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Actually, they can keep writing cheques and cashing them, they have their own currency, it allows you to do that. The current problem is that the "core" of the

Actually, they can keep writing cheques and cashing them, they have their own currency, it allows you to do that. The current problem is that the "core" of the EU thinks it is in their best interest to keep inflation down and let the other nations suffer. The best evidence we have so far indicates that this is a very bad idea.

adventured 13y ago
Cuts or inflation, it's the same end result. One is just more of a fraud than the other. Inflation is almost universally preferred by the political class because it does a better job of hiding the erosion of purchasing power and standard of living.
- bodyfour 13y ago
  They have a similar end result on wages, maybe. It doesn't matter if your paycheck (and public benefits) decrease outright because of austerity or its silently inflated away. They differ though on who pays overall. Inflation is a tax on anyone holding €-denominated assets. For those who have denominated debts at a fixed interest rate, it's a boon. I'm sure France wouldn't complain if they end up repaying their 10-year bonds at a negative real return. Austerity is largely the opposite: countries (and people) who are in the worst financial situation feel the most pain. It's perfectly understandable that those with money will want more austerity, while those without want more inflation.
sliverstorm 13y ago
The best evidence we have so far indicates that this is a very bad idea. Do we have evidence that indicates the alternative is any better? There's nothing that says both options can't be terrible.
- deleted 13y ago
  [deleted]
- snowwrestler 13y ago
  The U.S. has not followed a program of austerity, and our economy and hiring is recovering faster than Europe's.
  - sliverstorm 13y ago
    Apples and oranges. The U.S. didn't crash as hard, and doesn't have some of the EU's unique challenges.
    - jckt 13y ago
      Likewise the converse statement is true and, I believe, important to mention explicitly: the USA has a uniquely advantageous position in this world.
    - fauigerzigerk 13y ago
      But those unique challenges don't indicate that the U.S approach wouldn't work, they just explain why it isn't chosen.
  - alipang 13y ago
    Sweden here. Went through heavy austerity in the 90s. Things going comparatively good now, just to give you some anectodal evidence for the contrary position.
    - deleted 13y ago
      [deleted]
    - JamisonM 13y ago
      Canada too, but it a largely inapplicable data point in both cases. First of all for both countries there is no evidence that our lending rates would have increase without the 90's austerity, so its actual value was dubious in the first place. Secondly, as nations mostly on the edge of the global financial storm we are not very interesting, we do not have a huge overhang of private debt that has drastically collapsed demand and crushed our tax base. (Canada has a large amount of private debt but since house values have held that debt is not an "overhang" it just sitting there, I can't speak for Sweden.) That is what put these countries in the positions they are in.
- JamisonM 13y ago
  Sure, post-WW1 France vs. Britain are a fairly good natural experiment that was conducted - France devalued and Britain did not, and despite the natural advantage of not being destroyed in the war France's economy generally outperformed Britain's anyway. In the current situation one can look at the US vs. Europe though that is more of a less-austerity vs. more-austerity example and of the course, as with all natural experiments the two subjects are not entirely the same. That, and the economic models that are consistent with recent behaviour in these economies are saying that the alternative is better. Also, we know the trade-off here - austerity is bad for wage-earners, the poor, people with few, no, or negative assets in the denominated currency. Inflation is bad for net asset-holders in the denominated currency and importers. Now, given that most of the vulnerable people in a society fall into one group that can be a moral basis for action and it is easy to see which side of the political spectrum is more likely to align on each particular side of the debate. (I post this feeling assured you probably won't read the response since a whole day has passed, but what the heck!)

adventured 13y ago

Cuts or inflation, it's the same end result. One is just more of a fraud than the other. Inflation is almost universally preferred by the political class because it does a better job of hiding the erosion of purchasing power and standard of living.

bodyfour 13y ago
They have a similar end result on wages, maybe. It doesn't matter if your paycheck (and public benefits) decrease outright because of austerity or its silently inflated away. They differ though on who pays overall. Inflation is a tax on anyone holding €-denominated assets. For those who have denominated debts at a fixed interest rate, it's a boon. I'm sure France wouldn't complain if they end up repaying their 10-year bonds at a negative real return. Austerity is largely the opposite: countries (and people) who are in the worst financial situation feel the most pain. It's perfectly understandable that those with money will want more austerity, while those without want more inflation.

sliverstorm 13y ago

The best evidence we have so far indicates that this is a very bad idea. Do we have evidence that indicates the alternative is any better? There's nothing that says both options can't be terrible.

deleted 13y ago
[deleted]
snowwrestler 13y ago
The U.S. has not followed a program of austerity, and our economy and hiring is recovering faster than Europe's.
- sliverstorm 13y ago
  Apples and oranges. The U.S. didn't crash as hard, and doesn't have some of the EU's unique challenges.
  - jckt 13y ago
    Likewise the converse statement is true and, I believe, important to mention explicitly: the USA has a uniquely advantageous position in this world.
  - fauigerzigerk 13y ago
    But those unique challenges don't indicate that the U.S approach wouldn't work, they just explain why it isn't chosen.
- alipang 13y ago
  Sweden here. Went through heavy austerity in the 90s. Things going comparatively good now, just to give you some anectodal evidence for the contrary position.
  - deleted 13y ago
    [deleted]
  - JamisonM 13y ago
    Canada too, but it a largely inapplicable data point in both cases. First of all for both countries there is no evidence that our lending rates would have increase without the 90's austerity, so its actual value was dubious in the first place. Secondly, as nations mostly on the edge of the global financial storm we are not very interesting, we do not have a huge overhang of private debt that has drastically collapsed demand and crushed our tax base. (Canada has a large amount of private debt but since house values have held that debt is not an "overhang" it just sitting there, I can't speak for Sweden.) That is what put these countries in the positions they are in.
JamisonM 13y ago
Sure, post-WW1 France vs. Britain are a fairly good natural experiment that was conducted - France devalued and Britain did not, and despite the natural advantage of not being destroyed in the war France's economy generally outperformed Britain's anyway. In the current situation one can look at the US vs. Europe though that is more of a less-austerity vs. more-austerity example and of the course, as with all natural experiments the two subjects are not entirely the same. That, and the economic models that are consistent with recent behaviour in these economies are saying that the alternative is better. Also, we know the trade-off here - austerity is bad for wage-earners, the poor, people with few, no, or negative assets in the denominated currency. Inflation is bad for net asset-holders in the denominated currency and importers. Now, given that most of the vulnerable people in a society fall into one group that can be a moral basis for action and it is easy to see which side of the political spectrum is more likely to align on each particular side of the debate. (I post this feeling assured you probably won't read the response since a whole day has passed, but what the heck!)