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> Europe’s manufacturing base underpins the value of the euro. When this base is obliterated by high energy costs, the euro will sink. Hmm... but when the Euro

> Europe’s manufacturing base underpins the value of the euro. When this base is obliterated by high energy costs, the euro will sink. Hmm... but when the Euro falls the attractiveness of its exports increases. One consistent thing about these articles is that they fail common sense tests. Anyway, Brexit is almost certainly to blame for the magnitude of the calamity in England. The bigger problem is that nobody buys anything from there, that English industry and innovation have been stagnating for a long time.

gfguigyutf 4y ago
My reading of this is that high energy costs disable the (production of) supply coming from Europe, such that demand (and the attractiveness of demand for European goods) is irrelevant, because supply is just not there.
polotics 4y ago
The main problem is that some journalists have read enough economists to be able to pass themselves off as having done the work. When you scratch, there is no quantifying of anything. This article is shock-value based clickbait.
nobodyandproud 4y ago
The energy costs are passed on—a devalued currency doesn’t help here—and same with raw materials imported from elsewhere.
kansface 4y ago
That’s normally the story, but probably not the case when you can’t make stuff overnight or move it because energy is too expensive (just for you). You can’t afford to import the stuff you were making because your currency slid 25% which further breaks supply chains fueling more inflation. Inflation goes up with no levers to pull to slow it down (moderate interest rates will send Southern European over the edge). At the same time, central budgets have to get reallocated to just keep citizens alive through winter.
makomk 4y ago
The problem is that manufacturing those exports requires imported energy which goes up in price every time the Euro sinks in value, and those energy prices are already so much higher than (for example) the USA that it's basically infeasible to manufacture stuff in Europe. The price is only half the story as well, Europe has serious problems with the availability of energy and it probably wouldn't be possible for Germany to import enough energy to keep its industries running at any price.
caeril 4y ago
> but when the Euro falls the attractiveness of its exports increases. They're talking about manufacturing. Energy input costs are still denominated in dollars/rubles, so those exports will still be pretty expensive if the factory doors are to remain open. A falling euro will only make the labor portion of cost inputs decline. And because labor needs to eat, even those input costs will be rising as well. Will a falling euro help? Sure. But probably not as much as you think.

gfguigyutf 4y ago

My reading of this is that high energy costs disable the (production of) supply coming from Europe, such that demand (and the attractiveness of demand for European goods) is irrelevant, because supply is just not there.

polotics 4y ago

The main problem is that some journalists have read enough economists to be able to pass themselves off as having done the work. When you scratch, there is no quantifying of anything. This article is shock-value based clickbait.

nobodyandproud 4y ago

The energy costs are passed on—a devalued currency doesn’t help here—and same with raw materials imported from elsewhere.

kansface 4y ago

That’s normally the story, but probably not the case when you can’t make stuff overnight or move it because energy is too expensive (just for you). You can’t afford to import the stuff you were making because your currency slid 25% which further breaks supply chains fueling more inflation. Inflation goes up with no levers to pull to slow it down (moderate interest rates will send Southern European over the edge). At the same time, central budgets have to get reallocated to just keep citizens alive through winter.

makomk 4y ago

The problem is that manufacturing those exports requires imported energy which goes up in price every time the Euro sinks in value, and those energy prices are already so much higher than (for example) the USA that it's basically infeasible to manufacture stuff in Europe. The price is only half the story as well, Europe has serious problems with the availability of energy and it probably wouldn't be possible for Germany to import enough energy to keep its industries running at any price.

caeril 4y ago

> but when the Euro falls the attractiveness of its exports increases. They're talking about manufacturing. Energy input costs are still denominated in dollars/rubles, so those exports will still be pretty expensive if the factory doors are to remain open. A falling euro will only make the labor portion of cost inputs decline. And because labor needs to eat, even those input costs will be rising as well. Will a falling euro help? Sure. But probably not as much as you think.