Angela Merkel warned earlier this week that Germany will bail out the rest of the EU over her dead body. A Citadel CEO and University of Chicago economist argue today in the N.Y. Times that the solution to the Eurozone problem is not for Greece to abandon the Euro, but for Germany to do so.
I've often confessed here that monetary theory confuses me. People act as though currency were a magic wand. I see it as a kind of promise, and therefore something that's incompatible, long-term, with lying. The proposal for Germany to re-introduce the Deutschmark at least has the advantage of uniting words and reality in the combination we often describe as "honesty."
3 comments:
Well said. This is a view that I gather is considered hopelessly naive by monetary theorists, but I agree entirely.
Chancellor Merkel may be on life support. German Finance Minister Wolfgang Schäuble is quoted in The Wall Street JOurnal today that Germany would agree to absorb everyone else's debts on a promise of tighter fiscal union.
Eric Hines
The value of money is the trust we have in the amount of goods and services we will receive for it. We know politicians are typically liars, but if we trust they won't do too much damage the money's value doesn't fall. Much. But here they can do huge damage and show an inclination to do it.
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