I wonder what that would have done to the peseta if we still had it.What would likely have happened is that less would have gone toward US treasuries and more would have gone toward the stronger currencies among the largest European trading partners of Spain.
I wonder what that would have done to the peseta if we still had it.
But still, Exchange rates are more a function of one's largest trading partners than anything else holds in normal times. This here is a flight to safety by "foreign direct speculators" (and some domestic speculators seeking safety abroad) and has nothing to do with trade flows or central bank reserves. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Viewed this way, it is easy to see why many economists viewed the Euro as an essentially German scheme to sustain a positive structural trade balance with the rest of Europe, with resulting wealth benefits for German workers, indefinitely.
The longer term planning and budgeting of real industry combined with industry's access to credit markets means that momentary flights to quality have little impact on employment or production decisions.
I disagree.
The Indonesia currency collapse of the late 90s thrust the firms whose currency-of-account was the rupiah into the bargain bin and those firms were snapped-up by those whose currency-of-account (US dollar, mostly) became more 'valuable' in relation. This switch in control definitely had an impact on "long term planning" of those firms.
Perhaps a 10% drop doesn't seem like much of a change. But I do remember one or two comments about its significance at the time.
The larger issue with Indonesia from what I remember is that, perhaps like China today, it was trying maintain a given, unsustainable rate that currency speculators sniffed out and moved on, forcing the government to free the exchange, at which point everyone dumped the currency because the arbitrage profit opportunities were over.
I'm not sure that we can say that change in ownership or control really has an impact on long-term planning regarding employment or production.
If this is the case, then the whole of Irish industrial policy since the '60's has been a waste of time because it was predicated on attracting the EU HQ, R&D and other high value activities of key global firms into Ireland on the basis that more investment would then follow. Thus Microsoft, Oracle, Google, Intel, IBM, Motorola, and a host of big pharma and biotech companies located here, employed thousands, and added billions to our corporate tax take (despite low 12.5% rates) and laregly kickstarted the Celtic Tiger.
They have not left and are still huge employers and value adders, and tax revenue generators and have led to many spin-off investment and expansion decisions because key management were located here - even thought the Irish cost base gradually rose to one of the highest in the world.
As a former long term of an iconic Irish firm taken over by a British one I can also vouce for the fact that slowly, over a decade or so, all top management functions, decision making and corporate biases gradually became British resulting in many illogical pro-British decisions when functions/investments would more cost effectively have been made in Ireland.
Likewise, I would argue, that much of the "City" financial services industry is now located in London purely for historical/cultural/management bias regions and should much more logicically and cost effectively be re-located to Frankfurt, Dublin, or some Swiss Canton.
Change of owner/management control is a vital factor in economic development and investment decisions and cn defy all commercial logic almost indefinitely. It is an economists conceit that cultural, managerial, political, and organisational factors are not key aspects of location/investment decisions. notes from no w here
If this is the case, then the whole of Irish industrial policy since the '60's has been a waste of time because it was predicated on attracting the EU HQ, R&D and other high value activities of key global firms into Ireland on the basis that more investment would then follow.
Two things: 1) There is, indeed, a very large literature in economics, urban planning, policy studies, and other fields that argues precisely that trying to attract employers, especially with subsidies, is usually a worse strategy compared to simply investing in education and transportation infrastructure and attracting employers on the basis of superior efficiency or value added.
But, 2) What you are listing are not, in fact corporate HQ's -- that is, native or resident ownership of production facilities. The firms you describe are all foreign-owned companies, or at least public companies with majority foreign ownership and NO embedded local control over business strategy and policy. So, if other capitalists suddenly took over Google or Motorola because it could pick up their shares for cheap due to the collapse of the US dollar or other currency, there is no reason to think this should have any effect on employment in Ireland whatsoever, particularly if Irish facilities were profitable ones for the larger firms.
One can point at evidence to argue either way. If the purchaser is Warren Buffet, or like him, who is interested in a long-term cash flow from ownership/control then there is little to no impact on employment and production -- operation, if you will. If the purchaser(s) are only interested in looting the company for a one-shot, short term, gain then there will be a major impact on the long-term up to and including the existence of the company over the long-term.
