euro zone falls to bits

[Dryce]

http://www.guardian.co.uk/commentisfree/2011/sep/19/greece-must-default-and-quit-euro
Where does the collapse of the euro zone leave Blighty?

In a very odd unpredictable place.

The UK may be as damaged as the other economies but if the 'markets' decide the Eurozone including Germany is bad news then the effect may be for Sterling to look attractive for a while. That then has a potential knock on regarding UK asset prices and interest rates.

Thing is that the Greek debacle isn't exactly a surprise by now so anybody managing investments shouldn't exactly be shocked or surprised by the course things are taking.

The problem comes when people in the markets start placing bets.

Bit like a horse race except that the bets affect the horses ability to eat sleep run and poop.

 

[Ted]

Right - that does it.

I'm going out straight away to withdraw all my investments, savings, pensions, ISAs, etc, and go directly to M&S and buy up all their stock of prawn mayo sandwiches.

That way, my money will be more safely (and longer term) invested than where it is now.

(With thanks to Gerald Ratner.)

Rather shellfish of you isn't it?

 

[Druk]

Rather shellfish of you isn't it?

Beats 'spread betting'.

 

[Kingy68]

The only way for Western Countries to re-energise sustainable economic growth is to stop buying stuff from the Chinese and start making it here again.

Couldn't agree more.

 

[The _Don]

This volatility is excellent for the markets - i am making good money whilst trading

 

[markjay]

Chinese manufacturing is only a short term problem (10-15 years).

They are going through a fast-forward phase of our very own Industrial Revolution.

We had masses of poor people who were willing to work on machinery all day long in appalling conditions - or build railways overnight - because the alternative was famine.

But in spite of the fact that introduction of machinery initially cost jobs, in the long term everyone prospered, and people were no longer willing to work long hours for little pay.

The workers got organised under trade unions, the government introduced legislation to protect employees, the working week was shortened to 5 days, holidays added, etc etc.

Not a bad thing mind you, every working man and woman in the UK now has access to food, housing, free education for their children, free healthcare, and all this from 40-hours per week less 28 days of annual holiday.

And it has become the norm for working-class people to have a car, a night out every now and then, and one or two overseas holidays a year.

Nothing wrong with that... except that the new kid on the block is legging some 150 years behind us and now has a huge workforce who are willing to work 14 hours a day starting form the age of 14, for very little pay, and have very little expectations from life in terms of niceties.

But my prediction is that it will not take China 150 years, but 15 years, to catch up - through disillusioned population, strong work unions, and a working class that wants to have the same standard of living as their counterparts in the West.

Maybe it will be India's turn then... and some bloggers in China will write how the country was left in the mire after manufacturing went elsewhere.

Sounds unrealistic? Think Taiwan... once the world's capital of low-quality goods... then the population prospered... and then it lost its edge.

 

[Red C220]

I thought this graph from the BBC was quite a eye opener...

BBC News - Eurozone in crisis in graphics: Deficit

Finland are obviously doing something right.

That's an eye opener.

Looks like the place to be right now is Estonia.

 

[st13phil]

The problem comes when people in the markets start placing bets.

And the longer the inevitable is delayed, the more bets get placed.

Germany has prospered enormously from having access to growing markets in the poorer countries of the EU that have been funded by ever-growing deficits. It's arguable that the least-worst option for Germany would be to actually underwrite the Greek economy, but that's not politically acceptable.

Personally, I think the Euro is a political vanity project that was doomed to fail as long as there isn't a federal Europe - which is also politically unacceptable to most citizens - so that's where we now find ourselves.

I'm also of the view that it would have helped if, back in 2008 when the banking crisis emerged, some of those responsible for the mess had been put against a wall and shot. That would certainly have encouraged their ilk to take a less risky approach going forward.

 

[grober]

Chinese manufacturing is only a short term problem (10-15 years).

They are going through a fast-forward phase of our very own Industrial Revolution.

We had masses of poor people who were willing to work on machinery all day long in appalling conditions - or build railways overnight - because the alternative was famine.

But in spite of the fact that introduction of machinery initially cost jobs, in the long term everyone prospered, and people were no longer willing to work long hours for little pay.

The workers got organised under trade unions, the government introduced legislation to protect employees, the working week was shortened to 5 days, holidays added, etc etc.

Not a bad thing mind you, every working man and woman in the UK now has access to food, housing, free education for their children, free healthcare, and all this from 40-hours per week less 28 days of annual holiday.

And it has become the norm for working-class people to have a car, a night out every now and then, and one or two overseas holidays a year.

Nothing wrong with that... except that the new kid on the block is legging some 150 years behind us and now has a huge workforce who are willing to work 14 hours a day starting form the age of 14, for very little pay, and have very little expectations from life in terms of niceties.

But my prediction is that it will not take China 150 years, but 15 years, to catch up - through disillusioned population, strong work unions, and a working class that wants to have the same standard of living as their counterparts in the West.

Maybe it will be India's turn then... and some bloggers in China will write how the country was left in the mire after manufacturing went elsewhere.

Sounds unrealistic? Think Taiwan... once the world's capital of low-quality goods... then the population prospered... and then it lost its edge.

While agreeing in principle with what you are saying I don't share your optimism. People tend to forget China is a tightly controlled centralist society producing a highly efficient ruling party elite who run things. Would you want to start a trade union in the knowledge that you might spend the next 30 years in prison as a dissident? Think an Oriental version of Orwell's 1984. At least India and Brazil are democracies of a sort?

 

[E CLASS]

Greece is in the mire due to alleged corruption at all levels within its government and suppliers.

Couple that with an ever sceptical population that simply don't pay their taxes (its endemic by the way) and who can blame them when their money dissappears and is not spent on what it should be - services etc...

Its a vicious circle thats finally popped.

 

[markjay]

....is a tightly controlled centralist society producing a highly efficient ruling ... elite who run things....

You means as in the Victorian times?

 

[Red C220]

Chinese manufacturing is only a short term problem (10-15 years).

They are going through a fast-forward phase of our very own Industrial Revolution.

We had masses of poor people who were willing to work on machinery all day long in appalling conditions - or build railways overnight - because the alternative was famine.

But in spite of the fact that introduction of machinery initially cost jobs, in the long term everyone prospered, and people were no longer willing to work long hours for little pay.

The workers got organised under trade unions, the government introduced legislation to protect employees, the working week was shortened to 5 days, holidays added, etc etc.

Not a bad thing mind you, every working man and woman in the UK now has access to food, housing, free education for their children, free healthcare, and all this from 40-hours per week less 28 days of annual holiday.

And it has become the norm for working-class people to have a car, a night out every now and then, and one or two overseas holidays a year.

Nothing wrong with that... except that the new kid on the block is legging some 150 years behind us and now has a huge workforce who are willing to work 14 hours a day starting form the age of 14, for very little pay, and have very little expectations from life in terms of niceties.

But my prediction is that it will not take China 150 years, but 15 years, to catch up - through disillusioned population, strong work unions, and a working class that wants to have the same standard of living as their counterparts in the West.

Maybe it will be India's turn then... and some bloggers in China will write how the country was left in the mire after manufacturing went elsewhere.

Sounds unrealistic? Think Taiwan... once the world's capital of low-quality goods... then the population prospered... and then it lost its edge.

Whilst there are some very valid points here. China will stay in control of manufacturing as long as it controls the exchange rate of the RMB (it's currency) on the world markets.

It also regulates foreign investments (most wealth has to stay in shore) and at present it's single largest export is actually US $ by way of buying US govt bonds.

China is currently supporting the US in a round about way.

The way the world markets are trying to deal with this is by imposing punitive import duties on specific products from China into the EU - Ceramics and Porcelain tiles spring to mind (70% duty on top of tax).

The communist regime will keep any form of union in check. When it wants to allow something to occur that is against the ethics of communism it takes place in Hong Kong or Macau or any of the other "special administrative regions" that allow it to conduct itself as a capitalist dictatorship.

It is very different to the industrial revolution that we went through.

 

[markjay]

...The way the world markets are trying to deal with this is by imposing punitive import duties on specific products from China into the EU - Ceramics and Porcelain tiles spring to mind (70% duty on top of tax)....

The US were engaged in trade wars with Japan in the last decades of the previous centrality, the problem is that these tend to be reciprocal. The Chinese emerging middle class has increasing appetite for Western goods, and Europe needs China as an export market so can't risk the Chinese imposing similar punitive taxes and duties. The future may see solutions akin to those the US (and UK) and Japan reached eventually - perhaps MB cars manufactured in a factory in China?

... The communist regime will keep any form of union in check. When it wants to allow something to occur that is against the ethics of communism it takes place in Hong Kong or Macau or any of the other "special administrative regions" that allow it to conduct itself as a capitalist dictatorship...

Indeed, and gambling springs to mind...

... It is very different to the industrial revolution that we went through...

Only in the circumstances and the financial and technical aspects... I believe that human spirit is essentially universal, and my prediction is that Chinese workers will become 'Westernised' in a rather short space of time, negating most of China's current advantages.


And another point... Regime changes do occur from time to time... there is no guarantee that China will remain a communist dictatorship forever. I say this is on a very general note however, I do not predict anything in particular - it is just that Democracies tend (though admittedly not always) to be more stable and long-lasting than other regimes.

 

[GP801]

Greece is in the mire due to alleged corruption at all levels within its government and suppliers.

Couple that with an ever sceptical population that simply don't pay their taxes (its endemic by the way) and who can blame them when their money dissappears and is not spent on what it should be - services etc...

Its a vicious circle thats finally popped.

Just back from Italy where things are heading towards the same situation as Greece. The corruption is not quite so bad but the tax avoidance certainly is. Its a national passtime. In the Italian papers they are saying that if everyone paid the taxes they were supposed to then the debt problem in Italy would not exist.

 

[markjay]

Just back from Italy where things are heading towards the same situation as Greece. The corruption is not quite so bad but the tax avoidance certainly is. Its a national passtime. In the Italian papers they are saying that if everyone paid the taxes they were supposed to then the debt problem in Italy would not exist.

Yes, but this is misleading... no country manages to collect 100% of the taxes due. Yes, the Italian situation is indeed particularly dire and bleak in that department (in spite of the heavy presence of Guardia di Finanza patrol cars and armed uniformed officers!). But the more realistic and reasonable target of simply bringing Italy's tax evasion (and corruption levels) in-line with other European countries will improve matters but not resolve the debt problem altogether.

Furthermore, the Greek always had very low level of taxation, which naturally brings about lower levels of tax evasion...

So the two are not necessarily directly comparable.

 

[crockers]

Following the mantra 'buy low, sell high', wouldn't it be a good time to join the euro now? As a sort of knight in shining armour?

Actually if we went in now we would be buying high. When the Euro was 1.50 to the pound is buying in low.

 

[312 Sprinter]

Hmm..."Jawohl, mein Obergruppensturmbannfuhrer ze plan is vorking, soon ve shall be able to buy ALL of Europa for ze price of an old Mercedes-Benz auto!

Don't think we actually did much to help German or Japanese industry, the Yanks were all too happy to throw billions at them to build a new industrial economy while we struggled to pay back lend-lease, though.

That's actually a complete myth. Britain got a larger share of Marshall aid than either France or Germany. However in a fit of hubris and economic incompetence the UK decided to pursue an empire that was already lost and restore the gold standard. There was no economic plan for economic recovery and the money was just wasted.

 

[Red C220]

The future may see solutions akin to those the US (and UK) and Japan reached eventually - perhaps MB cars manufactured in a factory in China?

VW/Audi have been manufacturing there for sometime in Shanghai.

Every cab is a VW Santana - think old square Passat.

Audi's are popular as well as BMW, Mercedes less so.

Mostly though they have their own specific models, they are very keen on Audi A6L and BMW 5 series Li - Models not built for the European market.

 

[Mr E]

It would seem that Public Sector austerity isn't working here either -> BBC News - UK government borrowing rises in August

Growth down to 1.1%, income & wealth tax receipts down 5% - yep, these policies really work, don't they?

What is the government doing to foster growth, which is the only real solution?

 

[Deleted member 37751]

What is the government doing to foster growth, which is the only real solution?

They don't have a clue what to do and I would imagine the last lot wouldn't either.

The older I get, the more my eyes get opened to the incompetence of MP's.

What actually qualifies someone to run the economy? Or run the country?

I wouldn't trust any of them to run a bath.