Ollie Kamm on the euro

How wonderful it is, what a joyous and irreversible thing.

What grates though is that he doesn\’t even mention the most important point.

A single currency requires a single interest rate. And a large number of the problems places are facing at the moment have been caused by that very single interest rate.

5 thoughts on “Ollie Kamm on the euro”

  1. I like Oliver Kamm’s blog, but his idea of what constitutes an argument often seems perverse.

    Expect something like, “Well you may think a single exchange rate causes significant problems, but in 1983 against all available evidence you said ‘cat juggling does not harm the cats’.”

  2. What do you mean by ‘a single interest rate’? Greek bonds have a higher interest rate than German bonds, for example, even though both are denominated in Euros.

  3. He also doesn’t mention the need for an “internal devaluation” in Greece; that is, a reduction in the actual money value of wages, pensions and benefits.
    This is esential if Greece is to compete within the euro-zone.
    Watch europhiles heads hurt as they realise Brussels has ordered the wages of the poor to be reduced and the value of rich Greeks’ saving to increase.
    Check out the “A Fistful of Euros” site if you doubt it.

  4. The value of wages in Greece is not going to fall because of the euro, it is going to fall because they are higher than productivity. If devaluation increased real wages then Zimbabwe would be the world’s richest country.

  5. Bear in mind it’s not the “purcvhasing power” of wages that must fall, but the money value.
    With the drachma, a devaluation reduced the purchasing power of wages without reducing the nominal value, and sent a signal to policy-makers that something was wrong.
    Service provided for free by the market.
    Now, the policy-makers have to decide specifically to do the deed and force down wages.
    And they will do it – with or without Brussels ordering them to do so. Because leaving the euro would befar more hurtful to their pride.

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