3 ms·

I am constantly amazed that printing more money, thereby devaluing the currency and causing hyperinflation, is even considered as a viable option. Does anybody

• _delirium 15y ago
  Controlled devaluation has worked fairly well for Greece in the past, when it had its own currency. Several times in its history it's used one-time 15-20% devaluations, which didn't spark hyperinflation. The main purpose of them was to: 1) reduce outstanding debt in real terms by in effect soft-defaulting; and 2) increase competitiveness by cutting domestic wages in real terms, without having to cut nominal wages, which are extremely sticky. Greece is currently at least suffering from the inability to do #2: it would be ideal for Greece for the Eurozone to be running higher inflation rates, which, if nominal pay was held constant (as it currently has to be under their agreements), would in effect cut the pay of Greek employees (and their pensions) without having to cut it in nominal terms, as well as bring down the real prices of all sorts of other things like housing. The only alternative way of accomplishing that is significant, sustained domestic deflation in the form of actual nominal price/wage cuts, which is more difficult to pull off in a way that doesn't completely wreck the economy.