The Fed to buy $1 trillion worth of securities

[constitutionus]

2007 Trading Partners Source CSO

Millions of Euro

Great Britain and Northern Ireland Imp: 20,869.2 Exp: 16,742.8
Other EU Countries Imp: 18,520.2 Exp: 39,864.0 (Almost all traded in Euro)
USA Imp: 7,050.6 Exp: 15,825.0
Rest of World Imp: 17,045.7 Exp: 16,794.3
Total Imp: 63,485.7 Exp: 89,266.1

A major shift in US$ and £ will certainly damage Irish exporters, particularly in the food sector. But, it's not by any means the 'vast majority' of our exports, rather it's about half which is still pretty worrying to put it mildly.

I don't think the Eurozone economies will put up with the Euro trading this high though. It may suit the German conservative savers, but it's killing industrial and other exports. Germany itself is going to suffer badly as the demand for industrial equipment, cars, from the far east will shift to the US. Same with France, Netherlands etc

It's also going to do terrible damage to Spain and Portugal's holiday industry which is heavily dependent on the UK.

The Eurozone is a huge bloc, but we can't just trade with ourselves. It would not kill us, but it would leave us pretty damn broke!

the problem with the figures SIX is its a total figure for the economy including all the foreign multinationals and is based solely on monetary terms.

its says sod all about the types of companies in this country and it distorts the reality that 80% of businnes in this country is SME and they dont do squat with europe.

remember just the big three (microsoft, intel and formerly now dell) accounted for something like 20% of GNP who are/were here almost exclusively for EU market access. take them out and see what happens to the figures. more over think what'll happen if the other two decide to feck off too like dell did.

Theres ALOT more jobs on the line here from the average irish company who are reliant on the US/UK market. the gov needs to get off its arse and put something in place to encourage greater trade within the EU. like i said the food and drink sector is buggered without it.

[Dios]

its says sod all about the types of companies in this country and it distorts the reality that 80% of businnes in this country is SME and they dont do squat with europe.

Those businesses wouldn't be exporting anyway.

the gov needs to get off its arse and put something in place to encourage greater trade within the EU. like i said the food and drink sector is buggered without it.

Agreed, finding new markets is going to be a very vital part of the future economic outlook if the Germans stick to their guns, and lets face it, they have a habit of doing that. If its cheaper to import from those countries where QE has taken place however, protectionist tariffs will need to go into place or local exports will be wiped out completely.

[Anorakphobia]

Its the only rabbit they need, really. If that rabbit doesn't work, they just make it bigger until it does work.


Initially there was no doubt that eurozone membership saved us from an ungodly hiding in the international markets, a la Iceland. The future is a bit more cloudy however. Remember that hulking Germany is a largely export based economy, about half of which stays within the eurozone. The other half will vanish in a puff of hyperinflation once QE gets into motion properly in about two or three years. This raises a few interesting scenarios:

a) The ECB follows with QE: Exports go back up along with massive inflation, business as usual in a few years.

b) The ECB does not follow the QE method: Exports to those countries that have QE in place drop off completely, but leaving the euro as the stongest currency on earth, bar none. Intra-EU trade remains largely unaffected. Next question is do Asian economies engage in QE, or start focusing more on Europe as their export market, and vice-versa.

This would be the start of a major economic schism, globally, with the US and UK and those who flooded their markets with money working in one system, and the EU and possibly Asian economies as well as the middle east working in another. Its protectionism by any other name on the part of the Anglo countries, and it won't have escaped the attention of the Japanese and Chinese that their dollar reserves are becoming completely worthless.

The end result might be that the Anglo countries become expremely powerful exporters, the industrial powerhouses of this century, or it might work out that the euro becomes the global trade currency, in which case the US will be increasingly left behind in the cold, an isolationist state able to look after most of its interests internally.

Dios,

Very interesting post and an entirely possible scenario 2-4 years down.
One thing for sure, irrespective of what we think of the Germans, if it comes to a straight choice between having to hitch our wagon to their model or the insanity of the current US/UK crap shoot, I'm happier going with the Krauts.
In terms of prudence over fudging and long term over short they are past masters.
A favourite expression of mine in betting terms is "they have course and distance".

In simple terms, we must continue to respect the rule book.
Printing money has proved a distastrous strategy for centuries and just because it is the US doing it doesnt give it any new credence.
The queue of imbeciles on CNBC and Bloomberg last night ramping things on the back of it was nauseating.
Educated, intelligent people schilling like crazy, stoking the next phase of the ponzi.
******************** those who played by the rules and didn't borrow themselves into a hole, they are now going to get it up the ass, while the lunatics open up a whole new phase in the war.

These are scary times, billions of people are going to be a lot poorer while the reckless borrower class is not only being bailed out but is actually being openly courted to go spend like a lunatic once more.

Wonder what the Chinese are thinking?

[William]

Is it bad for Ireland that the pound and the dollar collapses?
It doesn't really matter for the Eurozone that they can't export to the US because the Americans can't pay anyway, they're broke.

In Norway now they are getting bargains from bankrupt Iceland,
they are buying up cars etc. cheap because the icelandic currency is worthless, and shipping them back to Norway.
Europeans could do the same in the UK and the US.
Because when your currency collapses so does your living standard.

[slx]

Is it bad for Ireland that the pound and the dollar collapses?
It doesn't really matter for the Eurozone that they can't export to the US because the Americans can't pay anyway, they're broke.

In Norway now they are getting bargains from bankrupt Iceland,
they are buying up cars etc. cheap because the icelandic currency is worthless, and shipping them back to Norway.
Europeans could do the same in the UK and the US.
Because when your currency collapses so does your living standard.

This may well be true for the UK, because it's a relatively small country that is highly dependent on imports, particularly from the Eurozone. It could end up being a giant Iceland with hyper inflation, or it could stumble on through this, fudge the figures and get out the other side.

However, for the USA, it isn't quite so simple as it's a huge economy with lots of internal resources and a large export economy. The consequences *might* not be quite so dire, and may actually stimulate US industry based on the fact that it can supply most of its own needs and export. Or, at least it was able to do all that in the 1960s.

It's rather difficult to 'unplug' from globalisation without having some kind of serious economic consequences.

Nobody really knows how it might work out.

My own feeling is that the ECB will come under immense pressure to devalue as Eurozone exports and tourism starts to be impacted upon.

I think sometimes we forget, Ireland's got quite a lot in common with most of the Eurozone. Just because the Germans are fiscally conservative, doesn't mean that everyone else is. In fact, I'm not even sure the Germans can survive with the Euro at this level. It's already hurting their major industrial exporters.

[William]

True, the world economy will suffer somewhat,
but that's because the world got conned into borrowing to the Americans.

Once the US goes bust prices like for example commodities will go down as the Americans can't afford to import them anymore,
so it's not all bad for Europe and East Asia.
The answer is definetly not to follow the US down into hyperinflation as some people are suggesting here.

[/etc]

Its the only rabbit they need, really. If that rabbit doesn't work, they just make it bigger until it does work.


Initially there was no doubt that eurozone membership saved us from an ungodly hiding in the international markets, a la Iceland. The future is a bit more cloudy however. Remember that hulking Germany is a largely export based economy, about half of which stays within the eurozone. The other half will vanish in a puff of hyperinflation once QE gets into motion properly in about two or three years. This raises a few interesting scenarios:

a) The ECB follows with QE: Exports go back up along with massive inflation, business as usual in a few years.

b) The ECB does not follow the QE method: Exports to those countries that have QE in place drop off completely, but leaving the euro as the stongest currency on earth, bar none. Intra-EU trade remains largely unaffected. Next question is do Asian economies engage in QE, or start focusing more on Europe as their export market, and vice-versa.

This would be the start of a major economic schism, globally, with the US and UK and those who flooded their markets with money working in one system, and the EU and possibly Asian economies as well as the middle east working in another. Its protectionism by any other name on the part of the Anglo countries, and it won't have escaped the attention of the Japanese and Chinese that their dollar reserves are becoming completely worthless.

The end result might be that the Anglo countries become expremely powerful exporters, the industrial powerhouses of this century, or it might work out that the euro becomes the global trade currency, in which case the US will be increasingly left behind in the cold, an isolationist state able to look after most of its interests internally.

The ECB has little choice but to follow suit as the pain of a drastic reduction in export may prove too much to bear for the eurozone. As the dollar will continue to tumble (1.2 trillion is quite lot to print. the euro is up over 600 points, nearly 5% just in one day), eurozone products will be unable to compete in the US domestic market.

I'm afraid as we are trying to pull ourselves out of the current credit crunch crisis, we are heading into a currency crisis. The US's action to print 1.2 trillion is merely protectionism in disguise. IMF has pointed out recently, protectionism is on the rise. 17 of the G20 were found to have implemented protectionist measures (as for the remaining three, they were not included simply because there were not enough evidence). Americans are having their "buy american" compaign. We have our "buy Irish" compaign. And I just heard a "buy Spainish" compaign is also underway. The Mexicans have just increase 100% tariff on certain US imports. I hope we don't all just end up buying our own goods.

What is likely to emerge from the wreckage in a few years time are nations who have a high national saving rate. They will be the ones who can best resist the temptation to "print". In this regard, our Government had a terrific Special Saving Scheme but we failed to carry on and expand it. As normal, we screwed it.

[William]

The ECB has little choice but to follow suit as the pain of a drastic reduction in export may prove too much to bear for the eurozone. As the dollar will continue to tumble (1.2 trillion is quite lot to print. the euro is up over 600 points, nearly 5% just in one day), eurozone products will be unable to compete in the US domestic market.

The Americans never paid for all the stuff they consumed,
they borrowed to pay for it, now no-one wants to borrow to them anymore so the scheme collapsed.
What's the point in competing in a market where everybody's broke?

If the dollar-collapse happens then the living standard of the average American will be reduced drastically,
because they import most of the stuff they consume.
And you forget that building up an industry, especially an export industry, takes time,
all the factories they had in 50's, the industry they had have been dismantled.
There isn't going to be a surge in American products on the European market because the industry to export does'nt exist anymore.

[Dios]

What is likely to emerge from the wreckage in a few years time are nations who have a high national saving rate. They will be the ones who can best resist the temptation to "print".

Eh the Germans are one of the most notable "saver" nations out there, and we're living in their currency zone. So I don't think the euro will undergo quantitative easing anytime soon, since if it does, German savings will be wiped out.

[Dios]

There isn't going to be a surge in American products on the European market because the industry to export does'nt exist anymore.

The US is the number one exporter in the world.