5 ms·

Well, as an individual eurozoner I vastly prefer a single currency and for me personally it certainly reduces the friction of cross-border trade (I both buy stu

Well, as an individual eurozoner I vastly prefer a single currency and for me personally it certainly reduces the friction of cross-border trade (I both buy stuff and sell services). I understand that many eurozone countries could be helped by currency tools like devaluing, but I'm not sure if anyone can really know how the tradeoffs vs. smoother commerce pan out and conclude authoritatively that the whole thing is a net negative.

petre 7y ago
I also buy stuff and services frictionlessly being outside of the EZ. Why trade away your country's monetary sovereignity for the convenience of currency exchange? We all know what happened to Greece and to the Italian economy.
- vnorilo 7y ago
  Maybe the businesses in your country improve their conversion rates ever so slightly because of said convenience? We spend time and money to optimize for far sillier things in our funnels. I do not claim to know the aggregate effects, but I would guess it is not as simple as convenience vs. sovereignity.
  - petre 7y ago
    Not really. Visa and the banks do take a cut. But there is Revolut now if you want to give them the middle finger. They will be forced to adapt and offer similar services or at least non-ripoff exchange rates. I always prefer a free market solution to an EU buceaucratic solution. Such as EU mandated zero transaction fees in order to convert the bulk of the transactions to cashless, be able to track them and "prevent money laundering", which of course isn't true (eg. Danske bank scandal).
- goodcanadian 7y ago
  The Greece and Italian economies were mismanaged. The Euro, in and of itself, had little to do with it. At worst, it removed one tool for dealing with the mismanagement. Far better to manage it well in the first place.
  - petre 7y ago
    Greece maybe. But if Italy's economy was mismanaged it was due to outside pressure. https://www.ineteconomics.org/perspectives/blog/how-to-ruin-a-country-in-three-decades https://www.ineteconomics.org/perspectives/blog/how-to-ruin-... https://news.ycombinator.com/item?id=19649182 https://news.ycombinator.com/item?id=19649182
    - gattilorenz 7y ago
      > Until the early 1990s, Italy enjoyed decades of relatively robust economic growth This is painting just one side of the story. Look up the graphs for debt as % of GDP in the same years.
      - gattilorenz 7y ago
        Here they are: https://tradingeconomics.com/italy/government-debt-to-gdp https://tradingeconomics.com/italy/government-debt-to-gdp https://2.bp.blogspot.com/-rj28mXbk6V8/TsEC58hZftI/AAAAAAAAAPY/cz9RMOQcXb0/s1600/Italy+Debt.jpg https://2.bp.blogspot.com/-rj28mXbk6V8/TsEC58hZftI/AAAAAAAAA... Sure, we were growing, but more than that we were growing our public debt. I'm no economist, but this doesn't seem the sign of a healthy economy to me.
    - pmontra 7y ago
      To put it into the words of my father (Italy early 90s), "the Euro will be good for us because our politicians will have to stop stealing". But they didn't and we kept voting for them. This is the problem in Italy. Internal, not external. Then other countries can take advantage of it, that's the way the world works.
- mad_tortoise 7y ago
  Monetary sovereignty is an ambiguous concept here in Africa. Many countries use the Dollar as acceptable forms of payment, and countries surrounding South Africa are susceptible to the strength of the Rand compared to say the Namibian Dollar, Botswana Pula or Zim Dollar.. So when many nation's already rely on a secondary currency, why have that currency be the Dollar? Make it a single currency, which works across borders (a major factor for Africans as many work in other countries and send money home) and begin to stabilise African economies together, rather than one at a time via the China/IMF's predatory loans.
  - petre 7y ago
    I can understand this. But it doesn't have to be te sole currency. Give contries the option of either running their own currency or using a single AU currency both by participaring in the AU or using it unilaterally like Montenegro is using the Euro.
Double_a_92 7y ago
How do currency policies even work? Isn't it like the state forcing exporting and tourism companies to lower their prices (by devaluating the currency)? Why is that the states job instead of the individual companies'? Also the state can scam buyers of state bonds by inflating the currency, which also has the sideeffect of meddling with it's own economy. It's not a silver bullet, it's just different cancer.
- bainsfather 7y ago
  "Isn't it like the state forcing exporting and tourism companies to lower their prices (by devaluating the currency)? Why is that the states job instead of the individual companies'?" With a free-floating currency, prices for foreign buyers can change overnight. This can allow quick responses to shocks. In contrast, internal devaluation (deflation) is a very slow process (how do you coordinate everyone in a country to reduce their prices). e.g. for the UK circa 2008 the economy had problems (more reliant on finance sector than most other countries) and the currency dropped, making UK exporters more competitive. Italy or Greece a few years later would have also seen their currencies fall, had they not been locked into the same currency as Germany. Instead, their exporters have problems with competitiveness which take many years to equilibrate (they must have lower inflation or deflation relative to Germany). There is a subject called 'Optimum Currency Areas'. As always, there are tradeoffs, more homogeneous economic areas face this particular problem less and so are more likely to benefit from a single currency.
  - vnorilo 7y ago
    Thank you for the insights. Any thoughts on how it went down in Latvia, sometimes cited as a success story but also criticized [1]? [1]: http://cepr.net/publications/reports/latvias-internal-devaluation-a-success-story http://cepr.net/publications/reports/latvias-internal-devalu...
    - bainsfather 7y ago
      I am sorry, no. I do not have such expertise. When I read economics textbooks, I see a marked contrast to physics textbooks. e.g. in physics, they might explain about a pendulum using equations etc, but then they show you real experimental data, to show that your equations about period vs pendulum length are correct. I have not found economics textbooks that do that. The more basic thing that economics gives me is akin to this: when iron ships were first proposed, sceptics might say 'iron sinks, so iron ships are impossible, you are crazy'. You can answer this by putting an iron saucepan in the kitchen sink, and showing that it floats. So (macro) economics can tell me some basic things about 'which way is up'. But putting even half-accurate numbers on things is difficult. imo economics is often done best when you view it using historical case studies + theory to know which way each effect acts. This is not to say that what you ask is impossible, but when that is done (by experts, not me), it is not convincing enough to convince others that it is right.
imtringued 7y ago
Devaluation is not a mere government tool, it's an automatic, market based mechanism of leveling the playing field between two countries.

petre 7y ago

I also buy stuff and services frictionlessly being outside of the EZ. Why trade away your country's monetary sovereignity for the convenience of currency exchange? We all know what happened to Greece and to the Italian economy.

vnorilo 7y ago
Maybe the businesses in your country improve their conversion rates ever so slightly because of said convenience? We spend time and money to optimize for far sillier things in our funnels. I do not claim to know the aggregate effects, but I would guess it is not as simple as convenience vs. sovereignity.
- petre 7y ago
  Not really. Visa and the banks do take a cut. But there is Revolut now if you want to give them the middle finger. They will be forced to adapt and offer similar services or at least non-ripoff exchange rates. I always prefer a free market solution to an EU buceaucratic solution. Such as EU mandated zero transaction fees in order to convert the bulk of the transactions to cashless, be able to track them and "prevent money laundering", which of course isn't true (eg. Danske bank scandal).
goodcanadian 7y ago
The Greece and Italian economies were mismanaged. The Euro, in and of itself, had little to do with it. At worst, it removed one tool for dealing with the mismanagement. Far better to manage it well in the first place.
- petre 7y ago
  Greece maybe. But if Italy's economy was mismanaged it was due to outside pressure. https://www.ineteconomics.org/perspectives/blog/how-to-ruin-a-country-in-three-decades https://www.ineteconomics.org/perspectives/blog/how-to-ruin-... https://news.ycombinator.com/item?id=19649182 https://news.ycombinator.com/item?id=19649182
  - gattilorenz 7y ago
    > Until the early 1990s, Italy enjoyed decades of relatively robust economic growth This is painting just one side of the story. Look up the graphs for debt as % of GDP in the same years.
    - gattilorenz 7y ago
      Here they are: https://tradingeconomics.com/italy/government-debt-to-gdp https://tradingeconomics.com/italy/government-debt-to-gdp https://2.bp.blogspot.com/-rj28mXbk6V8/TsEC58hZftI/AAAAAAAAAPY/cz9RMOQcXb0/s1600/Italy+Debt.jpg https://2.bp.blogspot.com/-rj28mXbk6V8/TsEC58hZftI/AAAAAAAAA... Sure, we were growing, but more than that we were growing our public debt. I'm no economist, but this doesn't seem the sign of a healthy economy to me.
  - pmontra 7y ago
    To put it into the words of my father (Italy early 90s), "the Euro will be good for us because our politicians will have to stop stealing". But they didn't and we kept voting for them. This is the problem in Italy. Internal, not external. Then other countries can take advantage of it, that's the way the world works.
mad_tortoise 7y ago
Monetary sovereignty is an ambiguous concept here in Africa. Many countries use the Dollar as acceptable forms of payment, and countries surrounding South Africa are susceptible to the strength of the Rand compared to say the Namibian Dollar, Botswana Pula or Zim Dollar.. So when many nation's already rely on a secondary currency, why have that currency be the Dollar? Make it a single currency, which works across borders (a major factor for Africans as many work in other countries and send money home) and begin to stabilise African economies together, rather than one at a time via the China/IMF's predatory loans.
- petre 7y ago
  I can understand this. But it doesn't have to be te sole currency. Give contries the option of either running their own currency or using a single AU currency both by participaring in the AU or using it unilaterally like Montenegro is using the Euro.

Double_a_92 7y ago

How do currency policies even work? Isn't it like the state forcing exporting and tourism companies to lower their prices (by devaluating the currency)? Why is that the states job instead of the individual companies'? Also the state can scam buyers of state bonds by inflating the currency, which also has the sideeffect of meddling with it's own economy. It's not a silver bullet, it's just different cancer.

bainsfather 7y ago
"Isn't it like the state forcing exporting and tourism companies to lower their prices (by devaluating the currency)? Why is that the states job instead of the individual companies'?" With a free-floating currency, prices for foreign buyers can change overnight. This can allow quick responses to shocks. In contrast, internal devaluation (deflation) is a very slow process (how do you coordinate everyone in a country to reduce their prices). e.g. for the UK circa 2008 the economy had problems (more reliant on finance sector than most other countries) and the currency dropped, making UK exporters more competitive. Italy or Greece a few years later would have also seen their currencies fall, had they not been locked into the same currency as Germany. Instead, their exporters have problems with competitiveness which take many years to equilibrate (they must have lower inflation or deflation relative to Germany). There is a subject called 'Optimum Currency Areas'. As always, there are tradeoffs, more homogeneous economic areas face this particular problem less and so are more likely to benefit from a single currency.
- vnorilo 7y ago
  Thank you for the insights. Any thoughts on how it went down in Latvia, sometimes cited as a success story but also criticized [1]? [1]: http://cepr.net/publications/reports/latvias-internal-devaluation-a-success-story http://cepr.net/publications/reports/latvias-internal-devalu...
  - bainsfather 7y ago
    I am sorry, no. I do not have such expertise. When I read economics textbooks, I see a marked contrast to physics textbooks. e.g. in physics, they might explain about a pendulum using equations etc, but then they show you real experimental data, to show that your equations about period vs pendulum length are correct. I have not found economics textbooks that do that. The more basic thing that economics gives me is akin to this: when iron ships were first proposed, sceptics might say 'iron sinks, so iron ships are impossible, you are crazy'. You can answer this by putting an iron saucepan in the kitchen sink, and showing that it floats. So (macro) economics can tell me some basic things about 'which way is up'. But putting even half-accurate numbers on things is difficult. imo economics is often done best when you view it using historical case studies + theory to know which way each effect acts. This is not to say that what you ask is impossible, but when that is done (by experts, not me), it is not convincing enough to convince others that it is right.

imtringued 7y ago

Devaluation is not a mere government tool, it's an automatic, market based mechanism of leveling the playing field between two countries.