Ukip And The Bnp

[Chinahand]

Finally, can anyone tell me a good financial reason not to align with the Euro, apart from the spurious reason of losing the Queen's face from our currency?

Yes - the ability to set our own interest rates for our economic conditions rather than the average conditions for Europe. Plus having a flexible currency.

 

Exchange rate movements help even out economic disruption by altering the terms of trade etc with countries trading partners.

 

The UK has recently been buying too much from abroad - and borrowing/selling the family silver to fund it. That was unsustainable - now the pound has dropped its far more expensive to buy from abroad - so people are doing far less of it - and hence borrowing etc less. The UK's biggest trade currency is the Euro - if we were fixed to it this method of equalization wouldn't be available.

 

Ireland was really screwed by its inability to set its own interest rates - they were far lower than what the economy needed during the boom years, but are now more than likely too high limiting its ability to recover.

 

I am highly infavour of flexible interest and exchange rates - it is pure economics and nothing to do with the Queen's head.

[pongo]

Lloyds were never in danger of doing a KFCIOM (Oh, yes, what happened there? The loony left stole the IOM's money.) .... Their biggest downfall is all the spin they put on "bailing out the banks", which has all the loonies wanting there money back.

 

Hehehe - loony left! That's a blast from the past. Are you visiting us from 1981 ?

 

Seriously - the term was only ever rhetorical and it just seems out of context in 2009. So it kind of devalues anything you might be trying to say. Only the loony right ever really called anyone else the loony left and only ever for effect. Political rhetoric is the enemy of measured analysis.

 

4 points:

 

1. The UK did not steal the IOM's money. The UK bank was put into administration because it was no longer sound. This was to prevent further money being poured into the Icelandic economic hole.

 

2. Lloyds have bought a good chunk of business (HBOS) at a knock down price to prevent HBOS from collapsing. They will do very nicely out of it. More importantly - if HBOS had failed then confidence in the rest of the banking sector would have evaporated. If that had happened then they would all have been in trouble.

 

3. None of the banks (including Barclays, HSBC and pre-merger Lloyds) would have been sound had confidence in the sector collapsed.

 

4. Gordon Brown is unpopular mostly because the economic weather is bad and because he can seem awkward. If the sun was shining and the champagne was flowing everyone would think he was great. Gordon Brown is not responsible for the mess which the world's economy has been in. I think that history will see him as a significant figure at a difficult time. I doubt he will be loved - only because economies recover slowly and normally when the next lot are in power (eg - like what happened to John Major and Norman Lamont - Blair took the credit for the recovering economy which they left behind).

[pongo]

@ Chinahand

 

I think you would have to agree that a significant amount of UK trade takes place between economically unequal parts of the UK - ie within a single economic zone with a common currency and exchange rates.

 

The logical conclusion of the interest rates argument would be to suggest that different UK cities (and the IOM) should be allowed to set their own interest rates and to ultimately establish their own currencies.

 

Clearly a crazy idea. Currency and interest rate stability is much better for sustainable business. Real prices (the cost of labor, land, local taxes etc) and productivity are a much better way of responding to and smoothing economic unevenness and correcting trade imbalances.

[Cambon]

Hehehe - loony left! That's a blast from the past. Are you visiting us from 1981 ?

Those comments were for P.K.'s benefit.

1. The UK did not steal the IOM's money. The UK bank was put into administration because it was no longer sound. This was to prevent further money being poured into the Icelandic economic hole.

The UK used inappropriate laws to cease the money and put it under the control of british law. I doubt IOM will see any of it again.

2. Lloyds have bought a good chunk of business (HBOS) at a knock down price to prevent HBOS from collapsing. They will do very nicely out of it. More importantly - if HBOS had failed then confidence in the rest of the banking sector would have evaporated. If that had happened then they would all have been in trouble.

Agreed, Lloyds have bought HBOS at a knock down price and they will do well out of it. However, it was not a good business and that is why it nearly collapsed.

3. None of the banks (including Barclays, HSBC and pre-merger Lloyds) would have been sound had confidence in the sector collapsed.

Confidence in the sector did collapse. If you remember back to when this was all happening, the government made a statement that they wanted to control four banks and split them into four different types of business (Mortgage & loan, Investment, Retail and Commercial). The four banks were HBOS, Northern Rock, Lloyds and RBS. Prior to the second tranch of lending to Lloyds, Sky News leaked this by accident saying that they were all state owned banks, which they were/are not, only one is. The report was only shown a couple of times, but the damage was done. A couple of days later (after the announcement of the additional HBOS debt) a revised news story was released along similar lines. In other words, the government had already decided to try to nationalise the banks prior to the collapse, and that helped cause the collapse.

4. Gordon Brown is unpopular mostly because the economic weather is bad and because he can seem awkward. If the sun was shining and the champagne was flowing everyone would think he was great. Gordon Brown is not responsible for the mess which the world's economy has been in. I think that history will see him as a significant figure at a difficult time. I doubt he will be loved - only because economies recover slowly and normally when the next lot are in power (eg John Major and Norman Lamont).

I have nothing in particular against Gordon Brown, but the bad economic weather seems to follow him around and the majority or it is his own making from when he was chancellor. I agree he is not responsible for the mess the world's economy is in, but he is responsible for the mess the UK economy is in.

[Cambon]

I am a bit reluctant to take lessons in economics from someone who cannot spell a basic word like 'speech' not once, but twice.

 

Be very careful, Lawnmower, everyone makes mistakes.

[pongo]

The UK used inappropriate laws to cease the money and put it under the control of british law. I doubt IOM will see any of it again.

 

There is more chance of some of the money being recovered from the failed Icelandic banking group than if the UK had not acted to put the UK bank into administration. The money was being lost.

 

What would you have done differently if you were running things in the UK ?

[Chinahand]

@ Chinahand

 

I think you would have to agree that a significant amount of UK trade takes place between economically unequal parts of the UK - ie within a single economic zone with a common currency and exchange rates.

 

The logical conclusion of the interest rates argument would be to suggest that different UK cities (and the IOM) should be allowed to set their own interest rates and to ultimately establish their own currencies.

 

Clearly a crazy idea. Currency and interest rate stability is much better for sustainable business. Real prices (the cost of labor, land, local taxes etc) and productivity are a much better way of responding to and smoothing economic unevenness and correcting trade imbalances.

Pongo - obviously this is a massively complex debate - It isn't a logical conclusion that ever smaller units should set their own interest rates and hence have their own currencies - currency risk and exchange rate costs are significant issues - you can't just impose these arbitarily on ever small areas. I do not know how familliar you are with ideas like Optimal Currency Areas etc.

 

I think it is pretty clear that the UK is a better optimal currency area than the Euro area. Most specifically the Euro area doesn't have good labour mobility or adequate fiscal arrangements to offset unequal development. You may scoff at the UK's efforts in these areas but they are multiple times better than those available to the European Central Bank and Treasury!

 

Real price adjustments are painful - as you say they have to come from productivity improvements which often means unemployment in the short term.

 

An exchange rate change spreads the burden more widely within the economy. Industry becomes more productive internationally, but everyone becomes poorer compared to abroad.

 

Plus the idea of intrest rate and currency stability is chimera because you will only have nominal stability - differential inflation and interest rates around the world will result in real changes in value - just ask an Argentinian when they had "fixed" rates to the dollar - the reality was massive real appreciation due to differential inflation rates. Or ask an Italian as opposed to a German bond holder - both EU denominated but at very different interest rates due to inflation risk etc.

[Cambon]

The UK used inappropriate laws to cease the money and put it under the control of british law. I doubt IOM will see any of it again.

 

There is more chance of some of the money being recovered from the failed Icelandic banking group than if the UK had not acted to put the UK bank into administration. The money was being lost.

 

What would you have done differently if you were running things in the UK ?

 

 

If I was running things in the UK I would never have let it get so far. A bit like the situation in IOM, the FSA and government knew very well, and for a long time, that Iceland was in trouble. They could, and should have stepped in earlier to prevent the finanial movements.

 

However, the one thing you need to remember is that the UK acted in it's own best interests, not the interests of IOM.

[Lawnmower]

I am a bit reluctant to take lessons in economics from someone who cannot spell a basic word like 'speech' not once, but twice.

 

Be very careful, Lawnmower, everyone makes mistakes.

 

Incorrectly spelling speech twice is not a mistake. It indicates a lack of knowledge of the correct spelling of a simple word. Hence my doubts about your grasp of complex fiscal matters.

 

You will be pushed to find a mistake by me. I am the spawn of a pedant.

[Chinahand]

I've always admitted I can't spell for toffee - I'm tone deaf too, but don't think either issues says anything about my ability to understand issues.

 

It probably does do some damage to my ability to communicate with others as they may become fixated on form and not content, but my level of tolerance is at sentence and paragraph level and not word.

 

If you discount everyone who spells the odd word wrong on an internet forum you'll miss out on alot - is it really worth the bother?

[La_Dolce_Vita]

Confidence in the sector did collapse. If you remember back to when this was all happening, the government made a statement that they wanted to control four banks and split them into four different types of business (Mortgage & loan, Investment, Retail and Commercial). The four banks were HBOS, Northern Rock, Lloyds and RBS. Prior to the second tranch of lending to Lloyds, Sky News leaked this by accident saying that they were all state owned banks, which they were/are not, only one is. The report was only shown a couple of times, but the damage was done. A couple of days later (after the announcement of the additional HBOS debt) a revised news story was released along similar lines. In other words, the government had already decided to try to nationalise the banks prior to the collapse, and that helped cause the collapse.

 

What collapse? Maybe I have misunderstood, are you saying the financial crisis owes its existence partly because of a nationalisation of banks? (Though I thought it was only banking organisation that was bailed out - Northern Rock)

[Cambon]

I am a bit reluctant to take lessons in economics from someone who cannot spell a basic word like 'speech' not once, but twice.

 

Be very careful, Lawnmower, everyone makes mistakes.

 

Incorrectly spelling speech twice is not a mistake. It indicates a lack of knowledge of the correct spelling of a simple word. Hence my doubts about your grasp of complex fiscal matters.

 

You will be pushed to find a mistake by me. I am the spawn of a pedant.

 

Actually, my mistake was not reviewing my message for errors before posting it, not incorrect spelling. That was your mistake.

 

But as you have said above, you are pedantic spawn.

[Cambon]

Confidence in the sector did collapse.

 

What collapse? Maybe I have misunderstood, are you saying the financial crisis owes its existence partly because of a nationalisation of banks? (Though I thought it was only banking organisation that was bailed out - Northern Rock)

 

The collapse of confidence in the banking sector was caused by the threat of nationalisation, not the financial crisis (although the banks are partly responsible). Everyone started to pull their money out of banks (Feb 09) and caused the biggest, steepest drop in the uk banking sector ever. HSBC was not affected as badly being foreign owned.

[Chinahand]

Cambon - you are talking rubbish.

[pongo]

I think it is pretty clear that the UK is a better optimal currency area than the Euro area.

 

I had not heard of 'optimal currency areas' before. Very interesting. Thanks for passing on the notion.

 

I wonder whether, in time, groups of people in similar industries could claim to be like optimal currency (sort of virtual) regions - just as much as if they were gathered around some particular national / geographical emblem or location. People in similar industries with similar interests may have more in economic common than other people who happen live in the same country.

 

From my perspective, exchange rates (therefore national interest rates) and different national tax regulations add to the cost and uncertainty of selling stuff. One big currency for everyone and proper double tax agreements across the board is the way to go IMO.