So if France had still got control of it's own currency; are you saying that they couldn't have "adjusted" it's value against the dollar to remain competitive?
Yes, that's much the case. For a large modern economy it is close to impossible to artificially devalue the currency without destabilising the economy. The Euro is actually much more competitive and realistically valued than the £ hence the benefits to the UK economy of entering the Euro would be enormous. The £ is over-valued (as we all know) because of domestic issues (e.g. housing bubble and the recent interest rate rises which continue to push it up) and makes us uncompetitive not only in the US but also in Europe.
The weak dollar is another matter.
Some £ exchange rates have gone up wildly. For example in Sept.2005 the Japanese Yen was at about JPY190: £1. Now its at about JPY240 to the £. That's over 20% appreciation against the Yen. Have Japanese-assembled cars dropped in price by 20% ? No - I think companies like Subaru, Mazda and Daihatsu which build in Japan and sell at high UK prices must be really coining at the moment.
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Aprilla are you saying that Subaru, Mazda and Daihatsu still assemble all their cars in Japan?
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Aprilla are you saying that Subaru Mazda and Daihatsu still assemble all their cars in Japan?
No, I am saying most of the cars we get **here in UK** are from Japan. Mazda6 is certainly assembled in Japan, also 3 IIRC. All UK subarus come from Japan (although they have a plant in US for some North Am market models); Justy is made by Suzuki in Hungary and rebadged, but we don't get it in UK. All Diahatsu (AFAIK) come from Japan.
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>>For a large modern economy it is close to impossibleto artificially devalue the currency without destabilising the economy.
True; but if the French economy was collapsing due to an inappropriate exchange rate; then that fact alone would weigh on the currency's long-term desirability and, eventually, equilibrium would be restored.
Corsetted in the unwieldy Euro - they're stuffed.
The Yen is a different matter. Particularly in the light of recent fears over excess credit; the security of the main Japanese banks has never been fully established and that must have an effect on the currency's desirability.
Still; it was nice to see that big drop in petrol prices due to oil being traded in now-weaker dollars... Wasn't it?
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I'm not sure I go along with the Euro=unwieldy argument.
Any negative effects are largely offset by the added strength the larger currency gives.
You could take things the other way -- regions of the UK have economies that are not in sync with each other -- thus the pound is itself potentially unwieldy. But if say Scotland went its own way, the weakness of its currency would more than offset any benefits the economy would gain through more targetted management.
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I have not seen any robust evidence that joining the Euro would benefit UK. As we are increasingly dependent on imports of raw materials, it makes sense for the pound to be relatively high. By the same assumption one would expect to see the Euro economies racing away. I don't think we see that. Being in the Euro would just be a trap, we would not be able to set our own interest rates and manipulate our exchange rate. The last time UK linked with the EU was a disaster (ERM). You will never get a situation where all the economies are moving in the same direction simultaneously.
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By the same assumption one would expect to see the Euro economies racing away.
Some of them are.
The ones that aren't (Italy, Germany, France) are suffering from the same underlying malaise that afflicted the UK economy before Thatcher. I'm not talking about industrial relations etc, it's more the higher taxation levels that don't really work in larger countries (one area where the big stick approach really doesn't work).
Britain has shed all that, and yet we're still not expanding as we should. Meanwhile formerly poor backwaters like the Irish Republic have overtaken us on the back of the Euro and EU integration.
The system isn't at fault, it's the petty nationalistic interests that get in the way. Granted, it's corrupt and needs a radical overhaul, but the problems with the EU at the Commision level are mostly down to petty national governments in any case (it was they who insisted on unelected representatives running the show etc).
Countries that just knuckle down and make the best of it are booming.
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jase1
Sadly; I fear that you are right. If Scotland broke away, [150 years too late!] the Scottish pound would quickly achieve parity with the dollar.
[Unfortunately; it would be the Zimbabwean dollar.....]
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>Sadly; I fear that you are right. If Scotland broke away [150 years too late!] the Scottish pound would quickly achieve parity with the dollar. [Unfortunately; it would be the Zimbabwean dollar.....]
Scottish oil might help the value of the Scottish pound just a little.. ;-)
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Still; it was nice to see that big drop in petrol prices due to oil being traded in now-weaker dollars... Wasn't it?
Glad to see I wasn't the only one who 'missed' that cut-price petrol!
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>>Airbus recently said they couldn't compete with Boeing at current exchange rates - it must be a similar story for UK/EU carmakers.<<
Not really the same as the world currency for Aircraft is US$ so Airbus make them in Euro's and sell in US$ to all their customers regardless of location.
Boeing of course make in US$ and sell in US$ but when the sell abroad to BA for instance the price looks cheaper as they can provide bigger discounts to the customer resulting from the exchange rates.
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>>For a large modern economy it is close to impossible to artificially devalue the currency without destabilising the economy. <<
That is not really the case in all Countries - if you take Singapore as an example they do not internationalise their currency and it is not linked to interest rates either so if they change the value it does not effect their economy and which means they can change its value to remain gloablly competitive. If you look at the industry in Singapore, Oil services, electronics, drugs, aerospace, hearing aids etc they are number one in the world or Aisa in each of these sectors. They run their economy like a successful company because that is what they want to be.
Back to the OP - the point IMO is stated above and as I have bleeted on about for some time now. The US is a totally different market to Europe. Service and reliability is preffered to image and badge appeal. Hence Toyota, Honda and Lexus reign supreme in the US.
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> Service and reliability is preffered to image and badge appeal. Hence Toyota, Honda and Lexus reign supreme in the US.
It's true. You frequently hear Americans refer to VWs as "unreliable".
Now while I accept that they aren't what they were, "unreliable" is too strong a word.
What would they think of the Laguna if that's what they think of the Jetta?
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I agree jase1 - you could not really say that in isolation VW are unreliable - they clearly make good cars that appeal to alot of people.
Unfortunatley for VW, reliability & service are relative to other makes and if you compare Passat to Accord or Avensis then VW will come a poor third. If you apply different criteria as in design then they may score better.
The likes of JD Power have been around in the US alot longer than they have here and this has given the Japs time to establish their dominant position.
JD Power now conduct a survey in the US for 3 year old+ cars as they have learnt that the US and European brands are getting very good at inspecting quality in during manufacturing and the survey scores are very much more equal - but of course this does not stand the test of time and no prizes for guessing who tops relaibility and service surveys for 3 year old+ cars.
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What would they think of the Laguna if that's what they think of the Jetta?
Well they'd see it for the unreliable, over-hyped, style-over-substance carp that it is! Incidentally Hyundai and Kia are doing VERY well in the US.
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Jaguar are doing very well in the US on JD Power as well.
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That is not really the case in all Countries - if you take Singapore as an example they do not internationalise their currency and it is not linked to interest rates either so if they change the value it does not effect their economy and which means they can change its value to remain gloablly competitive.
I was in Singapore last year and its a very odd economy. Totally incomparable to almost anything else. 60% of its industry is linked to government, one way or another, and of course it has a tiny population - its really a city-state. The UK could not operate like that.
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The Yen is a different matter. Particularly in the light of recent fears over excess credit; the security of the main Japanese banks has never been fully established and that must have an effect on the currency's desirability.
The Japanese economy and its banks are sound enough. They've just been investing too much abroad and when the average Japanese gets a bit of extra money in his hand, he saves it! We go out and spend it.
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