Hungary has floated its currency, the Forint. The accompanying statement said that this would help towards the goal of joining the Euro.
So, let’s see if we can understand this. As part of its approach to ‘full’ membership, Hungary had fixed its exchange rate against the euro. It liked the idea of fixed exchange rates. Then to help it...er...fix its value to the euro it decouples, preferring floating exchange rates as a means to ...er...fixing them again. The truth is it can’t hold on at these high exchange rates.
Hungary’s is a developing economy: high growth (or supposed to be), high inflation. The last thing it needs is to fix its currency to the mature economies of Europe. Its growth will come from its cheap labour manufacturing and exporting low value low tech items. Like China. Does it think China would have fixed its currency to the euro as it rose against the dollar?
It’s like watching someone walk slowly towards the cliff edge with their eyes bandaged.
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