Saturday, December 31, 2011

Sounds familiar

Here is an interesting quote from a long article that analyzes the problems of the eurozone and insists that it was founded on a lie and that politicians do not understand or will not admit what is happening:
Nevertheless, not one of the currency union's founding fathers will admit that it was poorly designed. The currency union brought together countries that weren't compatible economically simply because it was opportune politically. It replaced the currency exchange rate, the standard mechanism for balancing out differences between national economies, with the principle of hope. Now, the common currency was supposed to make the economies align themselves with each other, practically automatically.
In reality, however, the differences between the economies of the euro-zone countries became larger rather than smaller. The so-called "Club Med" countries benefited from the low common interest rate. They lived beyond their means and they consumed more than they could afford -- to the detriment of their already weak ability to compete.
A country with a flagging economy normally devalues its currency. Doing so makes its goods cheaper on the global market, allowing it to increase exports and cut back on its deficit. But, in a currency union, there isn't an exchange rate that can serve as a compensatory mechanism. If a country doesn't have a sound economy, the tensions only increase.
Yes, and your point is? I hear readers ask. Well the point is that the article appeared in Der Spiegel. Worth reading.

2 comments:

  1. They are only stating what has been known by the euro-sceptics since the inception of the euro and to the sane and rational since the start of the euro crisis. Most Western nations have deep economic and social problems that have come about because of inept government and social democrat ideologies that have put social engineering and social projects ahead of economic prudence most of which have been wasted. All civilisations have a cycle they rise and then they fall. History teaches those who choose to look what pointers to look out for that will indicate whether a civilisation is on the rise or in decline and every thing that has occurred in the last century tells us the the decline has started and is now accelerating.The euro crisis is a symptom of the fall cycle and may well be the catalyst that brings about the final demise. The US may hang on for a few more decades but a few more Obamas and their fate is sealed.

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  2. And who takes over, Antisthenes? Please don't say China because that country's problems are greater than the West's.

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