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Your opinion on the Euro (pg. 3)
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| torontotrance |
| quote: | | Monetary policy is not as effective a weapon as fiscal policy, you're right and that's a valid concern which I also have. However, each member state retains it's own fiscal powers and it's not in anyone's interests to give rise to inflation. That's one good thing about the euro, it's in everyone's interests to keep things running smoothly. So in effect, fiscal policy is working to keep inflation level, there just isn't one body calling the shots. |
Monetary policy is used when the situation arises and it works. Monetary policy is effective as fiscal policy but each are used in different situations. Normally it's fiscal and monetary policy used together. Each member has lost some of it's powers to retain monetary policy. Of course each state has fiscal policy still but I'm talking monetary policy. But fiscal policy should only be used during recessions but what about booms, this will come to ahalt in a few yrs when during the booms, they wonder what to do with monetary policy. |
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| flystyler |
Just to help spad.
Monetary policy - using interest rates to control either exchange rates or inflation.
Fiscal policy - taxation - used to raise money and can be used to dampen down demand or to help raise money to improve services like hospitals, but then u knew that :p |
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| Spad |
| quote: | Originally posted by flystyler
Just to help spad.
Monetary policy - using interest rates to control either exchange rates or inflation.
Fiscal policy - taxation - used to raise money and can be used to dampen down demand or to help raise money to improve services like hospitals, but then u knew that :p |
er yes.... of course I knew that....
:( |
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| TiestoFanMatt |
| quote: | Originally posted by flystyler
Just to help spad.
Monetary policy - using interest rates to control either exchange rates or inflation.
Fiscal policy - taxation - used to raise money and can be used to dampen down demand or to help raise money to improve services like hospitals, but then u knew that :p |
Hehe kinda following the discussion now!
So can anyone point out, if we join the Euro, what will england be able to control and what would be lose control of?
For example. If we join the Euro, would i be right in saying that the prices of, e.g. clothes will change for what i would usually pay for them? If that is so, its good coz things may be cheaper, but the idea of going abroad and buying things for cheaper and coming back with them, well thats all part of going on holiday. I really preffered going abraod b4 the euro where, like, i exchanged the £ for Francs!(spl?) It was something about the excitement, and every country iv been, iv saved the money as memorabilia!
Anyway, interesting read! I always learn new things on here:)
matt |
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| flystyler |
| quote: | Originally posted by TiestoFanMatt
Hehe kinda following the discussion now!
So can anyone point out, if we join the Euro, what will england be able to control and what would be lose control of?
matt |
Well firstly there will be no exchange rate for importing and selling goods. This is good for us as we cna import stuff cheaper, as the pound is strong, so we end up paying more for imported products.
Hoever this is bad for businesses exporting as they will recieve less for their products, but it will mean they are more competitive so should lead to more exports and more imports.
There will no longer be the bank of england controlling inflation and our interest rates. They will be controlled by a central european bank, which the bank of england will have a role in, but shared with the other countries.
We however can still carry on to set our own tax levels. And as for the price of products there should b no change, if anything they may become cheaper. Most products r already labelled in both euros and pounds, if you look it is usually cheaper to purchase them in euros :D
So tbh the only real change for us is that we will be using euros and not pounds. And for home owners mortages will get more expensive as the interest rate will be higher.
So this could lead to a fall in demand as well, which would b bad for the auffering economy. But it is prediucted to pick up within the next 2 to 3 years and it takes around 2 years after saying yes to the euro before we are fully joined.
So we will have a long time to get used to it :D |
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| TiestoFanMatt |
| quote: | Originally posted by flystyler
Well firstly there will be no exchange rate for importing and selling goods. This is good for us as we cna import stuff cheaper, as the pound is strong, so we end up paying more for imported products.
Hoever this is bad for businesses exporting as they will recieve less for their products, but it will mean they are more competitive so should lead to more exports and more imports.
There will no longer be the bank of england controlling inflation and our interest rates. They will be controlled by a central european bank, which the bank of england will have a role in, but shared with the other countries.
We however can still carry on to set our own tax levels. And as for the price of products there should b no change, if anything they may become cheaper. Most products r already labelled in both euros and pounds, if you look it is usually cheaper to purchase them in euros :D
So tbh the only real change for us is that we will be using euros and not pounds. And for home owners mortages will get more expensive as the interest rate will be higher.
So this could lead to a fall in demand as well, which would b bad for the auffering economy. But it is prediucted to pick up within the next 2 to 3 years and it takes around 2 years after saying yes to the euro before we are fully joined.
So we will have a long time to get used to it :D |
So if it affects people with morgages, then really it affects the middle class society in england most? As lets face it, we are the people (and of course the working class), well, who pay bigger morgages? So if there is a refferendum, then obviously most people will say no, coz id rather stay with the pound and pay less on morgage (or my mum would:D - im not there yet - when uni is over:p ). Does that make sense? |
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| torontotrance |
Fiscal Policy = Government spending money in a recession to spur the economy.
Monetary policy = Central Bank of a Country changing the amount of money that is available and changing the interest rates
Normally they work hand in hand but in Europe, it will be tough because you have so many different countries with different economic problems. You will get both, problems with deflation and inflation in certain countries and if you raise interest rates, you help certain countries but what about the other countries? won't their problems get worse. See you all talk about being able to buy things easily and being able to buy more, that's all micro-economic but I'm talking the macro-economic view which involves the entire country. Damage here affects the entire country. Look at South America, they left inflation alone and look at the problem it caused and this might happen if the central bank in Brussels decides to help out the countries suffering deflation, what about the countries suffering inflation. You can't do both and how do you decide it?, which country has more people?. This is the fundamental problem of the Euro, it was stated by economists all over the world when the Euro was being planned. Since fiscal policy is helping because most economies are not doing as well, it will hit the fan in a few years when the economies near the boom. It will end up very messy with different countries getting mad at each other. |
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| evil_bastard |
| quote: | Originally posted by torontotrance
Monetary policy is used when the situation arises and it works. Monetary policy is effective as fiscal policy but each are used in different situations. Normally it's fiscal and monetary policy used together. Each member has lost some of it's powers to retain monetary policy. Of course each state has fiscal policy still but I'm talking monetary policy. But fiscal policy should only be used during recessions but what about booms, this will come to ahalt in a few yrs when during the booms, they wonder what to do with monetary policy. |
Monetary policy doesn't have the same clout but quite a lot can be achieved. During a boom you raise interest rates meaning it's costly to take out loans and lucrative to save, which slows down consumption. The European Central Bank has the powers to do this and with individual states coordinating fiscal policy it can work, provided they are strict about who is allowed to join.
In response to your last post: Deflation is rare, but assuming for example Germany was experiencing inflation whilst Spain was experiencing deflation, the European Central Bank would naturally lower interest rates in Spain and raise interest rates in Germany. When interest rates are high it's expensive for people to use credit cards, and it's sensible to save. This would stump Germany's inflation problems. The German government would raise taxes to stump spending and bring themselves back in convergence with Europe. The Spanish government on the other hand would lower general taxes (or maybe indirect taxes) and that combined with low interest rates would stimulate the economy.
I can tell you probably know all this already but it will hopefully make sense to others if I explain in full.
The biggest risk in my view is that Europe might be unprepared for unforeseen events. In ordinary circumstances fiscal and monetary policy would be combined to stop the problem with the economy getting out of hand but as you have 2 different bodies calling the shots it makes coordination more difficult. We just have to hope that doesn't happen while the Euro is still "young".
There is one potential advantage to the euro though. In ordinary circumstances, if a country cannot deal with recession quickly enough it spirals out of control. In simple terms, people spend less, businesses lose money, businesses lay off workers, those workers can afford less, businesses sell less, companies lay off more workers, and the problem just goes on and on. It is generally accepted that to get out of this cycle outside intervention is needed, but that's easier said than done when a country is in recession. With a common currency however it is concievable that the European Central Bank could provide that intervention by subsidising industries in trouble. This would prevent the need to lay off workers and cut the negative cycle of problems mentioned above. |
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| TiestoFanMatt |
| quote: | Originally posted by evil_bastard
Monetary policy doesn't have the same clout but quite a lot can be achieved. During a boom you raise interest rates meaning it's costly to take out loans and lucrative to save, which slows down consumption. The European Central Bank has the powers to do this and with individual states coordinating fiscal policy it can work, provided they are strict about who is allowed to join.
In response to your last post: Deflation is rare, but assuming for example Germany was experiencing inflation whilst Spain was experiencing deflation, the European Central Bank would naturally lower interest rates in Spain and raise interest rates in Germany. When interest rates are high it's expensive for people to use credit cards, and it's sensible to save. This would stump Germany's inflation problems. The German government would raise taxes to stump spending and bring themselves back in convergence with Europe. The Spanish government on the other hand would lower general taxes (or maybe indirect taxes) and that combined with low interest rates would stimulate the economy.
I can tell you probably know all this already but it will hopefully make sense to others if I explain in full.
The biggest risk in my view is that Europe might be unprepared for unforeseen events. In ordinary circumstances fiscal and monetary policy would be combined to stop the problem with the economy getting out of hand but as you have 2 different bodies calling the shots it makes coordination more difficult. We just have to hope that doesn't happen while the Euro is still "young".
There is one potential advantage to the euro though. In ordinary circumstances, if a country cannot deal with recession quickly enough it spirals out of control. In simple terms, people spend less, businesses lose money, businesses lay off workers, those workers can afford less, businesses sell less, companies lay off more workers, and the problem just goes on and on. It is generally accepted that to get out of this cycle outside intervention is needed, but that's easier said than done when a country is in recession. With a common currency however it is concievable that the European Central Bank could provide that intervention by subsidising industries in trouble. This would prevent the need to lay off workers and cut the negative cycle of problems mentioned above. |
mmmmmmmm......glad i didnt take economics! would have been learning chinese!!!
:crazy: |
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| magnasoma |
Fly has it right in his early posts. It DOES make economical sense as British consumers to adopt the Euro. Eventually sterling will continue to devalue as it is traded less in relation to the other major currencies.
It is no accident that the euro and the dollar are worth a similar amount. As the dollar is traded more it will continue to stay relatively strong (recent market issues from 9.11 up to and surrounding us/iraq have affected things all over), but as the euro comes of age it will meet the dollar.
New World Order anyone? |
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| Dumonde Trancer |
all the prices would be rounded up which will be annoying.
obviously whats gonna happen is were gonna ride the pound until it is almost the same value as the euro, then join.
its not like the EU is gonna say "you join now or you never join"
but it is inevitable. |
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| Fundamental |
If it changes, I'll be sad to see "pence" go...
It's one of those words that sound fine when you say it once, but sound stupid if you say it too many times...
Pence, pence, pence. Pence is such a great word. Long live the pence.
So will it stay or will it go? The sus-pence is killing me... |
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