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Greece bailout will collapse Euro?

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Re: Greece bailout will collapse Euro?

Postby tigerryan » February 15, 2010, 7:47 pm

A common currency is something I just cant gets my arms around, is it for the ease of transactions? Pocket calculators, wire transfers and credit cards, make exchanging money so easy. If your country has wild volatility issues that complicate transactions, fix the root problem then come back to the deal. I just can’t understand why anyone would want to share his or her nations checkbook with a demonstrated financial train wreck like Greece or Spain. I am just not seeing any downstream return on the relationship.

I guess my baggage against the notion of the EU currency is that I don’t think all people/countries share the same capitalistic ideals that others do. Some people/countries are just freeloading scammers and I would never think for a second that it would be within my ability to fix.
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Re: Greece bailout will collapse Euro?

Postby BobHelm » February 15, 2010, 8:24 pm

I have no idea if the Euro is a good idea Ryan.
Here is the Abstract of a report by the Dutch Central Bank in 1997 discussing it.
This report concentrates on the benefits of a common European currency; in particular those of the convergence to a lower inflation level, reduction of exchange rate uncertainty, lower transaction and information costs and reduced price discrimination. Calculations with the general equilibrium model and the macroeconometric model EUROMON of the Bank show benefits from the inflation-convergence of 0,6%-point in real GDP, and from the other factors mentioned 1% to 4%-points. Total benefits in the long term could even be much higher in case where the introduction of the currency is associated with the reduction of the risk premium of investment(s)

http://ideas.repec.org/p/dnb/wormem/520.html
You should remember that a lot of goods move around Europe, particularly from USA & Far East into the major ports of Holland & Belgium & then on into central Europe. In addition, for the last 10-15 years the major European economies have used the former Soviet States as a "cheap labour" manufacturing area in much the same way as some US companies have used Mexico. I can certainly see the attraction of not having to recalculate everything into a local currency maybe 5 times on one of these trips...
I also know that for European companies with enterprises in more than 1 country multi-currency adds yet another complexity into planning & running the business that has nothing to do with the business itself. The business can actually generate a profit (or hide a loss) just on currency variations that are completely outside the remit of the business. I would imagine that if you talked to the Chief Financial Officer of any multi-national Corporation then a single world currency would be pretty high on his wish list !! :D :D

On the Euro collapse front I think Greece is a bit of a minor problem to the one that appears to be brewing in France at the minute.
The retirement age in France is 60 for men & women, Most of the other States it is 65 & plans are already in place to raise it to 67 over the next few years. The French system is seriously in debt & the current outlook for even the next couple of years is horrific. The French trade unions have already said that any raising of the retirement age will be met with great disruption - and no-one disrupts quite so well as the French Trade Unions enraged!! :mad:
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Re: Greece bailout will collapse Euro?

Postby rick » February 16, 2010, 1:42 am

One of the basic rules of having a common currency is that money supply is constrained within limits set by the group. In the case of the euro this is complicated by the fact that in theory any country COULD print more euros and increase their money supply, but they would draw sanctions from the rest of the eurozone if this blatantly happened, Zimbabwe style.
What about the united states? common currency, sure there must be some deadbeat states. Main difference is they cannot print there own money?

Advantages of the euro to european internal trade are enormous, as Bob states. Greek problem is only small part of europe. The germans have clearly indicated there is no open pocket for the greeks to dip into; short term guarantees, no blank cheque. If the greeks blatantly fail to sort themselves out, expulsion from the Euro would be a possibility, but the 'new drachma' would have no credibility and the greeks would instantly become the poorest in europe; It will just take them a while staring reality in the face, before they will realise they only have one real solution, bitr the bullet sometime in the next 12 months.
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