3 ms·
“Greeks are aware there are devastating consequences of being in a single currency, like capital controls,” Then they are aware of the wrong thing. Capital co
by kfk 11y ago
“Greeks are aware there are devastating consequences of being in a single currency, like capital controls,”
Then they are aware of the wrong thing. Capital controls are not the issue. My guess is that without some form of control capitals would leave the country making things even worst. Of course they should get worst, capital control is BAD, but it serves a purpose. Bartering is working because people are trading existing assets. It won't work when it comes to buy those goods from other countries, which is the real issue Greece has. Greece could stop paying debts and use feta cheese as currency and it would be great, if they could produce all they need without imports. As a matter of fact, they can't, thus they have to deal with other countries, thus they have to produce things people want to buy and that's the issue - Greece does not produce enough stuff that people buy to cover its expenses.
- gaspar 11y agoAs long as the strong countries (e.g. Germany) control the value of Euro then countries like the size of Greece will be always in trouble. I am Greek and the biggest mistake that we made was to enter the Eurozone. Euro is good only for very strong countries, but even those countries can have problems sometimes. A very good example is Finland and Sweden. The former has problems because of Euro but the latter thrives because they control their currency. And Greece may not produce cars for example, but our agriculture is strong. Because of the globalization though every country nowadays relies on other countries. See for example Iran's problems because of the sanctions. Iran is huge compare to Greece and they don't even have to import gas, but their economy on the other hand is weak.
- Zirro 11y ago"A very good example is Finland and Sweden. The former has problems because of Euro but the latter thrives because they control their currency." There are several reasons for this - many of which are likely more important than the Euro - such as Finland having relied mainly on the declining paper industry and Nokia for exports while Swedish exports are more diverse.
- collyw 11y agoNokia are Finnish though.
- zurn 11y agoThat's the beauty of having your own floating currency though. Independent of what the problem is, your trade balance evens out automatically. If a country's forestry exports tank, imports will become more expensive and exports will become more competitive though currency depreciation. And people will eat more domestic cheese vs imported, stimulating domestic demand.
- samstave 11y agoAside from going to school for economics, what do I read to grok this concept much better?
- tomp 11y ago> Greece does not produce enough stuff that people buy to cover its expenses. It's more complicated than this. The real issue is that Greeks don't control their own currency. When a country has its own currency, the balance of trade automatically adjusts with the FX ratio (well, kind of - e.g. Swiss and US currencies are overpriced, because people trust them). If Greeks had Drachma, its value would fall (relative to e.g. Euro), the imports would get more expensive for Greeks and thus decrease, the exports would get cheaper for the world and thus increase, and the balance of trade would return to zero. In EU, Germany and Greece share the same currency, but Germany more than it imports, while Greece is the other way. As a consequence, the German currency (Euro) is undervalued, while the Greek currency (again Euro) is overvalued. If