I stumbled across this article on David McWilliams blog in relation to exting the Euro. It’s sparked a lot of intense debate and got me thinking.
There will always be as many arguments against as for leaving the Euro. It’s essentially one of those arguments of perspective and potential that’s irreconcilable until a decision is reached and history unfolds. It’s funny but I don’t remember much debate about the negative effects of joining the Euro when we made the decision. This is probably more poor recollection on my part but I’m sure someone here remembers 🙂 Are we economically more sophisticated now or is it a small pocket of people sharing their thoughts over the net? I’d like to think that, based on the results of the lisbon treaty referendum, the Irish are looking more critically at the advice from our politicos than in the past. (accepting political trust is a cyclical thing). On some of the specifics of this debate. I’m not against the idea, in principle, of Tobin Tax or similar levies on national currency speculation. I quite liked the Sterling Stamp Duty idea, however, it’s likely that this damages liquidity unless implemented as a “braking function” on speculation through application on higher volumes of speculation alone. i.e. financial regulations should be utilitarian and when they don’t work it’s possible to fix them! I’d reject comparisons between an unpegged and reconsituted Irish punt and Sterling. Given our well publicised economic woes and small scale it appears unlikely a new Irish currency would, initially, be in sufficient demand to trade so strongly against the dollar. There’s the question of the dollar’s weakness. Some analysts will suggest this is inevitable as the result of a balance of power shift from the West to the East. A long and expensive war isn’t helping either. This is not the first time an eclipse of the US has been suggested and arises from an unhealthy IMHO obsession with trade balances. Many felt Japan would eclipse the US during the 80s and for a short period of time it worked. What are the Chinese accepting as payment for their goods? Billions of dollars, many of which are being invested in US companies, real estate etc. The strategy of beating a country into economic submission by accepting all the fiat currency they can print for your manufactured goods tends not to work. In a way, the gold standard continues in the minds of anyone who associates economic prestige with a particular country. What was the gold standard about but perceived security? The US is the prime example and as long as its economic competitors continue to accept payment in dollars and commit their profits to dollar investments then the US economy looks secure for the long term. As secure as anyone else’s anyway. So a pegged currency against the dollar or even the euro isn’t necessarily an awful idea in the short term. The HK dollar is pegged and the rate has been judiciously adjusted several times. Arguably more important than the currency debate is the corporate and personal tax debate that incentivises people and organisations to bring their wealth to Ireland. For our small size we can arguably make ourselves even more attractive.
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