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I am really at a loss to understand why people say a country will devalue it’s currency.
The pound floats up and down against other currencies, at rates dictated by the demand for the pound.
In general terms the UK could only affect its relative value by buying or selling pounds, thus they could affect the demand for the currency which would then dictate its relative value.
If Greece, Spain, etc. left the Euro then buyers and sellers of their currency would dictate its value against other currencies. I would not think that either governments would intervene to buy its currency to maintain its value, and thus, I would expect a NP, a Drachma etc. to weaken against most other currencies.
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J ZX,
There are many ways a currency is valued / DEvalued.
In the U.K (the government) do it by PRINTING money
and call it QUANTITIVE EASING i.e the value of the pound goes further down the drain.
You are correct, the value of a currency is also it's TRADED value in world markets.
Also , remember the ERM ? - another total balls up organised by our E.U. partners.
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If lucky, there is another day.
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So the pound euro rate today is around 1-26 interbank
The britsih govenment has introduced around 200bn by way of Quanitive Easing, yes 200bn that's more than the greek bailout and double what Spain has been offered.
What do you think the pound/euro rate would be today if they hadn't done it, I'll tell you what I think - 1-26
And where pray tell is all this money
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johnzx, on another, earlier thread, it was explained that governments can alter the exchange rates and examples were given. Harold Wilson did it in 1967 as the prime example.
If it weren't for quantative easing, the pound would now be worth far more against the euro. It has, however, dropped around 9 cents to the US dollar in the last month and a bit. How about if Spain did revert to the peseta, it may devalue sharply agains the euro but maybe not so much against the pound. It could be that the euro gets stronger without the poorer countries but it may have little effect on the pound. So, 1 new peseta being worth 75 cents agains the euro but staying at 1.25 against the pound. Which would also mean the pound to the euro (stronger zone euro, that is) being at parity or thereabouts. Still relatively cheap to come to Spain or Greece etc but hugely expensive going to Germany or France.
disclaimer: the above is purely a guess. If I really knew what was going to happen I would be investing every penny into the one that is going to make money and then sitting on a beach in the Caribbean watching my fortune increase instead of scouring Lidls catalogues for next weeks special offers. Not that I have a fortune now, of course. Then again, if I really did know what was going to happen I could pick the winning numbers on the euro lottery as well.
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BOBAOL,
Good post - 100% agree.
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If lucky, there is another day.
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In the scenario outlined by bobaol, Germany might devalue its currency in the same way the Swiss did last September with the Bundesbank (or whatever) pegging the Northern Euro to the Peseta at a certain rate and saying they would buy Pesetas (or whathave you) in unlimited quatities if they thought the value of the Northern Euro was creeping too high. Of course, this would mean the Bundesbank being stuffed full of New Pesetas which might not make its bondholders too happy, so they might pay more to borrow. That is to say, if the Germans would need to borrow once shot of the PIIGS. If anyone's worried about the way Sterling might go then buy a Sterling put.
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Hi Spain seemed to have more tourist before they changed there currency to the euro.
The tourist had a good exchange rate for the peseta.
The shops and restaurants where all doing well.
The country has had a lot of money from the EU to do up there roads and the infrastructure.
I think they lost a lot of business when the country started over charging for housing and people felt they where being ripping of at the housing boom.
I also think most of these EU countys seem to have over spent since they joined the euro.
We in the UK have been made to cut jobs ,have poor schools and poor health services for years and now work longer and pay more tax's even when we are not in the euro.
Is it any wonder the euro is in a mess.
I think every country should have there own currency and rule the own country but just trade with in the EU.
I also think Spain should have stayed out of the euro.
These country's that now need bailing out are now experiencing what the UK has had to put up with for some time.
I even read some time ago that France laughs at the state of our health service buy they still want us to pay more and more into the EU.
I do not know what the out come of all of this will be.
Irene
This message was last edited by irenemontague on 13/07/2012.
This message was last edited by irenemontague on 13/07/2012.
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By the way I got my QE figure wrong earlier, according to The Guardian the last 50bn tranche made 375bn so far in total
So this is probably more than all the bailouts to EU members put together (I can't do the sums now but food for thought)
Babol
In your scenario, If Spain fully takes up the 100bn€ bailout that has been agreed and then for whatever reason riverts back to the NP (which will devalue) how much will the loan be that they have to pay back in the local currency? If we believe Midasgold and the NP devalues 50% that means Spain then has to find the equivilent of 150bn euros in NP. Yes, exchange rates can be agreed, fixed or manipulated but in any event I can't see any of these bailouts being repaid.
Meanwhile back in London the Bank of Engalnd is just trying to build the biggest sandcastle
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spain has borrowed 690bn in may and june according to the ECB making the amount they are asking to bail the banks out small beans in comparision how are they going to be able to pay that back
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Well, we seem to have missed the bigger picture, here, apart from the banks, property collapses money worries a low € price globally its is good for EU manufacturing, who is the main EU manufacturer ? A .Germany. Has the € really collapsed ? A. at this point in time No. When the € floated it was around 1.60 € to the pound, the € is still stronger than Sterling. Further devaluation will make the global debt of € be even less.
I think that gbig games are being played here with Grmany being the Pupeteer.
Just a view backed up by nothing but life !
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How about this for a bit of "FUN".
Scrap the Euro. Countries in the Euro Zone go back to their original currency.
ALL the countries in the world "right off" all their debts and start from SCRATCH!!!
No one owes anyone anything and is not owed.
Then start again, without countries being billions in debt, with billions to pay back and the ordinary man- woman on the street taking the brunt of it all.
Years ago there was no currency and the butcher gave the baker a leg of lamb and he gave the butcher 2 loaves and 20 cream cakes. Etc, Etc. Bartering i think it was called. Someone then said, lets buy things with money instead and they did, and they started with currency from SCRATCH!!!
I said it was a bit of fun but food for thought............................................
I am sure someone somewhere will find a way of complicating it though................................
Bob.
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 Now Retired and have our money back in FULL via our bank guarantee. Bob and Pauline.
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Has anyone else noticed that an American Company decides what the rest of the world has to pay for borrowing money. Their track record is not very good to say the least. Dont you think they they might be be just a little bit predjudist?
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the reason the euro is still strong against the pound is the fact the bank of england has printed so much money devalueing the pound.In real monetry term most currencies are in the s--t it only doesn't look so bad because of it
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