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I Think The UK Just Did Something Very Smart

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December 09, 2011 – Comments (18)

The UK did something very smart when they refused to join the Euro. While the decision was widely derided at the time, in retrospect it was brilliant. Keeping their own currency let them set monetary policy rather than having it imposed on them. 

I think they just did it again. By refusing to join the Euro rescue plan that would have cost them much control of their own country I think they remain their own country after the rest of Europe has been reduced to vassals of Germany. And things are never run for the benefit of the vassals.

Cameron, I salute you! 

18 Comments – Post Your Own

#1) On December 09, 2011 at 6:32 PM, kickbishopbrenna (33.96) wrote:

Hmm just like it would have been better had Hawaii, Alaska, California and Texas not joined the Union..

hmmm.. no salute here 

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#2) On December 09, 2011 at 6:45 PM, portefeuille (99.65) wrote:

vassals of Germany

Germany is slightly underrepresented in the EU.

http://en.wikipedia.org/wiki/Member_State_of_the_European_Union#List

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#3) On December 09, 2011 at 6:53 PM, Frankydontfailme (28.15) wrote:

I couldn't agree more. 

Nonetheless, the UK has a mountain of problems. 

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#4) On December 09, 2011 at 7:13 PM, portefeuille (99.65) wrote:

it is all about the beta ...

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#5) On December 09, 2011 at 7:18 PM, portefeuille (99.65) wrote:

The continental territories of the member states of the European Union (European Communities pre-1993), animated in order of accession.

(from here)

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#6) On December 09, 2011 at 10:14 PM, rofgile (99.32) wrote:

The major beneficiaries are the London bankers, who don't need to be as regulated as the rest of Europe.  

London wants to be as free of a banking industry as possible (so that they can take huge risks, enact Goldman Sachs-like scams, give themselves huge bonuses and golden parachutes, etc).

The rich get richer and the most powerful will work to keep their power. 

The US money barons are still second tier to the British ones.

 -Rof 

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#7) On December 10, 2011 at 3:05 AM, JakilaTheHun (99.94) wrote:

I agree 100%, chk999.  German politicians and bankers have used the entire crisis as an opportunity to make power grab after repeated power grab.  This latest attempt was one meant to destroy the UK's financial services industry and make Germany the Masters of Europe. 

The UK just set itself up as the alternative.  It may very well become 'the new Switzerland'; the place in Europe where money flocks to get around the idiotic fiscal, monetary, and regulatory policies of the Eurozone. 

This new treaty does not do anything to solve Spain or Portugal's problems, at all.  It merely makes their population the "slaves" and the Germans, "the masters." 

Sorry Port, but it's true.  German bankers and politicians have become the despots of Europe. 

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#8) On December 10, 2011 at 3:40 AM, traderbach (< 20) wrote:

It may have been smart of the UK to stay out of the group in this case, time will tell.  But to say that German bankers & politicians have become the despots of Europe is quite ridiculous.  The social democratic example of the German system happens to work very well, is quite the opposite of despotic, and is one of the most enlightened in the world.  I for one would am taking advantage of the opportunity to learn from their methods and I believe that many nations would do well to learn from them also, if they could but have the humility & openness to do so.

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#9) On December 10, 2011 at 9:42 AM, JakilaTheHun (99.94) wrote:

traderback,

No one is claiming that Germany's government model is"despotic."  Rather, Germany's politicians, closely connected to its banking interests, have dictated the policies of most of the other nations inside the eurozone. 

It's freedom for Germany; but it's despotism for Greece, Spain, Portugal, and any other country that finds its domestic policies being dictated from Berlin. 

People generally don't understand the nature of despotism.  In every despotism, there are a class of people who have a high level of freedom.  It's the "other classes" that end up without the same rights.  I don't like what I see at all in the Eurozone --- as Germany seems to be the nation with the freedom; and everyone else is supposed to "do as Germany says." 

If I lived in Portugal or Spain --- I'd be very angry right now and I would want my country to get out of the eurozone as quickly as possible --- no matter the consequences.

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#10) On December 10, 2011 at 2:55 PM, Sturmudgeon (< 20) wrote:

Agree, Jak: no expert here, but from much of what I have read recently, the EU is most probably on the verge of breaking up...

thanks for the 'comments', all... all fools benefit here..

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#11) On December 10, 2011 at 3:59 PM, portefeuille (99.65) wrote:

no expert here

very true. mostly the usual anti-experts on Europe here, hehe ...

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#12) On December 10, 2011 at 4:42 PM, Indiscr33t (< 20) wrote:

I hope UK doesn't need anything from Europe on the UK's terms.

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#13) On December 10, 2011 at 4:44 PM, dwot (48.17) wrote:

Maybe true, but the UK is a disaster.  Sure it has been 5 years since I lived there but I don't see what's changed to deal with the problem of long term declining lifestyle.  Lifestyle has been declining in North America as well, but I think this trend started at least 20 years earlier for the UK.  I was quite shock at how many 30-something year olds still living with mom and dad because there was nothing there for them.

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#14) On December 10, 2011 at 5:34 PM, FleaBagger (28.75) wrote:

The whole EU, the UK, and all of North America except Canada are all economic disasters. I'm not too familiar with South America, but it wouldn't surprise me if they do a lot better than the EU or UK over the next 10-20 years. Likewise Iceland. I know a little bit more about Canada, and feel very confident that they will do better than the U.S. The fundamental difference is whether the trend is toward or away from collectivism and government profligacy. In Canada (and I think in Iceland as well), the trend is away. I've heard secondhand that China is headed toward economic freedom as well. Captive to the banks and other special interests, the U.S., the EU, and the UK will not be thriving over the next 10-20 years unless significant pro-market reforms are enacted immediately.

Unfortunately, the influence of our "drug warriors" in the U.S. is causing rampant violence in Mexico that cannot help but affect their economy, just as we did to Colombia in the 1980's and 90's.

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#15) On December 10, 2011 at 7:27 PM, portefeuille (99.65) wrote:

some statistics (population, area, gdp).

Reykjavík, 119108, 274.5 km^2, $0.01 trillion (2010 nominal, portefeuille estimate).

Iceland, 318452, 103001 km^2, $0.012 trillion (2010 nominal).

Canada, 34676000, 9984670 km^2, $1.758 trillion (2011 nominal).

Colombia, 45925397 (2012 estimate), 1141748 km^2, $0.33 trillion (2010 nominal).

UK, 62262000, 243610 km^2, $2.480 trillion (2011 nominal).

Mexico, 112322757, 1972550 km^2, $1.041 trillion (2011 nominal).

USA, 312748000, 9826675 km^2, $15.065 trillion (2011 nominal).

EU, 502486499, 4324782 km^2, $16.242 trillion (2010 nominal, IMF estimate).

Europe.



enlarge

 

Reykjavík.



enlarge

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#16) On December 11, 2011 at 3:37 AM, traderbach (< 20) wrote:

I agree w/ you Jakila that Germany's politicians are tied closely to it's banking interests.  I guess that is true everywhere.  I simply objected to what seemed to me to be a very broad denigration of the German nation in general.  I personally, as stated in my previous comment, see Germany, and the German government, as very enlightened relative to some of the other nations in the Western World.  I mean at least they have a consensus, a plan to go with it and the guts to implement it, whereas we in the U.S. are gridlocked on Capitol hill to the point that it is an international embarrassment.  More importantly, beyond embarrassment, is the impotence and inability that this gridlock brings to move rapidly toward integrated policies that will help the American people.  So, warts and all, next to that, the German model looks mighty good to me.  Nevertheless I appreciate your measured assessment and your opinion.  This type of conversation is very necessary right now and that is what democracy should be about.

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#17) On December 12, 2011 at 3:30 AM, JakilaTheHun (99.94) wrote:

I mean at least they have a consensus, a plan to go with it and the guts to implement it, whereas we in the U.S. are gridlocked on Capitol hill to the point that it is an international embarrassment. 

We're "gridlocked" because we actually give a damn about peoples' rights and liberties.   Whereas a nation like China can act almost instantly, because the rights of the people are irrelevant to their consideration.  I'd rather have a gridlocked government, than one that tramples over people's rights with rapidity!

More importantly, beyond embarrassment, is the impotence and inability that this gridlock brings to move rapidly toward integrated policies that will help the American people. 

Politicians rarely, if ever, help any people, other than those well-connected to them. This is what I've learned about government after observing it for so long.  Every act supposedly meant to help "the people", actually enriches lobbyists and special interests closely connected to the people passing that act.

So, warts and all, next to that, the German model looks mighty good to me.  Nevertheless I appreciate your measured assessment and your opinion.  This type of conversation is very necessary right now and that is what democracy should be about.

I agree. But I think everyone is selling short America right now, when our model is vastly better than Europe's dysfunctional one. 

We can say our government is gridlocked, but our economy is not.  Whereas, the eurozone is the reverse. 

Our government does have some major issues; but it's still proven to be a better model than many competing ones. 

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#18) On December 14, 2011 at 10:00 PM, TheDumbMoney (47.08) wrote:

I don't think Germany is being despotic.  I think they are the creditor nation, and so they (somewhat reasonably) want the debtors to have some accountability, rather than a freebie.  (The Original Sin of the Eurozone was not requiring budget discipline in the first place.) 

However, the problem for Germany is twofold:  1) the ECB are a bunch of idiots who were so worried about "hyperinflation" (under German influence) that they prematurely raised interest rates, and choked off a lot of growth -- the recent cut is too late, and are refusing to be a lender of last-resort; and 2) the Germans (and the UK, and others) bought all this crap that posters here on fool.com talk about, all about how one can grow an economy through immediate, instantaneous austerity, because it produces "confidence."  This is, respectfully, balderdash.  Thankfully our country did not buy into it quite so fully.

What the EU needed, a year or so ago, was: 1) the new treaty they are only now talking about, imposing required phased-in fiscal constraints on the PIIGS (on all Eurozone countries, actually); and 2) major forced entitlement program cuts in the PIIGS, where the ratio of retired-to-working workers is only going to get worse over the next twenty years, in no small part because Europeans seemingly would rather go clubbing in Ibiza or hiking in Morroco than have kids; and 3) super low interest rates from the ECB, continued for much longer, withOUT the interest rate increases Europe instead had; and 4) short-term stimulus projects, funded by Euro bonds, since Italy and Spain could not fund them; and 5) the ECB committing to being a lender of last result for all countries using the Euro.  That all had to happen at the same time, roughly. 

(Or, possibly: alternatively Greece should have been kicked out a year ago to prevent the contagion from speading, and to prevent moves like the "voluntary markdown" deal that suddenly made every sovereign bond-insurance derivative in the world feel pretty durned worthless.)

(Or it's possible there could never be a solution because monetary union without fiscal union is one of the most boneheaded ideas in the history of mankind.)

The EU got none of those things.  Now, it seems that too-high interest rates, no political solution, and "spend at the worst time, and cut at the worst time" austerity are combining to throw the EU into a nasty recession, which is just going to make the problems worse. 

In short, with all due respect to portefuille, is a ginormotastic sh!tshow.  It leads now either to full fiscal union, major ECB monetization of debts and serious devaluation fo the Euro, or Eurozone breakup.  My guess is the fit is really going to hit the shan in Q1 2012, when Italy and other nations have a combined hundreds of billions in debt that they need to roll over.  Germany is as trapped as all of the other countries are.  Even Germany won't be a real winner, because if things really go south, its taxpayers will likely be put on the hook for bailouts of multiple countries and/or banks. 

That's the pessimistic case.  In the alternative, hey, maybe it all works out!  Either way, the UK for all of its problems likely benefits from not being involved with that currency.  (Of course, many of its banks are going to get toasted anyway, and it will suffer recession because of the amount of trade it does with the rest of Europe.)

porte, I love your Rekjavik/Europe juxtoposition!

Incidentally, folks, Iceland is doing relatively better in no small part because: 1) unlike Greece and Spain, it actually had its own currency that it could devalue, thus reducing the value of Icelandic currency-denominated debts and; and 2) unlike Ireland, it wasn't stupid enough to go on the hook for the liabilities of its stupid banks.  Instead, it forced the idiot European countries who let their idiot citizens put tons of money into uninsured offshore Icelandic bank accounts to eat their own well-deserved losses.

Kisses,

DTAF

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