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07 June 2012

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Chris

I heard the interview, and I think the point about a truly federal europe was raised - I admit to being naive in matters of finance, although basic common sense suggests we should do all we can to clear our debts, avoid borrowing, and if that means going without, then so be it. However I'm wondering if all the "shenanigans" about bail outs, collapse of the euro etc, are simply masking the real dilema of establishing once and for all or not a true federal europe?

Alan Dykes

Hi Terry,

With the current mania for protecting banks, bank shareholders, and bank creditors at all costs, I'd like to know whether you think this is a good plan. Shouldn't we let the failures fail; see what's left; pick up the pieces and move on.

I don't see how it's possible to save all the banks given the preceeding credit boom and property bubble we're trying to digest. All we do by trying is increase the debt burden pulling us all into the pit.

Umbongo

I noticed that your final point in the discussion was that, given what is happening (and has happened) to the euro and in the eurozone, the eurofanatics (here and in the rest of the EU) have been conclusively proved wrong. I would have thought that such a conclusion was more or less incontrovertible.

However, in the tradition of what the BBC is pleased to call "impartiality" your remark was talked over by Evan Davis with the rather lame comment that they (the eurofanatics) are certainly "getting the worst of the argument". Accordingly, we can assume that, as far as Evan and (I suspect) his employer are concerned, the debate about the sense or otherwise of our joining the eurozone is still alive and our entry is still a matter of genuine argument.

On a general point, I must say I enjoy your (rare) appearances on the Today programme. Once you're introduced I know I can expect some lively and honest debate on the subject under discussion. Frankly, I'm amazed that the invitations keep on coming since your views and your trenchant arguments are so much at variance with those of the Today team. Certainly, in other areas, particularly CAGW, such is the potential discomfort level of the Today team that I can't remember the last time anyone with anything approaching a sceptical view - on the science let alone the massive financial costs of "dealing" with the "effects" of climate change - has been allowed near a Today (or any other BBC) microphone.

prohyp

Terry, your comments regarding not sending (squandering) any more of money we don't have on 'bailing out' the euro, thereby increasing our own deficit, are timely and welcome. Regrettably given the number of closet europhiles we have in the coalition, including those who claim to be Euro sceptics, I fear your plea for overdue restraint will be ignored.

I was heartened to note an article in today's Telegraph wherein it appears that a number of true Euro sceptics are seeking to persuade our fearless leader to renegotiate the terms of our euro membership,, I've got a hundred pounds that say's he'll 'bottle' it, any takers?


Terry Smith

To Alan Dykes: I have considerable sympathy with your view on banks. I wonder whether the phrase “Too big to fail” should in fact have been “Too big to save”. Adherence to the concept that no bank or major company must fail is one of the factors which has hobbled the Japanese economy since the bubble burst there at the end of the 80s. But amongst the problems of following this logic, however, is the fact that on both sides of the Atlantic retail and commercial banking became intertwined with investment banking over the past 25 years which means that when you let one of those banks fail you risk damaging the payment and credit system on which the real economy relies. That’s why I’m a supporter of the Volcker Rule and any attempts to split banks into their retail/commercial and investment banking functions.

Terry Smith

To Chris: I think the Eurozone is to use a cliché but hopefully a justifiable one, at a crossroads. No amount of fudges, bailouts, or summits will resolve the current problem. Either 1) the Eurozone will resolve to have a single authority which will issue bonds to fund all the member countries and have the power to tax them to pay interest and principal on those bonds and a single central bank which will act as lender of last resort and have the ability to regulate those banks. Germany will accept that it will foot the bill for these actions and that this will involve transfer payments forever from Germany to the peripheral countries; or 2) the Euro will collapse. My guess is that we will get the latter.

Alan Dykes

Hi Terry,

I agree with your "To big to Save", but do you see any prospect of real reform this side of a major collapse.

In my fantasy world, I'd go slightly further then the Volcker rule and turn Investment Banks back into Partnerships. They've demonstrated that they can't be trusted with other people's money. Perhaps they'd judge risk better if it's their wealth on the line.

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