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Is that because of the euro, or because the policies of austerities that were chosen at that time? The problem with the euro is that it is considered as an eco

Is that because of the euro, or because the policies of austerities that were chosen at that time? The problem with the euro is that it is considered as an economic issue, whereas it should be a political one (and it was when it was created, as the first step in an "ever tighter union"). If we European citizens want to keep the euro, we need to deepen the Union.

adventured 11y ago
If they went with inflation instead of austerity, all you'd see accomplished is the nominal numbers would climb, while the real numbers would not. That's what we're seeing right now with the QE devaluation of the Euro; pretend growth via dropping the value of the Euro (if you have to drop your currency by 20% to get 2% growth, what you have is not growth). Austerity and inflation accomplish the exact same outcome, the only difference between the two depends on how they're implemented, and the lies that the politicians get to spin to pretend one is better than the other (politicians in weak economies almost universally prefer inflation, because they can lie and show nominal growth, and tell their citizens that their wages and pensions aren't falling, when in fact they are in real terms). Take Greece for example. They could exit the Euro and meet all of their domestic obligations - in a debased new currency, that wouldn't actually be meeting the obligations in real terms as the currency tumbled. They'd get to pretend everything was fine nominally. Inflation instead of austerity is used to devalue the amount of debt held, which is a form of defaulting on creditors. It drops the standard of living, as it steals wealth from citizens by devaluing their real incomes and assets.
- Sami_Lehtinen 11y ago
  "devalue the amount of debt held, which is a form of defaulting on creditors" Which won't work well if the loans aren't nominated in your national currency. This is why currency loans are the real trap when devaluation hits.

adventured 11y ago

If they went with inflation instead of austerity, all you'd see accomplished is the nominal numbers would climb, while the real numbers would not. That's what we're seeing right now with the QE devaluation of the Euro; pretend growth via dropping the value of the Euro (if you have to drop your currency by 20% to get 2% growth, what you have is not growth). Austerity and inflation accomplish the exact same outcome, the only difference between the two depends on how they're implemented, and the lies that the politicians get to spin to pretend one is better than the other (politicians in weak economies almost universally prefer inflation, because they can lie and show nominal growth, and tell their citizens that their wages and pensions aren't falling, when in fact they are in real terms). Take Greece for example. They could exit the Euro and meet all of their domestic obligations - in a debased new currency, that wouldn't actually be meeting the obligations in real terms as the currency tumbled. They'd get to pretend everything was fine nominally. Inflation instead of austerity is used to devalue the amount of debt held, which is a form of defaulting on creditors. It drops the standard of living, as it steals wealth from citizens by devaluing their real incomes and assets.

Sami_Lehtinen 11y ago
"devalue the amount of debt held, which is a form of defaulting on creditors" Which won't work well if the loans aren't nominated in your national currency. This is why currency loans are the real trap when devaluation hits.