Comments on: Devaluation, Euro Membership And Loan Defaults – Some Thoughts For My Critics http://fistfulofeuros.net/afoe/devaluation-euro-membership-and-loan-defaults-some-thoughts-for-my-critics/ European Opinion Mon, 13 Feb 2012 07:39:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: DD http://fistfulofeuros.net/afoe/devaluation-euro-membership-and-loan-defaults-some-thoughts-for-my-critics/comment-page-1/#comment-24436 DD Wed, 18 Mar 2009 09:55:50 +0000 http://fistfulofeuros.net/?p=5101#comment-24436 Thanks for this update, it answered a great deal of my concerns regarding the relative benefits of devaluation. The insight that the existing social guarantees will match up better with a devaluation induced V shaped downturn versus the deflation induced U downturn. I would imagine that the risks of the downturn becoming a L shaped must increase greatly with deflationary approach. I think that the Swedish experience in the early 1990's may have a bit more relevance here than in other parts of the word due to the nature of the overhang. I understand one of the most important aspects of the workout was the devaluation of the Kronor: Here is a quote from an article in today's FT on the subject: "Yet the most important part of Sweden’s banking bail-out may have been the devaluation of the krona, a move that the government had actively resisted. In November 1992, the authorities gave up their defence of the currency, allowing it to float freely. This move, which coincided with an economic upturn in Europe, is likely to have given Sweden a boost by stimulating demand for exports. Whatever the reason, GDP started to grow again in the second quarter of 1993." While i do not think we can expect any upturn in the near future, the speed of recovery is remarkable, and certainly would result in a faster recovery in Estonia's case. Thanks for this update, it answered a great deal of my concerns regarding the relative benefits of devaluation. The insight that the existing social guarantees will match up better with a devaluation induced V shaped downturn versus the deflation induced U downturn. I would imagine that the risks of the downturn becoming a L shaped must increase greatly with deflationary approach.

I think that the Swedish experience in the early 1990′s may have a bit more relevance here than in other parts of the word due to the nature of the overhang. I understand one of the most important aspects of the workout was the devaluation of the Kronor: Here is a quote from an article in today’s FT on the subject:

“Yet the most important part of Sweden’s banking bail-out may have been the devaluation of the krona, a move that the government had actively resisted. In November 1992, the authorities gave up their defence of the currency, allowing it to float freely. This move, which coincided with an economic upturn in Europe, is likely to have given Sweden a boost by stimulating demand for exports. Whatever the reason, GDP started to grow again in the second quarter of 1993.”

While i do not think we can expect any upturn in the near future, the speed of recovery is remarkable, and certainly would result in a faster recovery in Estonia’s case.

]]> By: Oliver http://fistfulofeuros.net/afoe/devaluation-euro-membership-and-loan-defaults-some-thoughts-for-my-critics/comment-page-1/#comment-24434 Oliver Wed, 18 Mar 2009 09:20:32 +0000 http://fistfulofeuros.net/?p=5101#comment-24434 Concerning the equivalence of deflation and devaluation in terms of defaults, I'd like to ask about corporate debt. If you devalue, every corporation with foreign debt will be affected. If you deflate companies exporting goods or services benefit because they become more competitive. The degree of trouble should depend on domestic sales, shouldn't it? Secondly, if the population starts changing its savings to euros, do you risk a positive feedback, completely crashing the currency? Concerning the equivalence of deflation and devaluation in terms of defaults, I’d like to ask about corporate debt.

If you devalue, every corporation with foreign debt will be affected. If you deflate companies exporting goods or services benefit because they become more competitive. The degree of trouble should depend on domestic sales, shouldn’t it?

Secondly, if the population starts changing its savings to euros, do you risk a positive feedback, completely crashing the currency?

]]> By: Jussi Jalonen http://fistfulofeuros.net/afoe/devaluation-euro-membership-and-loan-defaults-some-thoughts-for-my-critics/comment-page-1/#comment-24422 Jussi Jalonen Tue, 17 Mar 2009 20:59:21 +0000 http://fistfulofeuros.net/?p=5101#comment-24422 There's one group of professional guest workers (a cynic might call also them "exports") whom you don't see in any official graphs. Judging by the same anecdotal evidence [1], apparently their number has also increased, while their wages have decreased. Still, I guess that sixty euros for half an hour's labour - minus that slice taken by the presumable middleman, however much it may be - is better than nothing. Assuming that you can handle enough customers. Cheers, J. J. [1] I know policemen, and I also know some professionals, but I'm not naming my sources in any further detail. There’s one group of professional guest workers (a cynic might call also them “exports”) whom you don’t see in any official graphs. Judging by the same anecdotal evidence [1], apparently their number has also increased, while their wages have decreased.

Still, I guess that sixty euros for half an hour’s labour – minus that slice taken by the presumable middleman, however much it may be – is better than nothing. Assuming that you can handle enough customers.

Cheers,

J. J.

[1] I know policemen, and I also know some professionals, but I’m not naming my sources in any further detail.

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