The Euro crisis

An interesting take from a left wing source

http://www.gregpalast.com/the-euro-is-a-big-success-no-kidding/

The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

-snip-

But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.)
"It's very hard to fire workers in Europe," he complained. His answer: the euro.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.

He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.

etc.

See, there's the problem. Using " using Keynesian monetary and fiscal juice to pull a nation out of recession" sounds great. And in theory, it is great.

But the problem is that once a government, gets that "Keynesian monetary and fiscal juice" flowing, it's impossible to turn off the spigot. Every temporary expenditure to shepherd the people through an economic crisis turns into a permanent entitlement that is politically difficult or impossible to reduce, let alone eliminate. And without politically difficult to pass tax increases, all it does is pass the burden on to a day of reckoning some time in the future.

If anything, the existence of the Euro brought the day of reckoning forward a decade or two, but that's a good thing. Now the crisis can be solved with some spending cuts and maybe an untapped Laffer-safe tax hike. Since we don't have the Euro, our crisis won't come until our deficit is so high as to be all but uncontrollable.

By "permanent entitlement" are you referring to Social Security, Medicare and/or Medicaid?

Originally posted by sh76
An interesting take from a left wing source

http://www.gregpalast.com/the-euro-is-a-big-success-no-kidding/

[quote]The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

-snip-

But Mundell, a can-do Canadian-American, intend ...[text shortened]... risis won't come until our deficit is so high as to be all but uncontrollable.

Don't quit your day job.

Originally posted by rwingett
Don't quit your day job.

Cause you won't be able to find another.

Originally posted by rwingett
Don't quit your day job.

Tempting though it is to live off the public dole, don't worry, I have no plans to quit my job.

Originally posted by AThousandYoung
By "permanent entitlement" are you referring to Social Security, Medicare and/or Medicaid?

Those are non-exhaustive examples.

The euro as a right-wing conspiracy? Please.

I agree with the principle of the euro in general, and I think that it's good for the economy. However, when it was implemented politicians lacked the courage to give up the required amount of national sovereignty to make it work. Furthermore, since traders are usually morons they actually assumed there was some kind of implicit scheme against countries defaulting even though there wasn't, and eurozone countries all paid almost the same interest rate up until 2008 or so. This exacerbated the problem since it allowed countries like Greece to get cheap credit even though the risk was much greater than investors assumed it would be, and so investors (and the taxpayers that partially bailed them out) took heavy losses.

Originally posted by KazetNagorra
The euro as a right-wing conspiracy? Please.

I agree with the principle of the euro in general, and I think that it's good for the economy. However, when it was implemented politicians lacked the courage to give up the required amount of national sovereignty to make it work. Furthermore, since traders are usually morons they actually assumed there wa uld be, and so investors (and the taxpayers that partially bailed them out) took heavy losses.

I agree with all of this, but not on the principle of the Euro, which I believe was always doomed to failure, which many people predicted from the outset.

The reasons are same as you make. For the Euro to work, it is inevitable that it must be accompanied by both fiscal and probably political union. The Eurozone must become effectively one country (economically speaking) with the richer members being willing to bail out the poorer members when things get tough. They will only be willing to do so for so long, unless they have confidence that they can force less affluent countries to behave responsibly.

I just can't see such disparate cultures and economies ever being able to agree to allow other countries to run their affairs in the way this demands. Of course, Greece is pretty much in this position, but look at the civil unrest this is causing. If the elections had gone just slightly in a different direction, the prospects for the Euro would have been very different. At the end of the day, all the measures taken since might buy enough time to allow an economic recovery to allow the Euro to muddle through.

I hope this is the case, but I fear the worst.

Originally posted by Rank outsider
I just can't see such disparate cultures and economies ever being able to agree to allow other countries to run their affairs in the way this demands.

The economies are disparate, but the cultures are not - not especially. From Dublin to Tallinn, from the Algarve to the Bosphorus, most people think, in the broadest possible sense, along similar lines about most substantive issues.

I don't mean of course that everyone has the same opinions. But there is a basic continental consensus about, say, the role of the state, the role of religion in society, the relation of the state to its citizens, the definition of individual freedom, which differs from the consensus reached in other regions. Europe is basically secular, social democratic, liberal and pragmatic; the politics of the left and right revolves around these basic poles.

In my opinion, the key function of the EU is and ought to be to provide a way of expressing that continental identity, and to put into practice the logical corollary that, since we share (in the broadest sense) these values, we ought to have institutions that express and defend them, and we ought to adopt, as far as possible, a common posture on the world stage. That is what the EU ought to be for. It would be a tragedy if a trivial matter like the failure of the single currency were to impede that project.

Originally posted by sh76
Those are non-exhaustive examples.

What are some other examples?

I'll make some guesses.

Food "stamps" (EBT cards now). Is "free" food to prevent impoverished people from starving to death, funded by taxpayers, an entitlement?

How about homeless shelters? Are those entitlements?

"Free" primary and secondary and partially subsidized tertiary public education?

"Free" vaccinations against communicable disease?