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The proposal is really unvetted, but it was Steve Keen's surmise that, by exchanging a significant portion of domestically circulating Euros for Punts that this would enable foreign creditors to be paid without crippling the domestic money supply. And additional Euros would still be entering Ireland, as it has a trade surplus. How much of the available Euro reserve so obtained it would be wise to pay on debts to other countries or the ECB should be a tactical decision - designed to buy time for the domestic economy to recover.

While no details were spelled out, I expect that it would be necessary to require all cross border transactions to be conducted through the Irish CB. This is what worked in China, however the Argentine experience might suggest other options. I don't know.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 12:28:22 PM EST
[ Parent ]
But it will have a current account deficit, which means that there will not be a net inflow of hard currency, unless .

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:40:11 PM EST
[ Parent ]
... unless they default on external debts, or take steps to prevent expatriation of profits.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:41:15 PM EST
[ Parent ]
Are you saying that the present current account surplus will turn negative if they implemented the proposed New Punt plan or that they do not now have a surplus? Were such a New Punt to be implemented it would allow for more domestic economic activity. Were it to be devalued relative to the Euro that would reduce imports. The effects on Intel and other transnational corporations could be mitigated by allowing such corporations to continue to make purchases of raw materials in Euros, and, of course, to price and sell their products in Euros.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 5th, 2012 at 10:26:32 AM EST
[ Parent ]
Ireland has a current account deficit, but a trade surplus.

Now, for a normal country, that would mean that after repudiating sufficient amounts of foreign debt, it would have a current accounts surplus. But Ireland is not a normal country, because the difference between trade balance and current accounts balance is driven by expatriation of profits rather than expatriation of interest payments (as is usually the case).

That means they can't default and peg the New Punt to the €, because they can't defend that peg.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 5th, 2012 at 04:58:04 PM EST
[ Parent ]

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