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The most convincing argument seemed to me that the way the Euro was set up is simply not workable/secure - for example they can not just print more Euros becaus
by Tichy 15y ago
The most convincing argument seemed to me that the way the Euro was set up is simply not workable/secure - for example they can not just print more Euros because of lots of rules.
But that kind of thing hardly seems to be the problem of mixing too many people together, it is simply a flaw in the system.
Of course the initial problem might have been that the system could only be some lowest common denominator of all the systems it tries to combine, making it almost impossible to create something good.
I find it interesting that there are therefore two interesting problems: how to set up a stable currency, and more importantly, how to set up a decision process that produces good results and doesn't alienate everybody.
- k-mcgrady 15y agoThe problem is that monetary policy is not set on a country by country basis. The economic cycles of countries differ and trying to control monetary policy on a global level leads to policies that do not help any country.
- Tichy 15y agoStill, it worked before. For example Germany used to be a lot of little states with different rulers and different currencies. The money union worked out well. And even within a country there are strong and weak economic regions. That alone does not seem to stand against a common currency. I suppose even the US has different parts with different economic cycles and different economic strength.
- k-mcgrady 15y agoThat very interesting I didn't know that Germany previously worked like that. Your point about the US is valid. However as their national debt is $15 trillion they aren't exactly a model economy.
- veyron 15y agoEven if the debt is 15 Trillion and one ratings agency felt we didn't deserve the highest rating, investors are champing at the bit to purchase bonds.
- themichael 15y agoThen the FED would not have to purchase bonds.
- k-mcgrady 15y agoThe reason the US is not suffering more from its huge debt is because the US dollar is the primary reserve currency.
- flourpower 15y agoThat's more of a reflection of liquidity than of creditworthiness though.
- Tichy 15y agoI just checked with Wikipedia: the unification of Germany happened in 1871. Before then there were sometimes even ferocious wars among the states in Germany, including the Thirty Years War. That is one reason why people had high hopes for Europe: today it seems unthinkable to have a war between states of Germany (they don't have their own military either). Perhaps one day it could be as unthinkable to have war between European states.
- antirez 15y agoIt already is, it is not conceivable that any country in the euro monetary union will attack militarily another one. Actually I think that this crisis will show that countries will also be able to do big sacrifices to save other countries economically.
- nhaehnle 15y agoYour point about the US is valid. However as their national debt is $15 trillion they aren't exactly a model economy. Why are people so obsessed about the debt of sovereign governments these days? Think about it like this: there is (virtual) money in MMO games. Gold in World of Warcraft, ISK in Eve Online, or whatever. In an in-world accounting sense, this money is a debt (liability) of whoever runs the system. But it is ridiculous on the fact of it to worry about the total amount of money in those systems. So why is their this obsession with the debt? The most immediate reason is this gut reflex of "it needs to be paid back". But what one has to realize is that, for a monetary sovereign, paying back the debt is just exchanging one type of liability against another. The debt is money that has already been spent. Paying it back does not create new financial assets, it is just an asset swap. Why on earth would that be problematic? The other objection is that the interest paid on debt causes an undue redistribution of wealth. That point is one of ignorance: a monetary sovereign effectively sets the interest rate that it pays on its outstanding debt - that is what the monetary policy of the central bank is about. Seeing the true nature of money is initially scary, and perhaps this is what stops many from a deeper understanding. I can only hope that future generation will make fun of us for the way we are thinking about money.
- justincormack 15y agoBut the US (and UK) are prepared to monitize their debt via QE which Germany is vetoing. And the US allows internal bankruptcy, with a legal framework.
- dalke 15y agoThen why would it ever make sense for Ecuador to tie its monetary policy directly to that of the US? That is, what you are saying is obvious was not obvious to the Ecuadorians.
- k-mcgrady 15y agoI don't know anything about Ecuador's situation but it sounds completely different. One country tying its monetary policy to one other is a lot different than trying to agree on one policy to fit the needs of 17 countries, the way the Eurozone works.
- dalke 15y agoI meant that as one example of a country which has dollarized; that is, which uses a foreign country's money as its basis of it domestic currency. Countries which tie their domestic currency directly to the US's include Panama, Ecuador, and El Salvador. Namibia ties its currency to South Africa's (or rather, to the Multilateral Monetary Area). Other monetary unions exist. The CFA franc has been around for 60+ years and the East Caribbean dollar has been around for 45+ years. Those seem like counter-arguments to the idea that monetary policy should be "set on a country by country basis." Since countries do yield domestic currency in favor of a shared currency, it's apparent that there are advantages to doing so. Why do none of those apply to the EU? I know that I like how I can use the same currency in Germany, France, Spain, and Ireland without having to change money each trip. While I don't like stopping in Denmark, which has their own domestic currency.
- randomafrican 15y ago"credibility" The idea of for a country to appear credible by using a golden straightjacket. It's usually used by countries coming out of hyperinflation phases. And that policy has badly failed before in Argentina.
- dalke 15y agoDomestic monetary policies also badly fail. Zimbabwe is the most spectacular recent example. Panama has been using the US dollar for over 100 years - is it not am example of how the policy can succeed, or does that work only because it has the Panama Canal?
- DanielBMarkham 15y agoYes, it is a structural problem. Separately, the governments are ruled by politicians that get their mandate from the people. They tried to keep local fiscal policy and yet somehow together have a unified monetary policy. That's the kind of problem that's blatantly obvious from day one. What happened was a series of complexities that were added to these systems of governance that obscured this underlying reality. This trend looks to continue, with more and more schemes using more and more complex policies and products. It doesn't look so good. Of course, I'm just relating what I've been reading. I can tell you it's been quite alarming and yet strangely placid. Like watching a slow-motion train wreck. I didn't mean the number of people. I meant the idea of smashing up lots of different systems of government and cultures through byzantine layers of bureaucracy instead of just replacing them with a centralized government (which would have worked very well, probably, but it was politically unfeasible)
- Tichy 15y agoI wish I had any idea what to do with my Euro savings :-(
- scotty79 15y agoBitcoins are now cheap again.
- pagekalisedown 15y agoGreenbacks and Yuans, that's what I'd do.
- BSousa 15y agoBut exactly how? I'm not being rude, just asking. Apart from going to these countries and open a bank account or have actual money under the mattress, how would this work? My bank allows me to have accounts in USD and GBP (I actually have some money on each) but if the euro blows, and there is a bank freeze and mandatory 'exchange' of euros to whatever your local coin is, I would think these accounts would also be affected (something like exchanging the USD to EUR at current rate, and then changing the EUR to escudo or dracma) I looked at forex but I'm in no way qualified to understand how the hell that works.
- deleted 15y ago[deleted]