the euro as we know it

A snowHead

With the Irish being bailed out, the real possibility of Spain and Portugal being next will be devastating for the Euro but what will it mean for our ski holiday prices ?

A snowHead

The markets seem relaxed, with the £ dipping slightly against the €. My guess is that the government will strive to keep the £ at a competitive rate for Bristish business - so keeping the £ below €1.20.

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limegreen1, zip - your suppliers are British TOs operating in sterling, so they'll just rake in more profit if the euro bombs. On the other hand, expenses in resort would be less and DIY deals with local providers more attractive. This is what my crystal ball says, but I haven't read the instructions properly so I could easily have tuned it in to the wrong channel. Laughing

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It won't be devastating if the today is anything to go by. Ireland announce a bail out package and the bloody Euro gains! There was me (selfishly I know) rubbing my hands at cheaper diesel, tolls, beer, food 'n' ski passes at Christmas and it's gonna cost me more. I really don't get it, I mean if I turned round and said "I'm skint" and got bailed out, how would I be worth more?

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because you're not part of a "collective".

there's more trouble to come from the euro zone and the value of the euro is no doubt going to dip again... bide yer time and get your euros later.

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Today looks like short term stabilty, as a package was put together, but the trand does look like a move to 1.20-1.25 in the short term, and if Spain does come out and admit serious toxic debt on its property debt, even Germany will not have enough to hold the value up. IMHO.

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TotallyBoard, Spoke too soon, headline on the BBC

22 November 2010 Last updated at 13:58 - Irish political uncertainty dents markets

European shares and the euro have both fallen following rising political uncertainty in the Irish Republic.

The declines followed a call from the Green Party, the junior partner in the government, for a general election.

The news saw the UK's main FTSE index fall into negative territory, down 0.8%. Meanwhile, the euro gave up earlier gains to dip to $1.3720.

With any luck the Euro will continue to fall just in time for my December ski holiday! Very Happy

After all it is free

You and me both kosciosco Wink

Looks like uncertainty re Ireland was a bigger drag on the Euro than having to bail them out. I'm not holding my breath for a rate of much higher than 1.18 ...

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I'm not sure what 'devastating for the Euro' means. I guess the OP is talking about the value of the Euro. The value of the Euro will only be reduced if the ECB starts printing more of them, or if the market believes that they will. So far, the Euro authorities seem determined not to, while the US authorities are printing dollars like they're going out of fashion - which they probably will.

The crunch for the Euro will come if/when the banks and/or government in a big Euro-using country - like Spain - can't roll over their debt. Then, the German people (and a few smaller nations) will have to decide whether they want to:

(1) continuously send welfare payments to the periphery;
(2) temporarily re-float the sinking ships on a tide of newly minted money;
(3) remove themselves from the Euro; or
(4) kick out the basket cases.

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Option 4.

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wonder if all this is a vindication for those who refused to join or the inevitable consequence of same. gonna refuse to pay any and all menberships in the furutre personally and then bleat on about it when the clubs start to fail Laughing

You know it makes sense.

Where's old Soros when you need a cheap ski deal ?

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Stubbornly around the 1.17 mark today Confused

A snowHead

I can't believe the UK are planning on 'lending' Ireland £7 billion, coincidentally that's pretty much what we're saving in cuts. So the pain and hardship we're going to feel because of the cuts will do nothing for our defecit, it will all go to keep a currency that we aren't in afloat. WTF?

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TotallyBoard, the concern is that if Ireland goes it takes your banking system with it, hence the government thinks shoring it up would be a good idea.

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something to do with our loans to ireland of circa £150 billion. Shocked

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''lending' Ireland £7 billion, ' - it's lending at 5%, not giving - and if they didn't, we'd be much more out of pocket if their banks go under. Cool

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and a non-negligible portion of UK banks not owned by HM Govt. are now owned by Spain... which all the UK eurobashers are talking down too.

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Iceland, Greece, Ireland, Portugal, Spain, Italy, UK, US ... do the world's taxpayers have the means and the will to bail out all the reckless banks and their depositors? Is any government even thinking about how to re-engineer the financial system so they don't do the same again?

After all it is free

It raises some interesting questions about the idea of separating out "good" retail banking from "Risky" investment banking. It seems that most of the Irish problems some from bad mortgages & property loans which no doubt would be funded by retail deposits in a split system.

I read an interesting suggestion the other day to limit banking risk - banks should be unlimited liability partnerships so that directors & shareholders are personally liable should things go bad....

My point is that the Eurozone countries *have* to bail out Ireland in order to keep the Euro alive. Germany (as a country) are making a huge surplus and thus can afford to do it (they probably don't want to but they can certainly afford it). We on the other hand are skint and making people unemployed supposedly to cut our defecit, but now that money is going in to shoring up the Euro. Banks have investments in countries all around the world, we aren't responsible for all of them, I think the onus falls on the members of the Euro to keep the Euro afloat, not on us.

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david@mediacopy, i do sometimes wonder whether limited liability is the elephant in the room in all this. i can certainly see its uses to encourage appropriate levels of risk taking in business, and there are limits to it (eg fraudulent or wrongful trading when a company is insolvent). however, so much of remuneration seems to treat employees and directors like owners when the business goes well but is really a one way bet

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TotallyBoard, but isn't there a risk that the resultant conditions imposed by the EU/ECB may not particularly favour the UK when Ireland is not only a trading partner, but also a country in debt to us. Possibly, by making up what amounts to 10% of their bailout (as a loan), we're also better protecting our position.

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You know it makes sense.

Greece & Ireland are two different story's

Greece was about a lying government (figures)

Ireland is about a boom economy based on property & bad banks loans.

Portugal will be different.

Spain also

The Euro will survive there is currently over €750billion available in ECB for bailouts & plenty more from the IMF if needed.

In the meantime Estonia, Poland + others are lining up to join the Euro Very Happy

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Chasseur, I kinda see your point but I would be amazed if we had a lot of clout with regards the conditions imposed for our 10%

andy, The Euro won't collapse (at least not in the short to medium term) our 7 billion is neither here nor there with keeping the Euro afloat. If Spain or Italy or Portugal go do we have to pay for them too? I think that it takes the pi55 that all of the heartache and pain that will be suffered in this country over the next 3 years with the cuts is going in the form of a loan to Ireland. Is this loan guaranteed? I mean what if we lend it and then Spain put their hand out and the Euro collapses? Bye bye 7 billion?

A snowHead

And Estonia's economy is pretty good afaik... and will be a net improvement of the Eurozone health (even if it is a tiny amount).

A snowHead

david@mediacopy, the root of the problem is excess lending, leading to chasing worse and worse prospects ... and then lying about them.

I think the solution does involve limiting the role of any one 'bank', along the following lines:

(1) Current accounts to be operated by custodian (non-lending) banks. A pretty safe and predictable business. Customers would have to get used to paying for safe-keeping and payments - but they involve real costs, so why not? At least they should always be able to get their money back. If they're paranoid, commercial insurance should be cheap enough - no bailouts required.
(2) Other banks would match people/organisations with spare cash to those that have a use for it. The model would be the unit trust industry, which has had no failures that I'm aware of. Thus you might invest in a fund that matched the composition of the FTSE-100 index, or in mortgages of £100k-£200k, with >3x salary and 1.5x valuation cover, maturing in 2025-2030...etc, etc. The bank would always publicise buy/sell prices and preferably there would be a market in all units. The securities themselves (shares or mortgages in the examples) would be held by a custodian bank, so the intermediary bank couldn't dick with them. In this way, investors would always know what they're investing in and would get early warning of any problems via the unit price - rather than fondly imagining their cash deposits are growing with compound interest, while 90% of what they deposited has been chucked at trailer trash in Alabama. The government (taxpayers) would not be on the hook in the rare event that a fund went tits up.
(3) The financial regulator would be responsible for ensuring that details, such as the mortgage details in the example above, are truthful. They'd probably subcontract most of the work to independent rating/valuation agencies. These agencies would not be allowed to undertake any other kind of work. In particular, they would not be able to work for any kind of bank directly, to avoid conflicts of interest.
(4) Investment banks could invest their own equity in whatever funds they liked, or directly with businesses. But they would not be allowed to attract co-investors by way of borrowing/deposits. Nor would they be allowed to offer financial advice, facilitate mergers for fees, etc.
(5) Financial consultancies would offer advice, arrangement of mergers/acquisitions, etc for fees. They would not be able to take on any of the other roles.

God knows what this has to do with 'The Piste'. Achiilles will be along to complain shortly. wink

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laundryman, There certainly seems to be a of conflict interest in some area's of the city and it makes sense to split it out. In terms of 'retail' banking the public perception of 'risk' when it comes to savings is\was obviously out of step with the reality and it's not unreasonable for a saver to give their funds to a bank and expect to get them back. Very different to 'Investing', say in equity's.

Arno, I hadn't really thought about it in terms of limited liability, but on the face if it, it makes sense. I'm guessing in the 'old' days many of the City investment firms would have been partnerships. Limited liability has it's place, but the current reward structures in the banking industry seem to encourage lending and\or speculation with little risk to the individual or company making the decisions. As you say, it's a one way bet.

Still, this is all moot given the current situation. The only real way forward is to recognise the bad debt and write it off, as would happen in 'real life'.

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laundryman, that would basically do away with deposit-taking altogether - not saying you're wrong but it's interesting that a clued up chap like yourself could see the deposit-taking business as so broken that it needs to be done away with

interestingly, some very large institutions are thinking your way. instead of holding cash in a bank or putting it out in the overnight markets, they would rather appoint an investment manager to invest it in highest quality government bonds

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david@mediacopy, admittedly this dates to when people were more concerned about banks going bust than countries! and they would generally only go for short maturities so you were betting that the USA would not go bust in the next 6 months...

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laundryman, Arno, both true.

Transparency's going to be hard to achieve, as most of the 'off balance sheet' shenanigans by Companies, Banks and Countries would seem to demonstrate. It's hard to escape the law of unintended consequences, but that's not to say that a solution isn't worth striving for. I'm tending to think that simple is best, along with a genuine connection for the participants between risk and reward / greed and fear.

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So is my first pint on 6th Dec going to be cheaper? Puzzled

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the euro as we know it

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