I’m an ordinary 34 year old who works for the government, is happily married, and suffers from major depressive disorder and anxiety. Nothing too unusual 😉
I love sleeping, renovating property, and animals. Oh, and the husband (better not forget him).
I have a first class honours degree in economics, not that it gets much play in my current job. However, I’m always happy to talk at the drop of a hat about monetary policy (much to the disappointment of friends and coworkers). Just ask me my opinion on the euro. Go on, ask. I dare you.
a life half lived 
3 comments
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July 26, 2010 at 10:49 AM
Gabriel...
…so, how about that Euro? As a political tool I thought it was doing a fabulous job, right up until Greece went and blew themselves up.
July 26, 2010 at 3:48 PM
petrona
Okay. There’s nothing like poking the beast to get a reaction!
A currency can look beautiful from the outside (great exchange rate) but not really be doing a lot of good for the country it serves. Kind of like dotcoms before the 2000 stock crash were trading way above their fundamental worth, the euro was basically sitting pretty as a result of currency trading (arbitrage). While lots of currency trading was supporting the euro, however, the different countries it covered had all lost their capacity to raise or lower interest rates.
Basically you can either target money supply (yes we will only allow a hundred dollars to be printed and circulate, so interest rates will fluctuate as needed) or interest rates (we are setting interest rates at 4%, doesn’t matter how much currency has to be printed to support this). Typically inflation is indirectly related to interest rates – as IR go up, inflation goes down, and vice versa. With a pegged currency like the euro, countries with good growth and low inflation do really well. Countries with poor growth, however, or high inflation, have lost their capacity to lower interest rates to stimulate things, or raise interest rates to slow inflation. As a result, the weaker countries will suffer during a downturn, and not have the ability to kickstart their own economy, as their currency is pegged to the euro.
I don’t know if that makes any sense but it’s the best I can do at explaining it…. happy to discuss further 😉
December 9, 2011 at 11:18 AM
Gabriel...
So… having a common currency for more than a dozen countries of various economic means, each with their own political systems and needs for political compromises which stand contrary to the monetary Union every time there’s an internal election, without having a central bank is:
a. a great idea
b. the greatest idea