Is the Eurozone now becoming a single state?

[GGT]

GGT: Not seen any of the latter. Overall opinion seems mainly to be that there was no alternative. Overall as well people have already moved on and its no longer big news.

Moved on, really? Here are a couple of articles I read just today that suggest otherwise:

Cameron cited defending London’s financial-services industry as the main reason he refused to join 26 other nations in a European Union treaty to rescue the euro last week. He was left out of further negotiations with French President Nicolas Sarkozy and German Chancellor Angela Merkel, leading to criticism from the Liberal Democrats, his coalition partners, that Britain would be frozen out of decision-making in Europe.

London is the world’s biggest market for interest-rate derivatives, with $1.4 trillion of daily revenue, or 46 percent of the world’s total, according to the Bank for International Settlements. The U.K. is also home to the world’s biggest foreign-exchange market and 251 foreign banks, more than in any other country.
“The City is relieved” at Cameron’s refusal to sign the treaty, according to Steven Bell, chief economist at hedge fund GLC Ltd. in London and a former U.K. Treasury economist. “For the U.K. economy it’s the equivalent of North Sea oil and it’s not running out.”


The U.K.’s financial-services industry makes up about 10 percent of the country’s gross domestic product and 11 percent of its total tax receipts, according to The City U.K., a lobby group backed by the City of London Corporation, which governs the financial district. Financial-services employ more than 1 million people in the U.K., the group said.


About 288,000 of these work in the City of London, according to the CEBR. That’s 9.3 percent fewer than in 2010 and the lowest headcount since at least 1998 as firms cut jobs amid the European debt crisis and tougher regulation.

http://www.businessweek.com/news/201...ntipathy-.html

That looks like what people in the US have been complaining (and Occupying) about since the global financial melt-down of '07-'08---public policy to prop up the same "experts" who caused the trouble in the first place, with politicians' help. Well, that's my take on it.

Combined with what we know about synthetic derivatives, it looks like a precarious position for the UK to choose to "go it alone". More on those financial WMD, including interest-rate swaps, to which London's financial-services industry is heavily exposed:

http://www.realclearmarkets.com/arti...fit_99422.html

[RandBlade]

That article was written 4 days ago.

[GGT]

Why does the date of the article matter?


After re-reading the OP, I wonder if anyone wants to dissect the politics of money further, and more structurally...? The eurozone isn't becoming a 'single state' any more than the euro as a currency defines statehood. But that's part of the inherent problem, when monetary policy competes with fiscal policy. We shouldn't kid ourselves---both are fundamentally political.

The US Federal Reserve is supposedly "neutral" and non-political, but that's bull. It's a group of private bankers that work closely with our Treasury, often in secrecy behind closed-doors, and Treasury relies on appointments/confirmations by the executive and legislative branches. The public doesn't have a real-time clue to the Fed's balance sheet, and relies on Beige Papers and quarterly press releases. Efforts to audit the Federal Reserve have been ignored for decades....since Ron Paul started the mission. People used to laugh at that, until post-crisis of 2008 showed monetary AND fiscal policy (politics) were killing savers, fixed-income retirees, small businesses, and middle-class earners.

For Europe and the Eurozone, or those using the Euro as a currency or investment 'tool'...that means national Treasurys and central bankers bumping up against ECB and IMF, trying to decide what's best for the union AND their own populace. It's not clear how the whole thing was constructed, or what the treaties contractually mandated (as an American, I didn't pay that much attention, to be honest).....but it's rather late in the game to realize political pressures from each nation might throw a monkey wrench in the cogs of the machinery if/when it wasn't working well for each nation involved. Wasn't there some sort of contingent plan at the beginning? Like what "to do" with members that had fudged their accounting, or refused to deal with debts/deficits (aka Greece)

Anywho....it's probably high time everyone asks who's in charge of "our money", and how it's done. We're all intertwined by global financial markets, treasurys and central banks, but that's not becoming one global nation or using one currency, let alone one body politik.

[RandBlade]

Why does the date of the article matter?

I suggested people were already moving on, you be butted that by quoting an article you'd read 'just today'. You may have read it just today but it wasn't published just today.

[GGT]

I suggested people were already moving on, you be butted that by quoting an article you'd read 'just today'. You may have read it just today but it wasn't published just today.

That's even stranger; to suggest people have "moved on" because I read and linked a four day old article as a rebuttal?

Let's try this approach instead: Can the UK survive as a single state outside the eurozone? Does it have enough economic power to compete on its own as a "single state"? Can the pound sterling compete against the eurodollar, the USD, remnimbi or yen?

No offense, but there's nothing in my home marked "Made in the UK". I may have some Irish linens, wool, or lace, but only thanks to American importers and distributors. London might be a leading financial district in Europe, but it's easily replaced. It seems silly for Cameron to make decisions based on an outdated assumption that anything English is best...simply because it's English. Same mistake the US has made, assuming US superiority, and resting on its laurels.

[Loki]

Eurozone? It's already outside of the eurozone and has been for its entire history (minus the brief period during which the pound was pegged to the precursor of the euro). And typical socialist using manufacturing as the key determinant of economic strength.

[Hazir]

Eurozone? It's already outside of the eurozone and has been for its entire history (minus the brief period during which the pound was pegged to the precursor of the euro). And typical socialist using manufacturing as the key determinant of economic strength.

Cheap shot.

[GGT]

Typical Loki, though. He knows damn well that meant could UK compete outside or with the eurozone, without any negotiating power, Domestic manufacturing isn't SSSocialist---it doesn't imply old world industrial assembly lines, but includes high tech and highly skilled engineering, too. Seems a pretty tall order for the UK to keep hoping London's financial services can/will continue to hold top spot, with their growth "trickling down" to the rest of their nation's workers. It doesn't work so great for financial services to be the foundation, when it implodes and takes the house down...using the US as a good example.

[Loki]

http://en.wikipedia.org/wiki/List_of...%29_per_capita

Britain seems to be doing just fine, only marginally behind the industrial powerhouse of Germany.

[GGT]

Britain has the same problems as everyone else: tons of debt, slow or sluggish growth, politicians fighting with central bankers over stimulus or austerity, monetizing sovereign debt, and fiscal policy that favors banking/financial sectors over the general public. While using the public's money and/or value of their money to correct structural problems...that are tied to legislators acting as self-serving politicians instead of wise national leaders.

I've said it before, I'll say it again---GDP doesn't reflect other important things like employment or quality of life, and shouldn't be trotted out as some all-inclusive number that means much without context. Expert economists used to believe (emphatically) that globalization and being a service-oriented economy wouldn't have any down-side for the US, or that losing/exporting blue collar jobs to cheap labor overseas would be replaced by more (wealthier) white collar professionals, who'd turn around and buy cheap imports.

They were wrong, of course. Not just because no one really understood the impact of growing internet/computer services <<who needs a language teacher when we have Rosetta Stone, who needs a local customer rep when someone in India can do that?>>, but because it was assumed our schools and corporations were actively involved in preparing every student and employee for a New Economy.

Yeah, we all have the same problems as evolving first world nations. No one is exempt.

[RandBlade]

GGT the financial industry is undeniably important to the UK but it's not the only important industry. In fact it's not even the most important by a long way. The UK does export more financial services than other nations, but we also do export more manufactured goods than financial services. In fact I think finance is ranked about 6th.

Its important but not exclusive.

[GGT]

GGT the financial industry is undeniably important to the UK but it's not the only important industry. In fact it's not even the most important by a long way. The UK does export more financial services than other nations, but we also do export more manufactured goods than financial services. In fact I think finance is ranked about 6th.

Its important but not exclusive.

http://www.theworldforgotten.com/sho...l=1#post103400

Was there anything incorrect in those links? Does the UK have anything else that compares to $1.4 TRILLION of daily revenue from interest-rate derivatives, or something that's 46% of the world's total? Does any other industry provide more than 11% of UK's overall tax receipts?

The Bank of International Settlements has apparently collected some jaw-dropping stats.

[GGT]

Rand, since you didn't reply otherwise, I'll assume you can't name another UK industry that's "as" important as the Financial District. Especially if/when it falters or fails....with enough political clout to drive Cameron's decisions. Financial services may be ranked 6th as a UK export, but you'd be hard pressed to prove the other top 5 are as heavily linked or coupled to other nations' economies. It's not like the UK is a net energy exporter, or even a big commodity/food exporter.

No offense, but I can't think of one damn thing the UK offers the world that can't be found elsewhere, with less expense. We all love watching Princes marry commoners, with the pomp and ceremony, but we can watch that on youtube now. If tourism and financial services are the bulk of your global trading....I'd say you've got real cause for worry.

British pound can't really compete against the euro dollar or US dollar, or any Asian currency. Begs the question---does your best national economic plan mean currency speculation, using your financial industry....?

[RandBlade]

Why should we be a big food exporter? Or commodities? That's a third world economies exports. There is nothing remotely skilled, advanced or productive about producing raw resources. I don't see why it is a worry about tourism and financial services being key industries. However the UK does have a very productive and efficient agricultural industry for what its worth. It is a lot harder to start up and attract tourism or financial services than it is to start a farm. I would be worried if farming was our key industry.

As for other important industries:
London is not just the leading financial city in the world, it is also (by a remarkably large margin) the world's main tourist destination city. London gets 15.6million visitors a year, 50% more than its nearest rival Bangkok that gets 10.4m while third placed Paris gets 9.7m annual visitors. The top US destination (New York) I would have expected to be much higher but it has 6.2million annual visitors.
Manufacturing is more important to the UK economy than financial services. Primarily highly-skilled manufacturing though, not robotic simpleton factory manufacturing which is why you don't see Made in UK stamped instead of Made in China on cheap tat. The UK is second or third (depending upon how you measure it) largest aerospace industry and is a leading producer in engines.
Pharmaceuticals is another industry we're a net producer in, heard of GlaxoSmithKline and AstraZenica?

I don't think you understand the purpose of a currency if you think a currency is a "competition". How does a currency "compete"? The pound sterling is a freely-floating currency and is part of all major "baskets" of key currencies along with the dollar, euro, yen etc

[Hazir]

Exporting food is a third world activity? Interesting.

(FYI; food exporters 1,2 and 3 in the world are US, France and The Netherlands)

[RandBlade]

By volume or as a percentage of overall exports?

[Timbuk2]

Tulips are food?

[Hazir]

By volume or as a percentage of overall exports?

By volume, it is also good for 20% of our exports. About 2% of our workforce is employed in agriculture but it's a big exporting sector and we make a lot of money exporting food.

Tulips are food?

Tulip bulbs appearantly can be eaten, but they are generally not considered to be a food crop. Besides producing flowers a big part of flowers grown anywhere in the world are sold (and shipped) through Holland. Roses you buy in London may be sold to the seller there by Dutch auctioneers who imported them from Africa.

[RandBlade]

98% of people not being employed in agriculture seems about right.

Dutch export figures/import are often a bit funny due to the Rotterdam-Antwerp effect.

[GGT]

Rand, my point was that the UK imports fuel/energy, commodities, food. You're not a self-sufficient nation that can thumb your nose at basic necessities (imported), while relying on tourism or Financial Services to fuel your economy. Not in a global economy that's changing so rapidly. The internet can let investors use Hong Kong or Tokyo for Financial Services.

It's only a matter of time before using a British (or American) investment firm operating in Asia isn't as efficient as using an Asian firm. I have trouble envisioning the UK being a very important player in the future, but it's easy to imagine British professionals emigrating to Asia. In fact, it's already underway. Right now that means surrogate executives for US/UK/EU corporations setting up business in Asia....but eventually that will mean some entrepreneurs leaving the corporation, and starting up their own businesses in Asia. With the UK being an importer.

I don't think you understand the purpose of a currency if you think a currency is a "competition". How does a currency "compete"? The pound sterling is a freely-floating currency and is part of all major "baskets" of key currencies along with the dollar, euro, yen etc

And I think you're naive if you don't understand that currencies are "competing" for value on the global stage. Our central banks, comptrollers of currency, treasury departments, and legislators are very busy making currency plays and trades every damn day. When China does it, we tend to call it "currency manipulation", but when we do it, we call it "monetary policy".

When nations want to apply political pressures, one of the first moves is to create a tariff or tax, or threaten a trade embargo, or banking freeze. That directly affects their currency value, because it affects their trading ability. Just look at what "we" are trying to do with Iran and their nuclear endeavors, by threatening their central bank's ability to borrow or lend in the global trade environment. It's viewed as a direct threat to their nation, and they're willing to cut off any oil moving through the Strait of Hormuz.

So, yeah, currency is money, money is power, and both have political profiles.

[RandBlade]

60% of domestic food consumption is produced locally by 0.6% of our population. Were it not for waste and over consumption that figure could be 100% if we needed it to be. But why would we need it to be? Financial services is a skilled industry, far more skilled than growing coffe beans. Why shouldn't we import coffee beans from Columbia really cheaply while exporting highly skilled manufactured goods and services?

As for manipulating currencies, yes that's possible. And as we have an independent currency it can either freely float or be manipulated as we require.

[GGT]

I'm not convinced those food consumption/production stats are placed in proper context, are you? I'm under the impression that the UK can't meet its own dairy needs, let alone fruits and meats, and needs to import quite a bit. Even if the UK could sustain itself on domestic food products, you can't fuel your economy on domestic energy products. You'd still have to import petrol, coal or natural gas to transport British products to other Brits.

Coffe beans don't require "skilled professionals", but it does require a certain environment/climate that can't be found--or replicated--in the UK. You also can't grow your own tea leaves, even though you're a nation of tea-lovers and rely on exotic imports, you can't dispatch the Queen's Navy to...oh, never mind that tangent.

Modern Financial Services are an education-based, expandable and transferrable service industry. Trying to call it a necessary 'commodity' for the UK doesn't make it so. There's no reason to believe that British financiers have stronger national alliances than American financiers do....when the only goal is to make money by trading money, and using emerging markets to make money.

I'm not sure why you think a UK currency is "independent" because it's based on a basket-of-goods....when those goods are pegged to other currency values, and how they trade in a global market.

[Hazir]

98% of people not being employed in agriculture seems about right.

Dutch export figures/import are often a bit funny due to the Rotterdam-Antwerp effect.

Another of those typical eurohaters lies; Dutch export figures are not 'funny' or distorted at all. But even if your lie were true, then it would only mean that a bigger proportion of our exports are in that 'third-world' sector of the economy than the 20% I quoted. Most of our trade is with Germany in the first place, and besides that, logistics are an actual service, adding to the GDP.

Which explains too why Dutch people are in favour of a real free trade zone as opposed to British Tories who only profess to being in favour of a free trade zone, but are not willing to accept that free trade only is possible if you have an organisation that stops national governments from imposing barriers in violation of those rules. One could point at the French refusal to import British beef, one could also point at the illegal levies on imports for personal use of spirits and tobacco that the British government imposed.

Finally, Antwerp is in Belgium, which has been a separate country for over 150 years now. What explains your not knowing this?

[RandBlade]

Don't get so touchy.

The Rotterdam-Antwerp effect is mis-used by eurohaters true but I didn't use it in that context to say anything anti-EU did I? In fact the EU wasn't even in the conversation. All I said was the Dutch figures are a bit distorted, I don't know how that distortion works. Either way I suspect that a far lower proportion of Dutch workers work in agriculture and lower proportion of total Dutch exports come from Agriculture than is the case in the third world.

The Rotterdam-Antwerp effect is to the best of my knowledge acknowledged as a known distortion by the EU Commission, the UK and Dutch governments. I am not aware of any definitive answers as to how big a distortion is causes, just that it is a known one. I don't particularly care too much.

I am aware that Antwerp is in Belgium, I never said only the Netherlands was affected did I? Belgium is also affected by it.

[Hazir]

Since you come from a country that doesn't really believe in free trade I guess I have to tell you this; goods traded are goods traded, no matter how long or short they stay in your country.

The Dutch government also sticks to that adage, so there is no reason to accomodate outlandish notions that somehow trade is of a lesser kind if you re-export it to another country. Quite to the contrary.

[GGT]

Short of this thread turning into a Freee Trade tangent....

I'd like to ask Rand to meld the questions if Italy is the next failed Euro state, and if the Eurozone is becoming a single state. They seem inextricably linked.

Seems the general complaint is about centralized monetary policy, as a form of central economic planning---when there are de-centralized (national) political processes at play that make a union difficult.

Is there any nation that doesn't feel some resentment toward the whole gig during these hard times? When things get tough, the instinct is to fall back onto protective national interests, losing sight of the forest for the trees. The US is a major funder of the IMF, and our Federal Reserve has loaned billions indirectly to the ECB, or directly to European banks.

I don't particularly like the US acting as the world's lender of first resort (any more than I like being the world's military of first resort). Especially since our "wealth" includes debt owned by other nations (like China). All sovereign debt is political. But I'm not quite sure what Rand sees as the major threat to the UK, or what he proposes as an alternative.

[LittleFuzzy]

Since you come from a country that doesn't really believe in free trade I guess I have to tell you this; goods traded are goods traded, no matter how long or short they stay in your country.

The Dutch government also sticks to that adage, so there is no reason to accomodate outlandish notions that somehow trade is of a lesser kind if you re-export it to another country. Quite to the contrary.

It's not, but it doesn't give an accurate picture of local production either. All the trade you're transshipping, reexporting, etc. distorts that picture which is generally derived from local consumption plus exports minus imports, and local production was what Rand and GGT had been discussing.

[RandBlade]

It's not, but it doesn't give an accurate picture of local production either. All the trade you're transshipping, reexporting, etc. distorts that picture which is generally derived from local consumption plus exports minus imports, and local production was what Rand and GGT had been discussing.

Exactly. I don't particularly care where things get produced generally as I believe in free trade - I no more believe the UK needs to produce my food than I believe I need to be a farmer myself - but in a conversation about local production its not odd to look at that known distortion. I've never brought up that distortion before (which also happens in the US with certain States, I believe from memory Baltimore especially is one city like that) as I'm not a "made in the UK/whatever" kind of person.

Geegee, the US is neither a lender of first resort (that's private companies generally) nor even accurately the "lender of last resort" which is the correct phrase used in this context.

[Hazir]

It's not, but it doesn't give an accurate picture of local production either. All the trade you're transshipping, reexporting, etc. distorts that picture which is generally derived from local consumption plus exports minus imports, and local production was what Rand and GGT had been discussing.

And you based this opinion on what information? God, you really love to get your tongue deep into any british ass that presents itself to you don't you? It would be so cool to even once see you write something that 's not sounding like it came right out of the comments of the Daily Telegraph. Then again, I guess that's too much to hope for with the big chip you have on your shoulders about eurocentrism.

[Hazir]

Exactly. I don't particularly care where things get produced generally as I believe in free trade - I no more believe the UK needs to produce my food than I believe I need to be a farmer myself - but in a conversation about local production its not odd to look at that known distortion. I've never brought up that distortion before (which also happens in the US with certain States, I believe from memory Baltimore especially is one city like that) as I'm not a "made in the UK/whatever" kind of person.

Geegee, the US is neither a lender of first resort (that's private companies generally) nor even accurately the "lender of last resort" which is the correct phrase used in this context.

Again, if that distortion you love to parade about were true then a corrected percentage of agriculture in our economy would be significantly HIGHER than the 20% quoted. And that brings us back to your ridiculous claim that there is something inherently backward about having an agricultural sector of a relevant size.