Gbelle wrote:The root of all problems is inflation. the optimal interest rate is not designed for greece's economy. The sooner greece gets it's sovereignty back the quicker it can target inflation which is an extension of unemployment.
Reintroducing the Drachma will only increase inflation.
Well using the impossible trinity principle you can have a fixed exhange rate, international capital mobility, or control of monetary policy. Greece does not have the latter, and international capital mobility is like trying to fight against the law of gravity when it comes to the euro.
moving to the drachma may cause some inflation but Greece can control and regulate it. Admitedly it would take 3 months before the monetary policies of greece to take into effect, this is usually because it's indirect, and there's all sorts of lags to take into account.
Leviwosc wrote: ILuvEire wrote:
Leviwosc wrote:Stop being so easily insulted, it's a very annoying habit. Are all Southern Europeans this emotional??
Stop associating everything you don't like with the nationality of the person you're talking to, it's a very annoying habit. Are all Northern Europeans this racist?
Since when is Southern European a race? Since when do races among humans exist!? As far as I've learnt there's only one race for the primate species homo; it's homo sapiens!
Actually eurogenes has researched and found a gap, or a barrier between the two groups, many northern europeans share SNP's that the southern europeans do possess. you can see the gap between spanish and italians to Germans in this graph
Australia has a two speed economy. Western Australia and Queensland (mining) are growing at a much faster rate than NSW and Victoria (services), and are also more productive. I don't think the solution needs to require anything about the Euro. In my opinion, Greece needs to default, and it's going to happen sooner or later.
while that is a fair point, there is a significant difference between Australia and Europe.
For starters Australians only have one national language, and thus the free movement of labour is easier because there isn't culture and language barriers. Not to mention that most states share the same laws, etc.
Europe is different in the respect I stated. While mundell's works on the optimum currency area was used for the argument of a euro, I simply refute it, because it goes against the principle and purpose of what the euro is now.
Mundell stated that if a number of regional economies do not respond in the way to external shock, then they should have their own currency and adopt floating exchange rates. These could act as a buffer and help keep various regional economies stable. How do we know whether there is sufficient homogenity for a common currency?
Mundell proposed five criterias
- Workers Workers must be ready to move across the region in search of jobs
- There should be freedom of movement of capital
- The economies must have similar wants and needs
- The economy should be diversified
- and there should be a fiscal system that transfers money from one region to another when it is needed.
on the basis of the external shocks, and the first principle and third principle I don't think half the european nations should be in the euro. Maybe if it was Germany, the low countries, and Austria. but the eurozone is too large for it to be truly effective.