The end of the EU

[counter_violent]

Sorry, if I misled because, of the various sides to this debate, yours is the one that I agree with most.

Because of Germany's productivity, her currency got strong and she had to find a solution.The solution was to join up with weaker currencies, but not with 17! I wonder why she did not stick with the original "snake" members?




You are talking about the UK, I suppose? Debt will cause inflation if it is not paid off. Why does a bus driver, who earned 7 pounds per week, when I was a kid ,want 500, now? Why is the house that he bought for 1300 pounds in 1946 cost 350,000 now?

Where is the plan to reduce all this debt? There is no plan ! Just keeping up with paying interest on outstanding debt would only be the start, what about actually repaying all this debt !

Govt debt should be outlawed...plain and simple...they do things in our name which we don't agree with...and those that do agree with ever increasing debt spirals are, i'm afraid, morally bankrupt.

Not rocket science is it !

 

[new_trader]

That is easily explained. Growth in credit but especially the expansion of the money supply. When the Government pays back its debt it doesn't repay if all from tax revenues or from productivity, it creates money out of thin air via the Central Bank. That is inflationary.

I should actually say that it isn't prices which are going up, it is the value or the purchasing power of the money going down due to excess supply. Scarcity makes anything hold it's value and paper money is anything but scarce because it can be created in unlimited amounts by Governments. If you priced those wages and property in real money, ounces of gold, you will find that they haven't changed by much at all over time, if anything they have gone down.

 

[barjon]

Why is that Jon?

Well, in this instance because you pour scorn on the thought that an undervalued (weak) currency is not beneficial to exporters.

Much of the resurgence in German and Japanese economies after WW2 was down to a pegged rate of exchange which gave them an undervalued currency which, in turn, left them very (and increasingly) competitive in world markets. Thus, exports led their economic growth (rather like China currently) and their export strength was helped considerably by the artificial currency value.

You could say the same now - because of the problems in Europe the Euro is giving Germany an artificially low currency compared to what it would be if they were on their own with the Deutschmark. Conversely, Greece and the other lame ducks are living with an artificially high currency which leaves them unable to improve matters by their currency falling and rendering their goods "cheap" in world markets. Just imagine what the Deutschmark/Drachma rate of exchange would be at the moment - it certainly wouldn't be parity as the Euro makes it.

 

[Atilla]

PRODUCTIVITY makes a country competitive, not the value of its currency. Money is a unit of account, a medium of exchange. It shouldn't be fiddled with, especially not by Central planners who are the least competent to do anything right.

Debt always causes inflation? Is this what they teach in English economics classes? No wonder the country has become a pathetic, unproductive, over-indebted welfare state.

So let's assume we have productivity.

Producitivity = More Goods and Services all other things being equal ie Ms remains constant.

More tomatoes are grown. More beef. More furniture. More houses. More of everything.

What happens next?

 

[new_trader]

Well, in this instance because you pour scorn on the thought that an undervalued (weak) currency is not beneficial to exporters.

I pour scorn on the fact that Governments have duped people like you into thinking that is the reason for doing it. Tell me exactly how The Weimar Republic grew its economy through a weak currency or how Mugabe grew Zimbabwe's economy through a weak currency. If debasement was so successful, why is the UK mired in debt and still in a recession...it should be one of the richest nations on earth.

You fail to acknowledge that there are importers in an economy and their costs rise with a weak currency. What about the marginal poor who are behind the inflation curve? They are hurt by rising prices caused by a weak currency. What happens to an oil dependent nation when oil prices rise due to a weak currency? How do businesses compete within the same currency regime?

The FACT is the greatest periods of REAL economic growth occurred when the world was on a gold standard. I am talking documented historical FACT...Jon...You continue believing what the Government wants you to believe...

 

[Splitlink]

Where is the plan to reduce all this debt? There is no plan ! Just keeping up with paying interest on outstanding debt would only be the start, what about actually repaying all this debt !

Govt debt should be outlawed...plain and simple...they do things in our name which we don't agree with...and those that do agree with ever increasing debt spirals are, i'm afraid, morally bankrupt.

Not rocket science is it !

It's not rocket science but it is easier to understand than to achieve. The debt is so colossal that it will never be paid back. It is so huge, now, that I believe that central banks do not bother anymore. they try to solve each crisis as it comes. Some countries can , no longer, pay the interest, let alone anything else.

Something like population control, another of my pet subjects.

 

[new_trader]

So let's assume we have productivity.

Producitivity = More Goods and Services all other things being equal ie Ms remains constant.

More tomatoes are grown. More beef. More furniture. More houses. More of everything.

What happens next?

The prices of those goods falls thereby increasing the purchasing power of money. This is observed in the high tech world where productivity improvements are increasing the quantity of goods faster than the money supply. This is called 'good' deflation.

 

[barjon]

I pour scorn on the fact that Governments have duped people like you into thinking that is the reason for doing it. Tell me exactly how The Weimar Republic grew its economy through a weak currency or how Mugabe grew Zimbabwe's economy through a weak currency. If debasement was so successful, why is the UK mired in debt and still in a recession...it should be one of the richest nations on earth.

You fail to acknowledge that there are importers in an economy and their costs rise with a weak currency. What about the marginal poor who are behind the inflation curve? They are hurt by rising prices caused by a weak currency. What happens to an oil dependent nation when oil prices rise due to a weak currency? How do businesses compete within the same currency regime?

The FACT is the greatest periods of REAL economic growth occurred when the world was on a gold standard. I am talking documented historical FACT...Jon...You continue believing what the Government wants you to believe...

nt

I did not even begin to suggest that a weak currency was a panacea for a country's economy, nor that it would not affect adversely other parts of that economy. All I did say was that an undervalued currency was beneficial to exports. Thus, if your economic well-being is based on your export strength and your competitiveness in world markets, then the overall economic effect is beneficial to you.

As for your last - "You continue believing what the Government wants you to believe" point. Well thanks, that's cast fifty years of career and learning into dust 🙂 I might as well have stayed a beach bum.

 

[new_trader]

The best way to think about it is to use a simple economy consisting of 3 groups. The butcher, the baker and the candlestick maker. If the butcher wants bread he must supply the baker with meat. If the candlestick maker wants meat he must supply the butcher with candles and so on. The government thinks it can solve all these productivity problems with paper money. Great, everyone has money but nobody has bread, meat or candles.

 

[new_trader]

nt

I did not even begin to suggest that a weak currency was a panacea for a country's economy, nor that it would not affect adversely other parts of that economy. All I did say was that an undervalued currency was beneficial to exports. Thus, if your economic well-being is based on your export strength and your competitiveness in world markets, then the overall economic effect is beneficial to you.

Jon, what if a widget exporter imports all of their raw materials needed to manufacture? If the raw material is the largest cost component of the finished product, how does a weaker currency help?

 

[barjon]

Jon, what if a widget exporter imports all of their raw materials needed to manufacture? If the raw material is the largest cost component of the finished product, how does a weaker currency help?

Ah, widgets 😀

If the widget manufacturer adds nothing to the cost of the raw materials, then no benefit whatsoever. But...

before currency change: $1 = £1

raw material cost $1
labour cost $1
profit $1

widget price $3 and that'll cost me in UK £3

after currency change: $2 = £1

raw material cost $2
labour cost $1
profit $1.50

widget price $4.50 and that'll cost me in UK £2.25 - coo, that's cheap, I'll get my widgets from them.

 

[new_trader]

Ah, widgets 😀

If the widget manufacturer adds nothing to the cost of the raw materials, then no benefit whatsoever. But...

before currency change: $1 = £1

raw material cost $1
labour cost $1
profit $1

widget price $3 and that'll cost me in UK £3

after currency change: $2 = £1

raw material cost $2
labour cost $1
profit $1.50

widget price $4.50 and that'll cost me in UK £2.25 - coo, that's cheap, I'll get my widgets from them.

You're saying the widget manufacturer must raise the price to account for the weaker currency in a competitive world market?

In a dream world, UK manufacturer due to low taxes, sound money and small government

raw material cost £0.50
labour cost £0.50
profit £0.75
---------------------------------
£1.75

why would you buy an import at £2.25?

 

[barjon]

Your saying the widget manufacturer must raise the price to account for the weaker currency in a competitive world market?

In a dream world, UK manufacturer due to low taxes, sound money and small government

raw material cost £0.50
labour cost £0.50
profit £0.75
---------------------------------
£1.75

why would you buy an import at £2.25?

don't be dense, nt 🙂

 

[Pat494]

I think that there are 2 major forces in the current world and neither is helping much.

The right as Atilla correctly says is Gordon Gecko type selfish greed

and the other leftie socialism/communism ( not the oriental variety ) that was and still is at the heart of their black bag policy of ruining capitalism by smashing the banking system.

Britain and the other crapocracies lurch from one to the other and the world's financial problems just don't get sorted out. The 2 groups are happy to kick the problem down the road. And why ?

Because they both think they are going to emerge from the mess as the unrivalled winners and they will be able to blame the losers.

One just can't ignore the success of the 1 party State system.
Most of the failed democracies I can see being swept away and replaced by a Chinese style 1 party state.

 

[new_trader]

don't be dense, nt 🙂

Jon.

You're the one pulling numbers out of your ****. Why is £2.25 cheap? Compared to what? The reason Governments give for weakening the currency is to make exports COMPETITIVE. If the widget manufacturer isn't competing with anyone, why do they need a weaker currency?

The smart people know that the way to become competitive is to improve production and invest in new technology or come out with a better product. People bought the iPhone because it is a great product, not because the US government weakened its currency...

 

[new_trader]

One just can't ignore the success of the 1 party State system.
Most of the failed democracies I can see being swept away and replaced by a Chinese style 1 party state.

The US was founded as a Constitutional Republic. Democracy destroyed it.

 

[new_trader]

don't be dense, nt 🙂

Why are manufacturers moving to China? I think it's you that is dense🙁

 

[Pat494]

The US was founded as a Constitutional Republic. Democracy destroyed it.

And they are still struggling on with a multi patched 18th century system.
Like enterring a horse and cart into a formula 1 race.

 

[new_trader]

And they are still struggling on with a multi patched 18th century system.
Like enterring a horse and cart into a formula 1 race.

Incorrect. America would be booming if it kept the 18th century level of Government, taxes and regulation. Maybe you should read the Constitution so you can make a more informed comment.

 

[new_trader]

Why do I bother. This forum is filled with brainwashed left wing numskulls. You have your big government, your currency debasement, your increasing taxes and regulation, your low interest rates, your inflation. You have it all and the country is a mess and you still can't figure out why...blame it all on the dastardly Chinese...LOL