Thursday, December 22, 2011

What's wrong with the euro

How Bad Ideas Worsen Europe’s Debt Meltdown: John H. Cochrane

"...  The euro’s fatal flaw then wasn’t to unite areas with differing levels and types of development under one currency. After all, Mississippi and Manhattan use the same money. Nor was it to deprive governments of the ephemeral pleasures of devaluation. Nor was it to envision a currency union without fiscal union. Banking misregulation was the euro’s fatal flaw. Sovereign debt, which can always avoid explicit default when countries print money, doesn’t remain risk-free in a currency union. Yet banking regulators and ECB rules continue to pretend otherwise..." More

Comment:  Indeed, the crisis is self-made, unnecessary and the result of bad thinking.

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