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I think you've missed his point. If the ECB prints more money but most of your trade is with other Euro countries (which it will be) then you can't really use t
by andy_boot 13y ago
I think you've missed his point. If the ECB prints more money but most of your trade is with other Euro countries (which it will be) then you can't really use the devaluation trick.
- SilasX 13y agoSure you can: mark down the nominal price of the goods you export. Not willing to make them competitive? Good luck.
- afterburner 13y agoHow? By lowering wages? That's the tricky part. That's why devaluation is so much easier.
- jpatokal 13y agoTo implement, yes, but the impact is the same. Those devalued wages are now worth less when it comes to buying imports, and since (to a first approximation) everything in this globalized world of ours is imported, even local goods and services have to hike up prices in response.
- afterburner 13y agoSo you agree devaluation would be equally effective and easier.
- aigarius 13y agoThat's what Latvia did - 20% wage cut across the whole country, up to 40% wage cuts in some areas. Government sector lead the way and privates followed. Devaluation also destroys any savings that people might have AND makes the country less safe for the investors.
- afterburner 13y agoWage cuts make any debt you still have harder to pay off though. Devaluation makes exports more competitive, which will attract investment as sales increase.