The Euro: Why it was dumb, is dumb, and will always be dumb
Back in high school, I competed in a national economics challenge. At one point, I was asked by judges whether I thought the Euro was a good idea. I told them I thought it was a terrible idea, because it meant tying completely different kinds of economies together with the same monetary policy. This works only if you can enforce absolute fiscal responsibility, which is like saying "temporary teachers can be effective, as long as the class behaves". Yeah...
The ECB and EU never really put a whole lot of muscle behind auditing and enforcing the regulations about fiscal policy, because everything was going well. And I have to admit that there have been times in the last decade where I seriously questioned whether I was wrong, whether I should support the common currency (in Europe, I never once considered supporting it for the UK - keep it the hell off our island). Ireland was doing incredibly well, Spain, Greece and Portugal were all improving, and the common currency seemed to be working. Reduced barriers to entry I figured were a good thing, and the rigorousness of the inflation-targeting ECB would actually be a good thing for a lot of traditionally high-inflation economies. Though this was sad news for all the Italians who did not get to be billionaires anymore.
But my initial presumption turned out to be correct, it just took a big enough swing in the business cycle (and some seriously stupid regulation on our side of the pond - here's looking at you Bill Clinton, Fannie and Freddie) to show that inflation-targeting while a bubble is bursting is all well and good... if you are not running massive debt. Whoops.
I just don't see how the Euro can survive. It makes no sense. And in a bigger sense, I am not convinced the EU should survive in its current form. Brussels is pretty goddamn useless, unless you think arbitrary rules without representation are useful.
And now, the EU is going after London as the financial center of the EU, because it is not within the Eurozone. They are trying to pass a regulation which makes it impossible for clearing houses (central counter-parties which make modern financial markets possible) to be based in non-Euro countries if they are handling over 5% of a market's transactions. For the first time a member state has had to sue the ECB.
All I can say? The Euro was a dumb idea. I am very happy the pound stands strong (ok.. not strong... but a hell of a lot better than the Euro). The Euro should die, Germany should introduce it's Thaler (alternative common currency managed by Germany) and periphery countries should manage their own monetary policy unless they can really (and keeping only one set of books - big challenge though that will be for the Mediterranean nations) keep their fiscal policy in line. Of course, I believe all this should happen slowly, and safely, not in the next two weeks or possibly even two years.
To sum it all up...
Fuck you France.
The ECB and EU never really put a whole lot of muscle behind auditing and enforcing the regulations about fiscal policy, because everything was going well. And I have to admit that there have been times in the last decade where I seriously questioned whether I was wrong, whether I should support the common currency (in Europe, I never once considered supporting it for the UK - keep it the hell off our island). Ireland was doing incredibly well, Spain, Greece and Portugal were all improving, and the common currency seemed to be working. Reduced barriers to entry I figured were a good thing, and the rigorousness of the inflation-targeting ECB would actually be a good thing for a lot of traditionally high-inflation economies. Though this was sad news for all the Italians who did not get to be billionaires anymore.
But my initial presumption turned out to be correct, it just took a big enough swing in the business cycle (and some seriously stupid regulation on our side of the pond - here's looking at you Bill Clinton, Fannie and Freddie) to show that inflation-targeting while a bubble is bursting is all well and good... if you are not running massive debt. Whoops.
I just don't see how the Euro can survive. It makes no sense. And in a bigger sense, I am not convinced the EU should survive in its current form. Brussels is pretty goddamn useless, unless you think arbitrary rules without representation are useful.
And now, the EU is going after London as the financial center of the EU, because it is not within the Eurozone. They are trying to pass a regulation which makes it impossible for clearing houses (central counter-parties which make modern financial markets possible) to be based in non-Euro countries if they are handling over 5% of a market's transactions. For the first time a member state has had to sue the ECB.
All I can say? The Euro was a dumb idea. I am very happy the pound stands strong (ok.. not strong... but a hell of a lot better than the Euro). The Euro should die, Germany should introduce it's Thaler (alternative common currency managed by Germany) and periphery countries should manage their own monetary policy unless they can really (and keeping only one set of books - big challenge though that will be for the Mediterranean nations) keep their fiscal policy in line. Of course, I believe all this should happen slowly, and safely, not in the next two weeks or possibly even two years.
To sum it all up...
Fuck you France.
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