Commentaries (some of them cheeky or provocative) on economic topics by Ralph Musgrave. This site is dedicated to Abba Lerner. I disagree with several claims made by Lerner, and made by his intellectual descendants, that is advocates of Modern Monetary Theory (MMT). But I regard MMT on balance as being a breath of fresh air for economics.
Monday, 20 December 2010
Monetary union requires political union?
I’m tired of that cliché. Hong Kong and various mid American countries use the US dollar or have their currencies pegged to the dollar. Same went for Argentina between 1991 and 2002. To call these countries a political union is obvious nonsense.
As this article in the Financial Times suggests, giving peripheral European countries an easier escape from the Euro might be a better option than forcing them to stay in and endure years of austerity.
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Why was Argentina a monetary union? Did US care about Argentina or anyhow acknowledged their union?
ReplyDeleteWell, to maintain the sovereignty to manage the market, it does. Or at least fiscal union. For all practical purposes, one currency, one fiscal policy works best afaik.
ReplyDeleteArgentina came into a badass recession because of the peg. Hong Kong maintains high net exports afaik and when you do that, then you can have a peg and not care.
My opinion of the Euro is that it's garbage. Fiscal union isn't politically viable and the decisionmaking in the EU is way too slow due to all nations using all their power to strengthen themselves and trying to pass the cost to others.
There are some ideas that could work, but it's late and they won't go into effect in time, unless the EU leaders somehow get their minds straight and start thinking like they represent the same entity, not 27 different ones.