Europe Saving the Euro?
The last of our series on the European Union.
The Embattled Euro
One way or another Europe will save the euro--and the currency is indeed worth saving. It has facilitated flows of capital and reduced the cost of doing business across borders. Greece's economic behavior has been bad, even by European standards, but that doesn't discount the idea of having a uniform currency. Illinois may well be the worst fiscally managed state in the Union these days, but that doesn't mean the dollar will collapse. It just means the citizens of Illinois will suffer disproportionately, and they will have to pay more to borrow money.
In fact, the euro has spared Greece from an even greater disaster: poverty-inducing hyperinflation. If Athens were still using the drachma the government's response to its fiscal difficulties would have been to turn on the printing presses, thus engulfing the nation in terrible inflation. This impoverishment would have been far more extensive and destructive than what the Greek people are currently experiencing. Just look at what hyperinflation did to Germany in the early 1920s.
The European central bank could firmly shore up the euro by fixing the currency to gold. Unfortunately, given the current intellectual state of economic thinking, that won't happen.
Link: Saving The Euro.
One way or another Europe will save the euro--and the currency is indeed worth saving. It has facilitated flows of capital and reduced the cost of doing business across borders. Greece's economic behavior has been bad, even by European standards, but that doesn't discount the idea of having a uniform currency. Illinois may well be the worst fiscally managed state in the Union these days, but that doesn't mean the dollar will collapse. It just means the citizens of Illinois will suffer disproportionately, and they will have to pay more to borrow money.
In fact, the euro has spared Greece from an even greater disaster: poverty-inducing hyperinflation. If Athens were still using the drachma the government's response to its fiscal difficulties would have been to turn on the printing presses, thus engulfing the nation in terrible inflation. This impoverishment would have been far more extensive and destructive than what the Greek people are currently experiencing. Just look at what hyperinflation did to Germany in the early 1920s.
The European central bank could firmly shore up the euro by fixing the currency to gold. Unfortunately, given the current intellectual state of economic thinking, that won't happen.
Link: Saving The Euro.
posted by CR English at 6:16 AM
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