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Devaluation isn't exactly what you'd call a long-term solution. Legolas Send a noteboard - 09/05/2015 08:38:54 PM

View original postI don't usually agree with Krugman, but I do agree with him very strongly that nations that don't control their currency don't control their economy. It's a problem for everyone right now except for the Germans that the euro exists as it does. A Grexit would, if it didn't lead to complete chaos, be a strong precedent for Italy and Spain, and then even perhaps France, leaving the single currency. For smaller EU members it might provide benefits by removing redundant state apparatus for a small area, but for the larger members it is more of a curse than a benefit. As a result, I think that essentially the euro would need to be a "dual currency" sort of model; a universally accepted currency by nations that are able to have a theoretical national currency that doesn't physically exist. Each nation would establish an exchange rate from the national currency to the euro, which could fluctuate to allow for devaluation. Businesses would express prices in local currency with the daily exchange rate posted. Russia did that for over a decade in the 1990s and has returned to it with recent currency instability. They did it with old-fashioned calculators. Now everything could be done with smartphone apps to instantly convert prices.

A Grexit would indeed create a precedent - but a rather scary one. The system you propose could be practically workable I'm sure, but I really don't see how the benefits outweigh the costs.

View original postA system like that, although the Germans would oppose it, would solve Greece's problems. Denominating salaries and pensions in drachmas, and slowly devaluing the currency without increasing salaries and pensions, would return Greece to its old economic model of devaluing its way out of unrealistic retirement promises, without getting rid of the convenience of the euro.

Greece wasn't the only country that used devaluation as a regular strategy back in the day, but that's hardly something we want to go back to. The Germans are exaggerating with the austerity, but they're not wrong on the general point that countries like Greece, Italy or Spain need real reforms that fix their broken employment/pension systems in the long term, instead of the old classic cop-out of devaluation. The euro isn't the problem, it merely restricts your options in how to deal with the problem by making it more difficult to just run away from it.

View original postAnd although you scoff at the populist parties, the simple fact is that they perform well because the technocrats of the EU ignore voters and popular will. Politicians will have to start listening to their constituents or the EU will rip apart in a most undignified fashion. Also, as bad as Syriza is doing, if Greece manages to muddle through it will be a victory for the populists. Expect to see more of them if immigration and ECB pressures keep unemployment high. Europe is just one recession away from torchlit parades everywhere.

Maybe, but they are almost per definition short-lived, unstable parties or movements, and there's a limit on how many votes you can win with that kind of populism. It's not that there aren't many problems with the EU, or that there isn't a democratic deficit, but the populist parties don't tend to have any kind of workable answers, they are more in the way of a solution than that they are helping. I wouldn't expect you, or any Republican, to be such a supporter of parties peddling protectionism, decreased retirement ages, and similar economically harmful nonsense.

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David Cameron whoops ass..... Anonymous2000 - 08/05/2015 01:33:15 PM 2205 Views

This time you're not talking nonsense.

Legolas - 08/05/2015 05:36:35 PM 717 Views

The UK election system is as much a mystery as is cricket..... Anonymous2000 - 08/05/2015 05:44:31 PM 715 Views

It's basically the same system as yours, you do realize?

For Congress, anyway. Legolas - 08/05/2015 06:32:54 PM 666 Views

The Scots seem quite suicidal Tom - 09/05/2015 04:29:31 AM 640 Views

Yes - but so do the Eurosceptic English. Legolas - 09/05/2015 09:27:39 AM 673 Views

The euro can only survive in one form Tom - 09/05/2015 05:39:34 PM 734 Views

Devaluation isn't exactly what you'd call a long-term solution. Legolas - 09/05/2015 08:38:54 PM 644 Views

Oh, I certainly don't support the populist parties Tom - 11/05/2015 01:43:23 AM 536 Views

I agree, "far right" is a misleading label in some ways. Legolas - 11/05/2015 09:29:56 PM 700 Views

What fool or fools started the EU? Anonymous2000 - 09/05/2015 01:37:27 PM 559 Views

Because Europe was doing so well before then, right?

Legolas - 09/05/2015 07:51:30 PM 674 Views

The Euro would have worked better if there had been fiscal integration. Rebekah - 10/05/2015 09:43:43 PM 760 Views

Re Scotland: Rebekah - 10/05/2015 09:41:43 PM 670 Views

Yeah, it was tense enough from the outside... Legolas - 10/05/2015 10:42:53 PM 691 Views

So what is the SNP going to do if Cameron tells them (rightly) to sod off about another referendum? Tom - 11/05/2015 01:45:16 AM 630 Views

Not the SNP so much as the people. Rebekah - 11/05/2015 02:00:32 PM 746 Views

So the mob rules now, does it? Tom - 11/05/2015 06:04:04 PM 669 Views

Significant devolution will happen, that's for sure. Legolas - 11/05/2015 09:07:00 PM 623 Views

Why? Tom - 12/05/2015 07:10:31 AM 686 Views

I think that's enough Putin speeches for you for today.

*NM* Legolas - 12/05/2015 06:37:23 PM 426 Views

Ha! It helps to not be 10 martinis in when you post, too.

*NM* Tom - 12/05/2015 11:41:48 PM 396 Views

I guess you haven't watched braveheart? random thoughts - 13/05/2015 01:49:30 PM 651 Views

You are a sad sorry little man, and I pity you. *NM* Wibble - 15/05/2015 12:03:37 AM 466 Views

Re: It's basically the same system as yours, you do realize?

For Congress, anyway. Duke - 11/05/2015 05:32:55 AM 728 Views

The US is made up of 50 nations random thoughts - 12/05/2015 03:19:25 PM 576 Views

Indeed, but with the same two parties everywhere. Legolas - 12/05/2015 06:35:27 PM 633 Views

Wisconsin's drinking age The Shrike - 13/05/2015 01:09:53 PM 709 Views

Texas has similar laws random thoughts - 13/05/2015 01:44:29 PM 555 Views

I know. It's really sad that that's the most reasonable law anywhere in the US... Legolas - 13/05/2015 06:26:09 PM 688 Views

It's the same in Louisiana. Ghavrel - 14/05/2015 08:23:20 AM 630 Views

The states still can set the drinking age, incidentally. The feds can just withhold some funds. Ghavrel - 13/05/2015 02:55:51 AM 599 Views

They have still gutted the 10th amendment random thoughts - 13/05/2015 01:47:53 PM 587 Views

I agree they've gutted it. I'm not sure how I feel about it. Ghavrel - 14/05/2015 07:37:22 AM 594 Views

Well your elected senators are not that stellar

random thoughts - 14/05/2015 01:38:37 PM 596 Views

What about open primaries like in California? *NM* Legolas - 15/05/2015 07:22:08 PM 322 Views

Texas kind of has open primaries random thoughts - 18/05/2015 08:34:43 PM 713 Views

They're all right. They're a hell of a lot better than our elected state legislature.

Ghavrel - 17/05/2015 05:37:35 AM 608 Views

Three cheers for foodbanks! *NM* Dion - 12/05/2015 02:51:06 AM 373 Views

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<quote id="287459">
<quote id="287457">I don't usually agree with Krugman, but I do agree with him very strongly that nations that don't control their currency don't control their economy.  It's a problem for everyone right now except for the Germans that the euro exists as it does.  A Grexit would, if it didn't lead to complete chaos, be a strong precedent for Italy and Spain, and then even perhaps France, leaving the single currency.  For smaller EU members it might provide benefits by removing redundant state apparatus for a small area, but for the larger members it is more of a curse than a benefit.  As a result, I think that essentially the euro would need to be a "dual currency" sort of model; a universally accepted currency by nations that are able to have a theoretical national currency that doesn't physically exist.  Each nation would establish an exchange rate from the national currency to the euro, which could fluctuate to allow for devaluation.  Businesses would express prices in local currency with the daily exchange rate posted.  Russia did that for over a decade in the 1990s and has returned to it with recent currency instability.  They did it with old-fashioned calculators.  Now everything could be done with smartphone apps to instantly convert prices.  </quote>
A Grexit would indeed create a precedent - but a rather scary one. The system you propose could be practically workable I'm sure, but I really don't see how the benefits outweigh the costs. 
<quote id="287457">A system like that, although the Germans would oppose it, would solve Greece's problems.  Denominating salaries and pensions in drachmas, and slowly devaluing the currency without increasing salaries and pensions, would return Greece to its old economic model of devaluing its way out of unrealistic retirement promises, without getting rid of the convenience of the euro.  </quote>
Greece wasn't the only country that used devaluation as a regular strategy back in the day, but that's hardly something we want to go back to. The Germans are exaggerating with the austerity, but they're not wrong on the general point that countries like Greece, Italy or Spain need real reforms that fix their broken employment/pension systems in the long term, instead of the old classic cop-out of devaluation. The euro isn't the problem, it merely restricts your options in how to deal with the problem by making it more difficult to just run away from it. 
<quote id="287457">And although you scoff at the populist parties, the simple fact is that they perform well because the technocrats of the EU ignore voters and popular will.  Politicians will have to start listening to their constituents or the EU will rip apart in a most undignified fashion.  Also, as bad as Syriza is doing, if Greece manages to muddle through it will be a victory for the populists.  Expect to see more of them if immigration and ECB pressures keep unemployment high.  Europe is just one recession away from torchlit parades everywhere.</quote>
Maybe, but they are almost per definition short-lived, unstable parties or movements, and there's a limit on how many votes you can win with that kind of populism. It's not that there aren't many problems with the EU, or that there isn't a democratic deficit, but the populist parties don't tend to have any kind of workable answers, they are more in the way of a solution than that they are helping. I wouldn't expect you, or any Republican, to be such a supporter of parties peddling protectionism, decreased retirement ages, and similar economically harmful nonsense. 
</quote>

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