3 ms·
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 sovereig
by 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 agoAlternatively, 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.