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> They should have waited until their economies were already on the same page before conjoining their currencies, but instead they tried to force a unity that w

by llambda 15y ago

> They should have waited until their economies were already on the same page before conjoining their currencies, but instead they tried to force a unity that wasn't there yet. Exactly. By having a single currency weaker economies were propped up at the expense of stronger economies, (yep, this is Germany, esp now); in essence, promoting economic mediocrity. Had the respective economies been similar in strength in regard to each other it would have been more feasible. But now it's too late for that. The Euro happened. In the long run, the Euro failing could be a good thing. By this I mean that those economies more capable might fair better however those that aren't, not so much. If they can escape debt (a Grecian default for instance) and then focus on rebuilding a sustainable economy, that in the long run would be more healthful. For now it's been put off, left for tomorrow, so to speak.

bd_at_rivenhill 15y ago
I see it differently: there's nothing wrong with a common currency and separate fiscal policy as long as you don't try to maintain the fiction that all sovereign entities have equal credit risk. Excessive/unexpected devaluation is just de facto default, but making this tool unavailable shouldn't mean that you should ignore the risk of de jure default. The countries of the common economic block should be able to enjoy the benefit of reduced friction in trade without being in a situation where it looks like a good idea to loan money to the Greek government at low interest rates. Regulatory authorities should be insulated from the political fallout of telling banks that they need to treat Greek bonds as less creditworthy than German bonds when they go to calculate the required amount of capital to carry their assets.
- llambda 15y ago
  Alternatively, nation-states could have retained their currency and focused on enacting policies that reduced friction of trade, i.e. a single currency is completely unnecessary to do this. There is no reason why a third-world economy should be joined with a first-world economy under a single currency: the outstanding result is that the currency hurts and ultimately the stronger economy props up the weaker a la Germany and Greece.

by llambda 15y ago

bd_at_rivenhill 15y ago

I see it differently: there's nothing wrong with a common currency and separate fiscal policy as long as you don't try to maintain the fiction that all sovereign entities have equal credit risk. Excessive/unexpected devaluation is just de facto default, but making this tool unavailable shouldn't mean that you should ignore the risk of de jure default. The countries of the common economic block should be able to enjoy the benefit of reduced friction in trade without being in a situation where it looks like a good idea to loan money to the Greek government at low interest rates. Regulatory authorities should be insulated from the political fallout of telling banks that they need to treat Greek bonds as less creditworthy than German bonds when they go to calculate the required amount of capital to carry their assets.

llambda 15y ago
Alternatively, nation-states could have retained their currency and focused on enacting policies that reduced friction of trade, i.e. a single currency is completely unnecessary to do this. There is no reason why a third-world economy should be joined with a first-world economy under a single currency: the outstanding result is that the currency hurts and ultimately the stronger economy props up the weaker a la Germany and Greece.