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Also, when one part of the country is doing poorly, it benefits from Federal taxes paid by people in wealthier parts—e.g., no matter how much Michigan’s state b
by sethg 15y ago
Also, when one part of the country is doing poorly, it benefits from Federal taxes paid by people in wealthier parts—e.g., no matter how much Michigan’s state budget is in the toilet, Michigan’s senior citizens will still get their Social Security checks.
The eurozone has the worst of both worlds: Greece can’t devalue its currency to alleviate its fiscal problems and there’s no Europe-wide social safety net to assist Greek people who are being screwed.
- roel_v 15y agoNo, that is orthogonal to the currency issue, you can have the same currency and no wealth transfer or different currencies and wealth transfer.
- nhaehnle 15y agoAs the Greece example shows very clearly, this does not work in the long run. By the way, this is also the reason that the gold standard failed. The gold standard was essentially a currency shared by the entire world. This had some advantages for international trade, namely no or reduced exchange rate risks. However, differences in how productivity developed in different countries ultimately led to countries being squeezed out of money to the point where politicians either had to default or rule by violence against their own citizens. A currency cannot survive for very long unless there is a significantly sized central authority that balances inequalities and acts in the interest of all citizens of the currency zone.