Author Topic: In search of a common currency  (Read 5102 times)

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Offline UK Decimal +

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Re: In search of a common currency
« Reply #15 on: May 14, 2011, 07:17:50 PM »

Thank you all for some very interesting replies.   I've even learnt something about the American Civil War!

As I said previously, I know little about international finance matters, and perhaps 'how little' will be shown by the following question:

If a Company goes bankrupt, I believe that it is put into administration and a Receiver appointed.    Therefore if a Country (Greece?) is in a similar position, why not do something similar (with the "Receiver" being appointed by the EU to sort out the mess)?

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

Offline Figleaf

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Re: In search of a common currency
« Reply #16 on: May 14, 2011, 09:40:50 PM »
It is a logical thought, but it doesn't work that way. For one thing, countries cannot go broke, so they cannot go into receivership. For another, the concept of sovereignty clashes with the idea of a Receiver.

The solution usually chosen is contract law. Credits to keep going are given with strings attached. Further credits become available only when certain targets are met. In this way, the sovereign country can in theory still decide not to meet the demands of its creditors. In practice, the cost of doing so is prohibitive. The last one to go that route was Ceaucescu.

In the usual situation, the country in trouble is bailed out by the World Bank or the IMF. If the country's problems are not drastic, its debts are restructured by the Paris Club (public debt) or the London club (private debt). The World Bank has a voting system that allows the US to dominate it. The US exercises its power through the Treasury, an institution that is in turn dominated by Wall Street banks, notably Goldman Sachs. The result is that the World Bank has long been accused of acting primarily in the interests of Wall Street and of inappropriate remedies, primarily by its former chief economist, Joe Stiglitz. Tellingly, the US Treasury repeatedly pushed the World Bank to get Stiglitz to shut up. He walked out, rather than be silenced. The World Bank claims to have reformed since.

In the case of Greece, the situation was different, because the EU wanted to keep the euro's business in their own hands. The European Central Bank (ECB) is just as much in the hands of the Germans as the World Bank is in US hands. However, there is no direct line to the Frankfurt stock exchange or any other stock exchange, so Greece is better off than most countries. Still, Greece has lost control of its central bank to the Germans, swarming all over the place. The Greek government cannot so easily be invaded, so you see a silent struggle in which the Greek central bank is largely the voice of the ECB and the Greek government represents the other side of the equation.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline chrisild

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Re: In search of a common currency
« Reply #17 on: May 15, 2011, 01:23:07 PM »
The European Central Bank (ECB) is just as much in the hands of the Germans as the World Bank is in US hands.

This is another issue that shows how "far" we have come in Europe. Quite a few in Germany believe that "the Germans" do not have enough control over how much will be paid (well, guaranteed) where. Quite a few in other countries seem to believe that in some way the ECB is under control of "the Germans". Maybe it would help both sides then if we did not have it any more ...

Christian

Offline Figleaf

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Re: In search of a common currency
« Reply #18 on: May 15, 2011, 01:39:18 PM »
This is the normal situation in an international organisation. Countries, like people, have their "hobbies" and capabilities. Ireland has women's rights, Norway the environment, Italy has figurative art, Sweden fugitives, Austria music, Britain rule drafting, France food and drink trading, the US the military and Germany inflation. Each of them dominate their field and believe they have insufficient control and each of them is believed to be too dominating in their field.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline villa66

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Re: In search of a common currency
« Reply #19 on: May 16, 2011, 02:58:08 AM »
This is the normal situation in an international organisation. Countries, like people, have their "hobbies" and capabilities. Ireland has women's rights, Norway the environment, Italy has figurative art, Sweden fugitives, Austria music, Britain rule drafting, France food and drink trading, the US the military and Germany inflation. Each of them dominate their field and believe they have insufficient control and each of them is believed to be too dominating in their field.

Peter

And the Dutch, apparently, occupy themselves caricaturing foreigners?

 ;) v.

Offline Ukrainii Pyat

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Re: In search of a common currency
« Reply #20 on: May 16, 2011, 03:01:06 AM »
And the Dutch, apparently, occupy themselves caricaturing foreigners?

 ;) v.

Not quite, rather it would be legalising what is not legal in other places and making it somewhat normal - and regulated and taxed!
Донецк Украина Donets'k Ukraine

Offline chrisild

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Re: In search of a common currency
« Reply #21 on: May 16, 2011, 09:17:11 AM »
This is the normal situation in an international organisation. Countries, like people, have their "hobbies" and capabilities. Ireland has women's rights, Norway the environment, Italy has figurative art, Sweden fugitives, Austria music, Britain rule drafting, France food and drink trading, the US the military and Germany inflation. Each of them dominate their field and believe they have insufficient control and each of them is believed to be too dominating in their field.

Let's make it easy and assume that all of these stereotypes are somehow based on facts. :) Then there would still be an enormous difference between saying that the ECB was maybe modeled after the Bundesbank, and saying that the ECB is in the hands of one country. Of course it is difficult for the ECB and its council members from all euro countries to find an appropriate balance regarding, for example, interest rates.

The European Union and its organizations such as the ECB are supranational rather than international bodies, I'd say (the EU can make laws, for example). Now if it becomes or is a common perception in the other European countries that the ECB serves the needs of "Germany" only, while in Germany many think that the contrary is the case, I don't really see much of a future for such an institution.

Christian

Offline Figleaf

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Re: In search of a common currency
« Reply #22 on: May 16, 2011, 01:59:48 PM »
You make it sound too dark, Christian. International organisations are populated by (mostly) adult professionals who can deal with realities as well as Kafka-esque situations. Nobody needs to explain to them what the priorities of their country are and what other countries' hang-ups are. An example: I am sitting in a NATO meeting when some CIA character starts making disparaging remarks about the Common Agricultural Policy (CAP). Now, neither NATO, nor the CIA nor I have anything to do with the CAP, but the chair does nothing, the Frenchman doesn't react and the German is distracted, so I kick the guy's behind with well-worn arguments while I am no admirer of the CAP and I am seconded by the Frenchman, who has woken up and knows his country adores the CAP. In theory, the whole exchange would have been in the minutes of the meeting and be completely irrelevant. In practice, the guy has learned it doesn't pay to go there and the whole episode sinks into oblivion.

"In the hands of" of course doesn't mean the country can do anything it wants, but it does mean you need the country on board for all important decisions. In the case of the ECB, it is no coincidence that it is in Frankfurt or that inflation in the European Union has always been very low (dangerously low, IMHO, but nobody's asking me). It is no coincidence that the German chancellor's candidate for the president wins and neither is it a coincidence that it is not a German (appearances do matter, so that the "common perception" you are afraid of doesn't materialise.)

For some countries (Italy, Spain, Portugal), German obsession with inflation is a blessing, because it strengthens fiscal discipline in their own country, for some, German domination (call it "leadership" if you prefer) is either business as usual (Benelux, Scandinavia) or just like the old days (Ireland) and in the end, only the French have a problem with the situation, so Berlin always makes a good show of consulting them. The only way I can see for the Germans to lose their domination is when the British come into the euro AND make smart alliances with either the French or the Germans, depending on where their interests lie, which would give them the deciding voice. That isn't going to happen any time soon.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline chrisild

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Re: In search of a common currency
« Reply #23 on: May 17, 2011, 12:30:54 AM »
Too dark? I don't think so. Then again, until not too long ago I also had the hope that the European Union would help us get beyond most of those alliances of a few. Nowadays ... well, it is not exactly surprising that candidates of political parties who want to be elected tend to avoid proposing European integration. They can only lose. May not equally apply to all EU member states, but the trend is certainly there.

Christian