On Tue, Aug 9, 2011 at 1:22 PM, John Sadd <jrs...@gmail.com> wrote: > Our friend Paul Krugman at the (NY) Times has written on the latter subject > a number of times, including this one: > > http://www.nytimes.com/2010/**04/30/opinion/30krugman.html<http://www.nytimes.com/2010/04/30/opinion/30krugman.html> > > The gist of his argument is I think two issues: > 1. Monetary union without true mobility is not feasible (more specific than > "just" political union). If things get bad in Nevada, people can move > elsewhere to look for jobs. If things get bad in Greece, it's not realistic > to expect Greeks to move to and get jobs in Germany. > 2. There's been no formal commitment for parts of the EU to bail out other > weaker parts. Again, if things are bad in Nevada, the Feds have an > opportunity/obligation to assist with funds collected from the entire > nation. In Europe, it seems as though everyone hopes Angela will pick up the > tab without similar legislated expectations.
I like the article, for example: So is the euro itself in danger? In a word, yes. If European leaders don’t start acting much more forcefully, providing Greece with enough help to avoid the worst, a chain reaction that starts with a Greek default and ends up wreaking much wider havoc looks all too possible. Meanwhile, what are the lessons for the rest of us? The deficit hawks are already trying to appropriate the European crisis, presenting it as an object lesson in the evils of government red ink. What the crisis really demonstrates, however, is the dangers of putting yourself in a policy straitjacket. When they joined the euro, the governments of Greece, Portugal and Spain denied themselves the ability to do some bad things, like printing too much money; but they also denied themselves the ability to respond flexibly to events. And when crisis strikes, governments need to be able to act. That’s what the architects of the euro forgot — and the rest of us need to remember. .. although I don't think simply giving "help" is anywhere near the answer. I do believe the individual EU countries should be able to be more fiscally flexible, but I don't think Krugman is willing to actually say what this means: either autonomy (i.e. quit the EU) or greater union (i.e. greater political integration.) -- Owen
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