We frequently hear financial commentators saying that "the Drachma will weaken considerably if it leaves the Euro."
I just don't get this. What will it weaken from? ie What is the starting point from which it will weaken? The Drachma doesn't exist any more, so there is no 'current level' from which it can weaken.
If it exits the Euro, presumably it will start off at a certain rate against the Euro (and all other currencies). But this starting rate will have to be at a level at which the policy makers will believe will achieve a certain amount of equilibrium and it certainly won't be a free money give-away for anyone planning on shorting it.
Therefore, what exactly do commentators mean when they say the "Drachma will weaken considerably when it exits the Euro"?
Is it just another case of commentators spouting rubbish that they know the average person will not be able to challenge them on?
I just don't get this. What will it weaken from? ie What is the starting point from which it will weaken? The Drachma doesn't exist any more, so there is no 'current level' from which it can weaken.
If it exits the Euro, presumably it will start off at a certain rate against the Euro (and all other currencies). But this starting rate will have to be at a level at which the policy makers will believe will achieve a certain amount of equilibrium and it certainly won't be a free money give-away for anyone planning on shorting it.
Therefore, what exactly do commentators mean when they say the "Drachma will weaken considerably when it exits the Euro"?
Is it just another case of commentators spouting rubbish that they know the average person will not be able to challenge them on?