressure on the Drachma, further increasing debt.

but more importantly it is paid back.


So they can't pay back 100 Euro, but 125? I'd like to learn that trick.

Look how Iceland recovered, it would not have been possible if it had been in the Euro.


If Greece have had a government half as responsible as the one of Island in the decades before the crash, Greece wouldn't have a debt to default on.

My point in all of this is that a Euro currency without fiscal unity does not work. The Euro should not have taken the place of the various currencies of Europe.


Exchanges rates between EU currencies had been pretty fixed long before the EURO. Since about the late 70s. Currencies could devaluate only be 2.25 percent, exceptions only to accomadate inflation rates higher than that and lower than the inflation rate. When Italy had double digit inflation rates, the lira was allowed to move down 6% top.
Changing that system was and is about as fast as wage discipline. So, even without the EURO, the result would have been pretty much the same.

I also love to remember all the experts and articles saying that countries like Greece and Portugal would have benefited from the EURO big time, while Germany would be screwed because of its high labour costs. So much for experts and their understanding of currency unions.

And unfortunately the banks making quasi-illegal loans to Greece should have been sanctioned, and senior officers should be facing prison time - but that does not happen anywhere for the most part.


On that we can agree, those banksters should have gone to jail. And their institutes should have been broken up into entities small enough to fail without widespread systematic consequences. In fact each bank considered to large to fail should be forced to split up into smaller ones.

Best regards
Thomas
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seahawk
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Re: Brexit - EU position

Wed Jan 17, 2018 6:10 pm

Countries are not offered credits, countries issue bonds that banks can buy. If those banks would not have bought the bonds, Greece would have defaulted earlier. There was lot of criminal activity in the banking sector during the financial crisis and it was very borderline when it came to the investment forms that invested into Greek Bonds, but the debt was made by Greece and Greece alone.
 
Bostrom
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Re: Brexit - EU position

Wed Jan 17, 2018 7:49 pm

Dutchy wrote:
frmrCapCadet wrote:
Avoiding the Euro was a key strategy for GB in preserving an essential sovereignty. And it somewhat is the factor in destroying the Greek economy as well as crippling Spain and Italy. Monetary unity without fiscal unity is madness. Economists as disparate as Friedman and Krugman have explained this.


Yes, Spain, Italy and mainly Greece have paid a price for the Euro, Germany, The Netherlands, Sweden, Finland and the like have huge benefits because of the Euro. If the UK had elected to become a member of the Euro community, it would have benefited as well.


How has Sweden benefited from the Euro?
 
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seahawk
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Re: Brexit - EU position

Wed Jan 17, 2018 8:02 pm

It is generally hard to say who benefited. When it was introduced Germany, Sweden or the Netherlands had to make some drastic adjustments to become more competitive again, while the southern European members enjoyed much reduced interest rates for any bond the issued. The problem is that those countries adjusting to be more competitive were more successful in achieving their goals, than the others were in achieving a lasting boost to their economy by wisely investing the cheap borrowed money. But in the end no currency can compensate a deficit of the Greek proportions. And in the end one should not forget that Greece was so eager to join the Euro, that they came up with some pretty creative accounting to meet the criteria, as they wanted the reduced interest rates for their government bonds that came with the Euro.
 
vc10
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Re: Brexit - EU position

Wed Jan 17, 2018 11:03 pm

seahawk, just a minute I do believe t hat Sweden is not part of the Euro club, but rather still uses the Swedish Kroner, as Bostrum suggested in posting1505
 
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seahawk
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Re: Brexit - EU position

Thu Jan 18, 2018 6:01 am

Yes, sorry. They were only in the group of countries who had to reduce their social security systems.
 
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Dutchy
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Re: Brexit - EU position

Thu Jan 18, 2018 7:38 am

vc10 wrote:
seahawk, just a minute I do believe t hat Sweden is not part of the Euro club, but rather still uses the Swedish Kroner, as Bostrum suggested in posting1505


True, their currency is coupled to the Euro though, so some of the benefits and drawbacks do spill over to these EU countries.
Many happy landings, greetings from The Netherlands!
 
olle
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Re: Brexit - EU position

Thu Jan 18, 2018 8:19 am

regarding the Euro Cyprus, Estonia, Latvia, Lithoania, Malta, Slovakia and Slovenia all joined after 2008. they have not got the catastrophic experience like Greece. Rather the opposite.

The effect Brexit will have is that before 2030 Sweden and Denmark also will have joined.

EU will also because of Brexit become much more of a state. I think that a Norvegian model for UK without a UK veto for change will mean that EU develop much faster compared to a EU with UK as full member.
 
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zkojq
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Re: Brexit - EU position

Thu Jan 18, 2018 8:37 am

More good news; Macron has managed to get May to pay for new security upgrades and border processing facility in Calais!

Britain will pay £44.5m for extra security measures in France to prevent another refugee camp forming in Calais or any other Channel port, Theresa May is to announce. The extra cash will go towards fencing, CCTV and other detection technology in Calais and other ports, possibly including Dunkirk. It will also be used to help relocate migrants from the port towns to other parts of France.

To be announced as part of the Anglo-French summit at Sandhurst military academy on Thursday, the money brings total British funding for security and policing in Calais since the “Jungle” camp was bulldozed in 2016 to more than £150m. The measures have included building a 1km-long concrete wall designed to prevent migrants and refugees getting close to the roads used by trucks approaching the port.

As well as pressing for an increased contribution to such costs, the French government has been urging the UK to set up a joint operation to process asylum seeker claims in Calais.

The proposal could form part of a new treaty – effectively an updated Le Touquet agreement, under which British border checks are carried out in France.
Macron had been seeking an overhaul of the Touquet accord, saying France could no longer be Britain’s “coastguard” without concessions from the UK to help ease the migration crisis.

https://www.theguardian.com/politics/20 ... rench-deal

Olddog wrote:
Macron is pushing hard for an inner circle that will move faster and closer.

Which is exactly what the EU needs.

Olddog wrote:
Well, not nice welcome for davis&hammond:
https://www.bloomberg.com/news/articles ... ank-access

The article isn't very specific, but I sure hope that by "access" to financial markets, Germany would not consider letting the UK continue with passporting.

JJJ wrote:
Prices up 30%, 18% growth wiped off up until 2030 (including a two-year recession).....

Talk about shooting yourself in the foot before a marathon.

:checkmark:

sabenapilot wrote:
You just can't make this one up: now even N. Farage is having second thoughts and is considering joining the call for a second referendum....

https://news.sky.com/story/nigel-farage ... t-11203281

:lol: I thought that he had retired from UKIP after the referendum? Why do people still give that waste of oxygen airtime?
First to fly the 787-9
 
UltimoTiger777
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Re: Brexit - EU position

Thu Jan 18, 2018 1:18 pm

olle wrote:
EU will also because of Brexit become much more of a state.


The nation state is dead, long live our new nation state!
 
ElPistolero
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Re: Brexit - EU position

Thu Jan 18, 2018 5:31 pm

UltimoTiger777 wrote:

The nation state is dead, long live our new nation state!


Correction: The ethno-lingual nation state is dead, long live our new civic nation state.

Not sure if that's the case yet, but it'll certainly be an improvement over the brexitbart nation state.
 
UltimoTiger777
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Re: Brexit - EU position

Thu Jan 18, 2018 7:51 pm

I think the Yugoslavs tried that too.

Remind me how it ended?
 
VSMUT
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Re: Brexit - EU position

Thu Jan 18, 2018 8:42 pm

UltimoTiger777 wrote:
I think the Yugoslavs tried that too.

Remind me how it ended?


With all the Yugoslav states scrambling to join the EU?
 
ElPistolero
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Re: Brexit - EU position

Thu Jan 18, 2018 9:14 pm

UltimoTiger777 wrote:
I think the Yugoslavs tried that too.

Remind me how it ended?


If the EU is like the erstwhile Yugoslavia, why are former Yugoslav states either trying to join the EU, or already part of the EU?
 
UltimoTiger777
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Re: Brexit - EU position

Fri Jan 19, 2018 12:39 am

You're missing the point.

You cannot build a new "civic" nation state out of 27 ones with sometimes completely different cultures and societies by stealth.
 
Klaus
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Re: Brexit - EU position

Fri Jan 19, 2018 2:35 am

UltimoTiger777 wrote:
You cannot build a new "civic" nation state out of 27 ones with sometimes completely different cultures and societies by stealth.


We have considerable experience with that already by now. People are still just as german, finnish, dutch or portuguese as they've ever been, and yet all of us share a common european citizenship and all the advantages the European Union brings only because we've pooled many structures and with huge amounts of effort removed large amounts of barriers and red tape between the nations.

Nation states will most likely always continue to exist, but as they do now within the larger shell of the European Union; And responsibilities will continue to be adjusted between those two levels and further down the stack with regions and local communities.

There is nothing fundamental about that, but some gradual adjustments still remain necessary because as the world evolves so must the EU.

The UK has unfortunately been an impediment to many reforms which are now going ahead at long last with the UK exiting, and at least that is a positive outcome of Brexit. I see none for the UK itself, but it's been their own choice.
 
ElPistolero
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Re: Brexit - EU position

Fri Jan 19, 2018 2:52 am

UltimoTiger777 wrote:
You're missing the point.

You cannot build a new "civic" nation state out of 27 ones with sometimes completely different cultures and societies by stealth.


Evidently. I don't recall Yugoslavia being a nation state created by stealth.

As for Europe being a nation state, frankly, I'm just humouring the brexitbart fantasy that it is one (it's quite clearly not). And noting that if it were to become one, it would likely be a civic nation state - like most multicultural societies which, believe it or not, both exist and thrive (some Brexit/alt-right anti-immigrant claims notwithstanding).

I know there's been talk of more integration post-Brexit, but that's been stated publicly by the likes of Macron and doesn't look like it's going anywhere anytime soon. Maybe it will happen. Maybe it won't.

Either way, I'll take a civic nationalist over an ethno-nationalist any day.
 
tommy1808
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Re: Brexit - EU position

Fri Jan 19, 2018 6:18 am

UltimoTiger777 wrote:
You're missing the point.

You cannot build a new "civic" nation state out of 27 ones with sometimes completely different cultures and societies by stealth.


You may want to check how many different nations make up the civic state of Germany. Holy Roman Empire ringing a bell? That was pretty much a small European Union that that survived for 1000 years, guess where Hitler got his 1000 year empire idea from?

best regards
Thomas
This Singature is a safe space......
 
Olddog
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Re: Brexit - EU position

Fri Jan 19, 2018 10:19 am

I think Macron spelled things nicely yesterday. If there is still some people that don't understand how things will be played, they have a brain problem.
When UK was in it wanted a lot of opt-outs, now it is out it wants opt-ins
 
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Aesma
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Re: Brexit - EU position

Fri Jan 19, 2018 1:05 pm

Macron wants a deal on the Euro very soon. He wants a go-ahead from Germany to present it at the next summit of EU leaders.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
Klaus
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Re: Brexit - EU position

Fri Jan 19, 2018 3:37 pm

tommy1808 wrote:
UltimoTiger777 wrote:
You're missing the point.

You cannot build a new "civic" nation state out of 27 ones with sometimes completely different cultures and societies by stealth.


You may want to check how many different nations make up the civic state of Germany. Holy Roman Empire ringing a bell? That was pretty much a small European Union that that survived for 1000 years, guess where Hitler got his 1000 year empire idea from?


That comparison has been misused by the brexiteers, too, but there is one crucial distinction: The European Union is the first and so far only Union of its kind where all member nations are joining voluntarily, where they all have their say and a full democratic vote and where they can leave again if they want.

And that makes all the difference, but of course it is extremely complex and challenging to make this work. But given the difficulties it is working remarkably well.

Specifically due to the member nation governments collectively holding the ultimate authority in the EU it is very unlikely that they would ever agree to being dismantled themselves, and that would be a bad idea anyway. Subsidiarity is a good idea and the nation states have a legitimate and useful role to play among the various structural layers.

By the way: The UN is the topmost layer of government even above the EU, but in the current distribution of responsibilities it has only very limited powers apart from the (relatively undemocratic) Security Council. Still, the principle of subsidiarity applies across all levels from the local community up to the UN.
 
LJ
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Re: Brexit - EU position

Fri Jan 19, 2018 9:01 pm

Maybe some interest to this discussion. The Dutch government released a study to the costs associated to a hard Brexit for The Netherlands. According to the study, KPMG estimates that the additional cost for import and/or export will be between EUR 387mio and 627mio annually. The cost relate to customs costs and costs associated with meeting the UK product standards. The additional customs costs are estimated at EUR 78.20 - EUR 127.60 per shipment (for The Netherlands 752,000 import declarations and 4.2mio export declarations). In addition, a shipment of cut flowers will add an additional EUR 100 - EUR 190 per shipment for packaging. A shipment of paint will add somewhere between EUR 250 - EUR 500 due to packaging, certification and other administrative costs. Costs associated with the increased transport

For those who want to read the full report (105 pages).
https://www.government.nl/documents/publications/2018/01/18/impact-of-non-tariff-barriers-as-a-result-of-brexit
 
prebennorholm
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Re: Brexit - EU position

Sat Jan 20, 2018 4:47 am

olle wrote:
The effect Brexit will have is that before 2030 Sweden and Denmark also will have joined.

That is certainly new to me. During the last ten years no Danish politician has dared to mention the word "Euro". And if one had done so, then he/she would have been politically dead a fraction of a nanosecond later, no matter from what party.

When the Euro was new, we voted 53% against it. A new referendum today would be closer to 90% "njet". And it cannot possibly happen without a public referendum.

I voted "yes" back in the old days. I will never do that again. I'm very glad that most of my fellow citizens were cleverer than me.

Big countries like France and Germany have some power when it comes to emposing discipline in the ECB system. They failed to do so against the so called PIIGS countries, but they might have been able to do an OK job, if they had tried.

Tiny little countries like Denmark don't have such "power". We only have to pay up with the rest of the club, if disaster strikes, and if we are a member.

Things can change dramatically over time. But "before 2030"? No way!

Sweden is likely more positive related to Euro, and they even find it relevant to make polls in the press at least annually. Last poll I can google:
Don't know: 11%
No: 74%
Yes: 15%
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Aesma
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Re: Brexit - EU position

Sat Jan 20, 2018 2:49 pm

The Danish krone is pegged very closely to the euro so what difference does it make ?
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
frmrCapCadet
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Re: Brexit - EU position

Sat Jan 20, 2018 4:25 pm

I think the difference for Denmark is that should they face a severe monetary crisis precipitated by forces outside of Denmark they do have the power to revalue (Switzerland) or to devalue (Iceland and Great Britain). Until pensions and social services are backed by the entire EEC particular regions are vulnerable to outside shocks. And there are countries and banks who are only too happy to take advantage. So long as the currency is local, even though there are reasonable reason for its value to be more or less constant, it is important to have the last say.
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Aesma
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Re: Brexit - EU position

Sat Jan 20, 2018 6:02 pm

Denmark has kept its debt very low so the risk is minimal. I wonder if it was on purpose or if it was because nobody wants their non euro denominated debt ?

I'm not in the market for treasuries in part because I really don't trust their value over time, especially when it's so easy to manipulate a currency. It's one of the appeals of cryptocurrencies, no government control, and no unlimited printing (at least for the good ones).
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
LJ
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Re: Brexit - EU position

Sat Jan 20, 2018 7:11 pm

Aesma wrote:
Denmark has kept its debt very low so the risk is minimal. I wonder if it was on purpose or if it was because nobody wants their non euro denominated debt ?


It's irrelevant in which currency a treasury is quoted. As long as it's from a country which repays its debts, and is rated highly, they're sought after.

Aesma wrote:
I'm not in the market for treasuries in part because I really don't trust their value over time, especially when it's so easy to manipulate a currency. It's one of the appeals of cryptocurrencies, no government control, and no unlimited printing (at least for the good ones).


Do you actually know how treasuries work? There is no unlimited printing of treasuries as once issued, it cannot be increased. Yes a government can issue more treasuries, but that is limited as well (you still need a buyer). Their value is nothing more than the net present value plus a mark-up (or mark-down) for the default risk. Moreover, how do you intend to manipulate a major curency (like DKK or GBP)? Have you any idea how FX rates are determined?

BTW What does this has to do with Brexit anyway?
 
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Aesma
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Re: Brexit - EU position

Sat Jan 20, 2018 7:56 pm

I was talking about the unlimited printing of actual money. Of course that means the treasuries will be paid back, it also means they will have lost value.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
frmrCapCadet
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Re: Brexit - EU position

Sun Jan 21, 2018 12:46 am

Krugman has been surprised at how little running deficits affects currency after watching what happened in Japan and the US. He and others are now wondering what a country has to do to create the optimum amount of inflation. Most think 2-3% inflation provides the 'lubricant' that keeps an economy running smoothly. Deflation and serious inflation are both harmful.
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prebennorholm
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Re: Brexit - EU position

Sun Jan 21, 2018 4:06 am

Aesma wrote:
The Danish krone is pegged very closely to the euro so what difference does it make ?

When the ECB loses control of the Euro, then the Danish krone becomes unpegged in a minute. So we sure hope that it makes no difference.

But as I said before, Denmark adopting the Euro is at present a politically total non-issue.
Always keep your number of landings equal to your number of take-offs
 
tommy1808
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Re: Brexit - EU position

Sun Jan 21, 2018 6:39 am

frmrCapCadet wrote:
He and others are now wondering what a country has to do to create the optimum amount of inflation. Most think 2-3% inflation provides the 'lubricant' that keeps an economy running smoothly. Deflation and serious inflation are both harmful.


Wage increases. In the long run inflation will always be wage increases - production increase = inflation.

If you want more inflation, you need wage increases exceeding efficiency growth.
They are not wondering how to create inflation, they are wondering how to do it without admitting how important healthy unions are to a healthy economy.

Best regards
Thomas
This Singature is a safe space......
 
tommy1808
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Re: Brexit - EU position

Sun Jan 21, 2018 6:55 am

prebennorholm wrote:
Aesma wrote:
The Danish krone is pegged very closely to the euro so what difference does it make ?

When the ECB loses control of the Euro, then the Danish krone becomes unpegged in a minute.


Legally only with the ECB agreeing to it and until that they have to keep the exchange rate pegged. The ECB has no obligation to keep the EURO stable vs. the Krone, but the nationalbank has to keep the krone stable vs. the EURO.

Denmark not officially joining the EURO is just like Brexit with access to the common market. Follow all the rules, but have no saying about the rules.

Best regards
Thomas
This Singature is a safe space......
 
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par13del
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Re: Brexit - EU position

Sun Jan 21, 2018 12:41 pm

tommy1808 wrote:
They don´t have abundant natural resources to export like Argentina....

best regards
Thomas

That line right there should tell you this is all about politics and not trade, I guess we could follow the politicians line and say that Argentina's problems are due to the fall in oil prices and the USA.
 
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Aesma
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Re: Brexit - EU position

Sun Jan 21, 2018 11:21 pm

I sympathize with the Greek people but at the same time I feel what happened to them could have happened to my country, if less responsible politicians had been put in power. The people put them in power though, so why try and blame other countries or foreign companies ? If Greek people elected corrupt politicians, it's because the Greek themselves were corrupt. They had no problem cheating taxes, it wasn't some side problem, it was everyone doing it. Bribing left and right, etc.

There was probably a better way to help Greece recover, but that has nothing to do with how Greece got there.

The irony in all this is that a left-wing populist is now the one in charge and, against all odds, is actually being responsible. His great friend in my country Jean-Luc Mélenchon would like to take power here to basically implement the program Tsipras couldn't do in his country.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
prebennorholm
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Re: Brexit - EU position

Mon Jan 22, 2018 12:24 am

tommy1808 wrote:
Legally only with the ECB agreeing to it and until that they have to keep the exchange rate pegged. The ECB has no obligation to keep the EURO stable vs. the Krone, but the nationalbank has to keep the krone stable vs. the EURO.

Correct. Because Denmark is an ERM II member. With extra narrow exchange rate limits, +/- 2.25% versus normal 15% for ERM II members.

But real politics is that should the ECB and the Eurozone countries again bend or violate own rules, and create a "PIIGS ver.2 crisis", then Denmark has the option to also bend/violate the rules and cancel ERM II membership.

What could happen is similar to PIIGS ver.1 and Switzerland. Switzerland voluntarily pegged the frank to Euro for many years, but it became too costly. Switzerland ended supporting the Euro on 15 January 2015, and the frank jumped some 20% up overnight.

tommy1808 wrote:
Denmark not officially joining the EURO is just like Brexit with access to the common market. Follow all the rules, but have no saying about the rules.

180 degrees wrong. Denmark's situation is identical to Britain as an EU member, except that the UK was a CRM member only for a brief period in 1991-92. And Britain as EU member is identical to for instance Sweden, Poland, Czech Republic, except that the latter countries are officially obliced to join the Euro some day or ASAP. Real politics means that ASAP = constantly pushed five years ahead as long as public resistance is polled around 70-75%. All relevant government carrying parties promise before elections, no Euro in our time, or they have no chance at the elections.

We will all have the Euro one day. It's a good idea. It was just introduced badly.

It was created as a healthy food to make healthy people even stronger. But it was introduced as a drug to cure serious illnesses. Not only didn't it work as a drug, but it also was incompatible with the drugs needed to cure the illnesses.
Always keep your number of landings equal to your number of take-offs
 
Olddog
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Re: Brexit - EU position

Mon Jan 22, 2018 10:12 am

Switzerland ended supporting the Euro on 15 January 2015, and the frank jumped some 20% up overnight.


After a 30% fall end 2014. Today Swiss franc is still lower than in 2013. It is always easy to chose data points for an argument but....
When UK was in it wanted a lot of opt-outs, now it is out it wants opt-ins
 
Catfry
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Re: Brexit - EU position

Mon Jan 22, 2018 5:13 pm

prebennorholm wrote:
tommy1808 wrote:
Denmark not officially joining the EURO is just like Brexit with access to the common market. Follow all the rules, but have no saying about the rules.

180 degrees wrong. Denmark's situation is identical to Britain as an EU member, except that the UK was a CRM member only for a brief period in 1991-92. And Britain as EU member is identical to for instance Sweden, Poland, Czech Republic, except that the latter countries are officially obliced to join the Euro some day or ASAP. Real politics means that ASAP = constantly pushed five years ahead as long as public resistance is polled around 70-75%. All relevant government carrying parties promise before elections, no Euro in our time, or they have no chance at the elections.

We will all have the Euro one day. It's a good idea. It was just introduced badly.

It was created as a healthy food to make healthy people even stronger. But it was introduced as a drug to cure serious illnesses. Not only didn't it work as a drug, but it also was incompatible with the drugs needed to cure the illnesses.


I think what tommy1908 means is that the Danish central bank have no say in policy decisions about "its" currency. As a practical matter, the Danish central bank has a single mandate, to maintain the DKK-EUR exchange rate at a largely fixed value. It doesn't target inflation, or employment, or GDP. As such, Danish monetary policy is entirely decided in Frankfurt. Everytime the ECB has raised or lowered rates, the Danish central bank has followed suit.
This is not a legal or political decision, but practical. the Danish economy is so integrated with the Euro area that it has no realistic path to success to act in a manner that do not take into account the trends in the Euro area. The Euro area decide what policies are followed for Denmark, it can never be any other way, unless danes decide to shoot themselves in the foot.
That Denmark is not formally a euro member only means that they do not have a vote on the ECB board, and are thus cut of from any direct influence on policy.
 
tommy1808
Posts: 11661
Joined: Thu Nov 21, 2013 3:24 pm

Re: Brexit - EU position

Tue Jan 23, 2018 6:30 am

Catfry wrote:
I think what tommy1908 means is that the Danish central bank have no say in policy decisions about "its" currency. .


Exactly right.

best regards
Thomas
This Singature is a safe space......
 
frmrCapCadet
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Joined: Thu May 29, 2008 8:24 pm

Re: Brexit - EU position

Tue Jan 23, 2018 10:56 pm

Denmark generally has no say about the value of its currency versus the Euro. Doesn't mean the same as never.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
Catfry
Posts: 30
Joined: Mon Oct 09, 2017 10:20 am

Re: Brexit - EU position

Wed Jan 24, 2018 4:10 pm

As an aside, Sorry to tommy1808 for misspelling his name.

Now, as I said, fixing the exchange rate between Denmark and its biggest trade partners is a practical decision, not due to any coercion, legal or political. The European exchange rate mechanism framework obliges Denmark to keep it, but Denmark was itself one of the founding partners, and a driver in the way it was set up. Before the ERM Denmark participated in the "Snake in the tunnel" partnership, and even before Bretton Woods the Krone was fixed against the Deutsche Mark, so it is a continuation of a policy that has existed practically all of the 20th century.

Denmark is a small open trade nation which is dependant on a level playing field on the market. A floating currency introduces risk in any cross border exchange. This can be dealt with by hedging, which is accepting a certain fixed cost, in exchange for reduced risk, or a company or trader can decide to accept the risk that the values in a deal will change unpredictably. The problem in the first case is that a company will bear costs that a different company without currency risks do not. So a Danish company selling on the german market will be disadvantaged in this scenario.
In the second case, the company is essentially gambling, it might win out, or it might lose, essentially at random. So it represents an introduction of an element of randomness to any transaction, meaning that winners or losers are selected, not on their merits, but by luck. This isn't desirable in a market economy, where the ideal is that companies that act rationally and economically desirably win out, due to merit. and the entire economy becomes less efficient because less efficient and rational actors on the market might randomly win economically, and continue allocating spending in an suboptimal fashion.
There are of course advantages to a floating currency but those are the ones you often hear about, I thought I'd remind that there are disadvantages as well.

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