Nick Rowe

Copio entero un post de Nick Rowe. Lo hago porque si quieren pueden traducirlo con el traductor que hay a la derecha (sonde pone translate). Es que es muy bueno.

Kill the Euro now?

It's an ugly thing to say, especially since the end of the Euro will be an ugly thing. But it needs to be said.

Back in June, Canada came under pressure to help the Eurozone survive, and came under criticism for failing to help (or failing to help enough). Canada's position was defensible on many levels. At its simplest, the Eurozone needs more Euros, not more Loonies; and the Eurozone can print Euros, while Canada can only print Loonies. "Print 'em yourselves" makes sense as a Canadian response, both technically and morally.

But ought we try to help the Euro survive, even if we could, and the Eurozoners (I refuse to say "Europeans") themselves couldn't?

The Economist's Greg Ip (HT Mark Thoma) relays the most optimistic scenario for the Euro, from Montreal's Bank Credit Analyst. Short version: Greece leaves, and the rest are so scared they form a fiscal and banking union.

This scenario is what I called a "shotgun wedding". If the people of Europe want an ever closer union, or if an ever closer union evolves naturally out of a sense of common identity, that's OK. But being duped and forced into marriage because the PIIGS are all pregnant and Germany is the father, though all of them thought they were just holding hands and nobody told them that sharing a common currency was quite such an intimate relationship -- is another thing entirely. The EU's legitimacy and governability, already shaky, would suffer.

If that's the most optimistic scenario for the survival of the Euro, do we want the Euro to survive?

An alternative "Mr Micawber" scenario is for the Eurozone to struggle along, slowly getting worse, with the ECB taking just enough action (like again today, Mish tells me) when things look really bad to preserve its own existence, but not enough to create a recovery, and everyone hoping that something will turn up. That's what's happening now, though I don't know how long it can last. I'm surprised it has lasted this long, but Paul Krugman says that Rudi Dornbusch said that crises are always like this:

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that’s sort of exactly the Mexican story. It took forever and then it took a night."

If it's going to happen some night, wouldn't it be better if it happened tonight? Then we could all start rebuilding now. And by "all" I don't just mean the Eurozone "periphery". Rebecca Wilder tells me that the Eurozone core is hurting too. And my guess is that there is an ongoing spillover into non-Euro countries as well. Yes, we non-Euro countries have our own central banks and monetary policies, and are responsible for our own Aggregate Demand. But if you don't know whether and when one of your major trading partners in goods and financial markets is going to go belly-up, there will be Aggregate Supply side effects too. AD matters a lot, but it isn't everything.

So, do we really want the Euro to survive another night? Even though its death will be ugly, and hurt a lot of people.

Or have I gone Leninist?

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