more boring economics stuff

[ajva]

I know people must think by now that I'm some kind of nutter Jeremiah-esque permabear muttering away in the corner and stinking of whisky, but in case you were wondering, it's things like this graph that make me wonder if we could be facing a total global meltdown economically, originating in the fundamental insolvency of the world's banking system.

Just saying. *swigs from bottle in brown bag*

Mind you, I remember my Dad saying something similar back in 1986 or thereabouts, so I expect everything will turn out OK.

Comments

[ajva.livejournal.com]

Yes, I don't dispute that. I'm just dubious that the Euro could really be a viable long-term alternative to the US dollar in terms of becoming a world reserve currency. It's barely a decade old and hasn't really been tested yet - and it has problems too (some quite similar to those of the dollar, I think, although others all of its own). At the moment, its principal attraction seems to be that it's a large first world currency that isn't the dollar. I hate to say it, but I'm not convinced that that's going to prove to be enough.

If I'm wrong, though, then that's obviously good news for Europe. However, I'm not sure an ECB-policy-led financial world would be terribly good either for us all. I used to be in favour of the UK joining the Euro as part of my generally pro-European poliical position, but now I think it would scupper our economy quite badly to cede control of our economic policy in that way. I think it is also scuppering the economies of a lot of the Euroland countries already. Ireland, for example, is now undergoing a very harsh, fast re-adjustment of its housing market because when the Euro launched its base rates became immediately aligned with what the ECB set as base rates for the Eurozone - in other words they were slashed, which suddenly encouraged a huge bubble in the Irish housing market.