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A thread on how the € impacts the Eurozone countries.
Fist consider a single country with its own currency, like the UK.
A thread on how the € impacts the Eurozone countries.
Fist consider a single country with its own currency, like the UK.
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Poor areas in the UK use the £. If the poor area had its own currency, that currency would be weaker than the £ and would boost exports (to other parts of the UK and to the world); ie be good for employment.
So using the £ is detrimental to poor areas.
Poor areas in the UK use the £. If the poor area had its own currency, that currency would be weaker than the £ and would boost exports (to other parts of the UK and to the world); ie be good for employment.
So using the £ is detrimental to poor areas.
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It is the opposite for rich areas. Using the £ which is weaker than if the rich area (like London) had its own currency.
So using the £ is beneficial for rich areas.
It is the opposite for rich areas. Using the £ which is weaker than if the rich area (like London) had its own currency.
So using the £ is beneficial for rich areas.
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That’s the impact of using a single currency for all parts of the UK.
Now let’s think of the fiscus; government taxing and spending.
Poor areas: They pay less tax (lower incomes and less company profits). They receive more spending mainly in the form of social spending.
That’s the impact of using a single currency for all parts of the UK.
Now let’s think of the fiscus; government taxing and spending.
Poor areas: They pay less tax (lower incomes and less company profits). They receive more spending mainly in the form of social spending.
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Rich areas are the opposite, they pay more tax and receive less spending.
London pays more tax than it gets back in government spending.
Rich areas are the opposite, they pay more tax and receive less spending.
London pays more tax than it gets back in government spending.
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So in a single currency country:
Rich regions benefit from using the country’s single currency (like the £) but subsidise other areas through a higher burden of central government tax and lower share of government spending.
So in a single currency country:
Rich regions benefit from using the country’s single currency (like the £) but subsidise other areas through a higher burden of central government tax and lower share of government spending.
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Poor regions suffer from using the same currency as the rich regions, but pay less tax and receive more government spending.
Overall there is a balance.
Rich areas subsidise poor through tax but benefit from using the same currency as the poor area.
And vice versa.
Poor regions suffer from using the same currency as the rich regions, but pay less tax and receive more government spending.
Overall there is a balance.
Rich areas subsidise poor through tax but benefit from using the same currency as the poor area.
And vice versa.
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Now let’s think of the Eurozone.
Poorer countries use the same currency as richer countries. Greece and Germany both use the €.
The € is stronger than what the Drachma would be if Greece still had its own currency.
This is bad for the Greek economy.
Now let’s think of the Eurozone.
Poorer countries use the same currency as richer countries. Greece and Germany both use the €.
The € is stronger than what the Drachma would be if Greece still had its own currency.
This is bad for the Greek economy.
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In particular it is bad for jobs. The strong currency make imports cheaper which hurts Greek producers.
Think how Greek tourism would be boosted if they had a weaker currency. 50% off on a Greek holiday, anyone?
In particular it is bad for jobs. The strong currency make imports cheaper which hurts Greek producers.
Think how Greek tourism would be boosted if they had a weaker currency. 50% off on a Greek holiday, anyone?
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The opposite is true for strong encomies like Germany. The Deutsch Mark would be stronger than the €. This would hurt German industry and tourism. Their cars would cost more.
Using the € instead of their own stronger currency boosts German industry, jobs and tourism.
The opposite is true for strong encomies like Germany. The Deutsch Mark would be stronger than the €. This would hurt German industry and tourism. Their cars would cost more.
Using the € instead of their own stronger currency boosts German industry, jobs and tourism.
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On the fiscus (taxing and spending) Germany and Greece both run their own independent regimes.
There is no cross subsidiary from Germany to Greece via the tax and spend system. Germany’s affluence does not spill over into Greece in the way that London’s does to rest of UK.
On the fiscus (taxing and spending) Germany and Greece both run their own independent regimes.
There is no cross subsidiary from Germany to Greece via the tax and spend system. Germany’s affluence does not spill over into Greece in the way that London’s does to rest of UK.
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Summing up:
Where you have a Country that has a common currency and a common fiscus (tax and spend regime), there is a flow of cash from poor regions to rich regions because of using a single currency, and
a flow of cash the other way due to tax and spend differences
Summing up:
Where you have a Country that has a common currency and a common fiscus (tax and spend regime), there is a flow of cash from poor regions to rich regions because of using a single currency, and a flow of cash the other way due to tax and spend differences
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In the Eurozone there is a flow of cash from the poorer states to the richer ones due using one currency, the €, but no counter flow from taxation and spending.
In this way the poor nations are subsidising the rich ones.
In the Eurozone there is a flow of cash from the poorer states to the richer ones due using one currency, the €, but no counter flow from taxation and spending.In this way the poor nations are subsidising the rich ones.
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Many argue that Greece causes its own problems because its people are lazy and inefficient, whereas Germans are productive.
This may or may not be true, but what is undoubtable is that Greece invisibly subsidises Germany through the unfair invisible operation of the €
Many argue that Greece causes its own problems because its people are lazy and inefficient, whereas Germans are productive.
This may or may not be true, but what is undoubtable is that Greece invisibly subsidises Germany through the unfair invisible operation of the €
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The € acts as an “exaggerator”.
When things are going well for a state, it makes them go even better. When things go bad, it makes them even worse.
The € acts as an “exaggerator”.
When things are going well for a state, it makes them go even better. When things go bad, it makes them even worse.
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One can see the effects this has had. Youth unemployment, June 2020
Eurozone 17%
Germany 5.6%
Netherlands 10.7%
Greece 33.6%
Spain 40.8%
(UK 13.6% USA 20.7%)
Source http://statista.com
One can see the effects this has had. Youth unemployment, June 2020
Eurozone 17%
Germany 5.6%
Netherlands 10.7%
Greece 33.6%
Spain 40.8%
(UK 13.6% USA 20.7%)
Source http://statista.com
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Of course this leads to harmful social consequences. Talented young Greeks seek their fortunes outside of Greece. Immigrants flock to Germany.
A vicious cycle. Consider what this does to individuals and families, and the national psyche.
Of course this leads to harmful social consequences. Talented young Greeks seek their fortunes outside of Greece. Immigrants flock to Germany.
A vicious cycle. Consider what this does to individuals and families, and the national psyche.
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What’s the solution?
I can only see two ways of undoing this.
1. Disband the € . Very, very difficult to do.
2. Create a Federation, with significant central taxing and spending powers. A United States of Europe.
What’s the solution?
I can only see two ways of undoing this.
1. Disband the € . Very, very difficult to do.
2. Create a Federation, with significant central taxing and spending powers. A United States of Europe.
19/
A third option might be to work out a substantial subsidy process, from Germany to Greece for example.
This is a terrible option. Can you imagine the lecturing and political bullying that would accompany this?
A third option might be to work out a substantial subsidy process, from Germany to Greece for example.
This is a terrible option. Can you imagine the lecturing and political bullying that would accompany this?
20/
Where will it end?
I don’t know.
But every time there is a bit of financial turmoil in the world, the faults inherent in the € will add to the woes and make that turmoil even worse. Total collapse one day? Quite possibly.
Where will it end?
I don’t know.
But every time there is a bit of financial turmoil in the world, the faults inherent in the € will add to the woes and make that turmoil even worse. Total collapse one day? Quite possibly.
21/
I would be interested in the views of Ken Clarke. He has much more experience and in-depth knowledge than I do. He wanted the UK to join the €
Anyone who knows him and agrees with my assessment... raise it with him maybe?
The end.
I would be interested in the views of Ken Clarke. He has much more experience and in-depth knowledge than I do. He wanted the UK to join the €
Anyone who knows him and agrees with my assessment... raise it with him maybe?
The end.
