Germany Was Biggest Deadbeat...Not Greece

[overthere]

The Greek exit from the euro is inevitable. The later they leave it the more painful it will be. Had they done it already in 2010 they would by now be on a growth path.

Not a chance. It is not inevitable, unless they contemplate mass suicide.

If they had done it in 2010 their economy today would be comparable to Chad or Mauritania.

Next up for Greece: I expect the frisky and solvent Turks will spark up a border dispute and try to take back all of Cyprus. They know full well how vulnerbale Greece is now.

[dre]

Greece cannot leave the Euro. if they did, their current situation would instantly be the good old days. The drachma would be utterly worthless, which means any imports to Greece would be completely unaffordable.

Thats not a bad thing, and in fact its the entire reason we have the floating exchange rate system. Increasing prices for imports encourages domestic production and being productive is the only real way to Greece to fix its problems.

Joining a currency union is really no different that pegging your currency value to that of another currency. Its a form of currency manipulation, and it can be very dangerous to an economy.... and when you marry yourself to an external monetary scheme that does not match your economy it fosters the accumulation of debt, fiscal mismanagment, and corruption.

A good example of this is Argentinas attempt to peg its currency to the US dollar. It DID keep imports cheap and benefited people that travelled abroad, but it also resulted in the flight of capital from the Argentinian economy, and the steady loss of industrial infrastructure, and productive capacity. After it abandoned the peg, and defaulted on its public debt there was a huge short term depression... But something interesting happened... With no more cheap imports available people started making stuff for each other.... producing things... industries started to rebuild... and by 2005 GDP was higher than it was prior to the recession.

In the case of Greece and complete default and withdrawal from the EU makes a lot of sense. It will take decades for Greece to become competitive under a regime of austerity, and their economy has rapidly contracted anyways. Not only that but if you look at their primary deficit its actually not very big... the main reason why they are running a deficit is because all the interest they are paying on their debt. Primary deficit is about 1% of GDP.

Edited February 10, 2015 by dre

[Argus]

They're the black/native/muslim of the eurocentric...am I right?

I know you people on the fringe left are horrified whenever anyone judges other people as in any way responsible for their own problems but unfortunately for you, reality shows they often are.

[Bonam]

Thats not a bad thing, and in fact its the entire reason we have the floating exchange rate system. Increasing prices for imports encourages domestic production and being productive is the only real way to Greece to fix its problems.

Joining a currency union is really no different that pegging your currency value to that of another currency. Its a form of currency manipulation, and it can be very dangerous to an economy.... and when you marry yourself to an external monetary scheme that does not match your economy it fosters the accumulation of debt, fiscal mismanagment, and corruption.

...

So should Ontario and Alberta have different currencies? One benefits more from a lower dollar, one from a higher dollar. Should everyone have their own currency to best optimize for their particular situation?

Yes, there are benefits to being able to set fiscal policy separately for smaller regions, but there are also benefits to having a currency span a larger region: greater ease of transactions, freer flow of money/capital, reduced hassle for travel/banking/etc.

Implementation of single currencies for larger regions bring short term pain but long term gain, in my opinion. If the world had a single currency, we'd need a decade or two to sort through the mess of that being implemented, but would make things a heck of a lot simpler and more efficient in the long run.

[dre]

So should Ontario and Alberta have different currencies? One benefits more from a lower dollar, one from a higher dollar. Should everyone have their own currency to best optimize for their particular situation?

Yes, there are benefits to being able to set fiscal policy separately for smaller regions, but there are also benefits to having a currency span a larger region: greater ease of transactions, freer flow of money/capital, reduced hassle for travel/banking/etc.

Implementation of single currencies for larger regions bring short term pain but long term gain, in my opinion. If the world had a single currency, we'd need a decade or two to sort through the mess of that being implemented, but would make things a heck of a lot simpler and more efficient in the long run.

I dont see why you think it would make things all that much simpler. All this money is electronic and a transaction between two currencies takes a millionth of a second. Iv used my interac card in france, thialand, the netherlands, london... Its not any hassle at all.

If the world had a single currency

A global currency would not last. Thats basically exactly what we saw with bretton woods and the gold peg.

Remember interest rates determine how fast the money supply of a country grows. You would be severing the tie between the size of the money supply and the economy... That means no price stability which is the core mission over every central bank since 1918. It would NOT make transactions easier, it would in fact make them harder and a lot less likely. Especially in terms of things like longer term contracts.

And the people that issue coin and credit have more real power than a national government. Tell me, who exactly is going to run this global central bank?

[Bonam]

I dont see why you think it would make things all that much simpler. All this money is electronic and a transaction between two currencies takes a millionth of a second. Iv used my interac card in france, thialand, the netherlands, london... Its not any hassle at all.

It would eliminate a layer of risk and expense. Exchange rate risk is a very real risk businesses have to deal with when operating internationally. Consider the Canadian companies that had a tough time when the Canadian dollar rose. As for the instant transactions... instant yes, but not free. The cards charge heavy fees for foreign transactions, if not to you, then to the merchant. And even when you use your "no foreign transaction fee" credit card, you're still not getting mid-market rates... there's always the bid-ask spread on currency exchange transactions. Forex houses make billions of dollars this way.

[dre]

It would eliminate a layer of risk and expense. Exchange rate risk is a very real risk businesses have to deal with when operating internationally. Consider the Canadian companies that had a tough time when the Canadian dollar rose. As for the instant transactions... instant yes, but not free. The cards charge heavy fees for foreign transactions, if not to you, then to the merchant. And even when you use your "no foreign transaction fee" credit card, you're still not getting mid-market rates... there's always the bid-ask spread on currency exchange transactions. Forex houses make billions of dollars this way.

The risk is still there either way... You just have wage and price instability instead of currency fluctation. And if youre unlucky enough to be one of the countries where interest rates dont match your economy, then the economy gets all kinds of false signals, and you are prone to asset bubbles, and all kinds of other unpleasant things.