Czech Republic is a member of the EU, but it still has it's own currency, the koruna. It intelligently never went to the euro.
So while Germany and the other two members of the "Troika" destroy Europe for their own ends, you'd think that the Czechs would just sit back and enjoy watching the show, after all, the koruna's appreciation against the euro equates to better real terms of trade for the Czech people. It also equates to a rise in their standard of living relative to their neighbors in the Eurozone.
What's wrong with that?
Apparently everything according to the Czech central bank, as in, they'll be damned to let that happen. They intervened in currency markets--selling the Czech koruna and buying euro--to maintain a fixed exchange rate of 27 koruuna to the euro.
"The central bank is ready to “automatically intervene for an unlimited time and in unlimited volumes to keep the koruna rate close to the level of 27 per euro,” Bartuskova said separately in an e-mailed statement. “The CNB only acts against exchange-rate appreciation beyond the declared level."
This is to affect what you may be wondering? To sustain exports. Of course this is the only way to grow in the minds of these Austrian lunatics. They're literally taking their citizens' money to support the economic arson that is going on in the Eurozone.
It's totally pathetic. The world goes to floating exchange rates, but central bankers still can't get away from trying to fix them. All this, of course, due to the abandonment and fiscal policy...branding it as bad.
Demand imported is somehow non-inflationary (they haven't heard of a faraway land called "China" yet.) Domestically generated demand is bad and inflationary and makes god angry.
ReplyDelete"To sustain exports".
ReplyDeleteBut obviously the Czech exporters would already be killing it and getting higher and higher prices for their wares in EUR terms.... If the kruona is seen appreciating ex post...
It would seem to me they don't need the CBs "help" here... They would have to be already killing it in EUR terms...
Or maybe the EUR exporters are lowering their prices to Czech buyers in Kruouna terms... Have to look at the balance of trade between Czech and the EZ....
ReplyDeleteThere is a little more to that Mike. I know the MMT answer would be to deficit spend and enjoy full employment+ improvement of real trade. The members of EU have signed Maastricht Treaty and their options are still limited.
ReplyDeleteAs Kristjan says, there is more to it, in a "out of paradigm" world employment, industry and business have to be protected by the surplus nations. They have also to comply with current treaties like Maastrich.
ReplyDeleteIn general I agree that industry has to be protected from foreign exchange movements, just as you subsidize some agricultural business for strategic reasons. Otherwise you are at the mercy of "the institutions", bankers and financiers like in Greece.
Any better terms you get from having a stronger currency would have to be reinvested into higher added value industries and research, and creating better labour markets with stronger wages and no unemployment, unfortunately this does not happen in the real world.