Should the UK join the Euro?

**mjohns** · 02-27-2008 03:37 AM

It make perfect business and economic sense so why not.... Because British people are scared of change?

In my opinion we should!

**GhostFac3** · 02-27-2008 11:30 AM

Whats the benefit for the British?

All I see if the opportunity to join the EU 'club' and give up their own currency which is dramatically outperforming the Euro and even more so the US Dollar.

**BusinessAdviser** · 02-27-2008 11:46 AM

Stability.

**jasaunders** · 02-27-2008 12:58 PM

But the British would lose any central banking authority and have to rely on the EU.

That's the problem with the Euro which we haven't seen yet in it's short life. If some of the country's that use the Euro have any kind of economic trouble, they have to rely on the EU to adjust monetary policy. If some countries are seeing a boon and some countries have unemployment skyrocket and fall into a deep recession, how would the EU central bank respond? It's a tradeoff between stability and having independent control of monetary policy to protect from economic shocks.

**BusinessAdviser** · 02-27-2008 01:05 PM

Originally Posted by jasaunders

But the British would lose any central banking authority and have to rely on the EU.

That's the problem with the Euro which we haven't seen yet in it's short life. If some of the country's that use the Euro have any kind of economic trouble, they have to rely on the EU to adjust monetary policy. If some countries are seeing a boon and some countries have unemployment skyrocket and fall into a deep recession, how would the EU central bank respond? It's a tradeoff between stability and having independent control of monetary policy to protect from economic shocks.

Isn't that what every country using the EU has done?

Let's explore that though:

Let's say that all nations using the EU are doing great except for one. This other country is in a recession and has high unemployment. What is the outcome?

**BusinessAdviser** · 02-27-2008 01:09 PM

My answer?

Prices obviously drop in the country suffering a recession. Because products are cheaper there than elsewhere in Europe, those outside the country begin to purchase products from that country because they are less expensive. This results in the economy expanding out of the recession.

Obviously, this is a very simplified version, but it serves its purpose. Although there are still other issues, theoretically nations using the Euro are just like states using the Dollar. While some states have economies booming more than others, we don't see huge catastrophes resulting. Rather, this same flowing of money from booming areas to recessed areas occurs.

**jasaunders** · 02-27-2008 02:37 PM

In principal you are right. Things always balance out. But there is a reason for monetary policy, to soften the impact of shocks to the economy. And it is similiar to the states, but not quite. Europeans still use different languages in each country and have different cultures. You can argue it's that way in the states too (people talk differently in the south).

But we rely on our monetary policy to prevent or shorten the effects of a recession. The Fed has been lowering interest rates as one measure to prevent a drawn-out recession or limit its effects as much as possible. Now let's say we have a currency called the UnitedMexiCanadian and we didn't have central bank authority and Mexico and Canada had healthy economies but we didn't. They wouldn't want to lower interest rates because it would raise inflation.

In the long run, we would come out of the recession. But it is likely the recession would have hit harder and been longer than if we had the ability to react with monetary policies.

**BusinessAdviser** · 02-27-2008 02:50 PM

Originally Posted by jasaunders

In principal you are right. Things always balance out. But there is a reason for monetary policy, to soften the impact of shocks to the economy. And it is similiar to the states, but not quite. Europeans still use different languages in each country and have different cultures. You can argue it's that way in the states too (people talk differently in the south).

But we rely on our monetary policy to prevent or shorten the effects of a recession. The Fed has been lowering interest rates as one measure to prevent a drawn-out recession or limit its effects as much as possible. Now let's say we have a currency called the UnitedMexiCanadian and we didn't have central bank authority and Mexico and Canada had healthy economies but we didn't. They wouldn't want to lower interest rates because it would raise inflation.

In the long run, we would come out of the recession. But it is likely the recession would have hit harder and been longer than if we had the ability to react with monetary policies.

Aside from the language and cultural differences, I really don't see much of a difference between the use of the Euro in Europe and the use of the Dollar in the States. Do you?

**jasaunders** · 02-27-2008 03:04 PM

There are different laws in each country, although there are laws from the EU as well.
But other than that, there aren't many other differences.

**BusinessAdviser** · 02-27-2008 03:49 PM

That's why I think that we'd be better off with a single currency. In the long run, which should be the focus, the world economy would be more stable. Money would flow from prospering areas to recessed areas naturally, just as they do in the United States, and this would keep the world economy balanced.

Of course, you're right that the theory is different than reality. Why? The main reason is regulation preventing free trade. (I hope I'm not opening up a new can of worms now.)

**jasaunders** · 02-27-2008 05:02 PM

Nope, we're both obviously right.
Basically what I am trying to say is the more widely used a currency, the more stable it is. But the more widely used a currency is (and more stable it is), the less control each individual country has over it. A tradeoff countries need to consider, and I can't see the U.S. giving up it's control of the central bank.

**jasaunders** · 02-27-2008 05:04 PM

If there was to be a North American Currency, yes we are all connected by land and have almost free trade. But Mexico has a more risky political atmoshphere and could devalue the currency. If people stop believing Mexico will pay their debts, the value of this new currency could fall. It would be outside the control of the U.S. and Canada. Just another thing to consider is political instability in a country. Investments in some countries are more risk adverse.

**Richard Burton** · 02-27-2008 05:43 PM

I say for irrational reasons of partriotism.

Richard

**usakos** · 02-27-2008 06:40 PM

The ultimate and the only one factor that makes the Brits not interested in joining the Eu no matter what, is; "pride".

The Brits are the most proud people of themselves and everything they are, on the face of the earth. Don't even dare to call any Brit as an european. They prefer to simply be referred to as and what they are; English people. Even though their country may seem to be in Europe, they strictly deny that the UK is in Europe and thus they are not Europeans.

Other pro-factors mentioned herein seem perfectly practical for them to join the union, but simply because of their pride, I don't fore see them joining the EU any time soon.

**Cole Taylor** · 02-27-2008 07:26 PM

Originally Posted by usakos

The ultimate and the only one factor that makes the Brits not interested in joining the Eu no matter what, is; "pride".

The Brits are the most proud people of themselves and everything they are, on the face of the earth. Don't even dare to call any Brit as an european. They prefer to simply be referred to as and what they are; English people. Even though their country may seem to be in Europe, they strictly deny that the UK is in Europe and thus they are not Europeans.

Other pro-factors mentioned herein seem perfectly practical for them to join the union, but simply because of their pride, I don't fore see them joining the EU any time soon.

The UK IS a member of the EU, they just dont use the euro.