Hacker News Reader

Comment by jscore | Hacker News Reader

I understand your argument that "it makes everyone aware that changes in economic policy are needed. ", however isn't the Euro basically a straightjacket preventing each individual country from setting its own monetary policy?

For example, the Central Bank of Ireland can't set its own interest rates, and basically needs to follow whatever Germany decides. Or Greece can't devalue its currency to attract more capital, etc.

I'm far from the expert but this has been my understanding so far.

View on HN

Yes. Good thing too, because monetarism worked very badly and led to continual economic instability prior to the ERM. Multiple currencies are an expensive inconvenience and an impediment to trade. Comversion fees are also a stealth tax.

How did we ever make it to 2010AD?

Through numerous wars, periods of famine, and economic hardships?

I didn't get the feeling that the parent to your post was suggesting that the EuroZone was the only way to possibly survive.

It's not impossible, just expensive and annoying for business or frequent travelers. When I was younger European currencies used to go up and down like yo-yos.

> isn't the Euro basically a straightjacket preventing each individual country from setting its own monetary policy?

It's generally a Good Thing for the people in the Eurozone that their governments can't impoverish them by printing money.

These countries are facing cuts to government spending and wages while increasing taxes. This causes debt to be more of a burden. Devaluing the currency would make paying for these things easier. Devaluing too much would cause problems as well.

So your advocating stealing from those who are responsible (savers) and giving money to those who are reckless (debtors). Also, when inflation happens it normally hurts the middle class and lower class much more than upper do the lower classes not owning assets - stock/land etc.

People who hold cash != savers.

Plenty of people with significant equity in their home still have negative cash positions for most of their lives regardless of the amount of money they save. On the other hand people that short stock can have significant cash holdings without saving anything.

To the extent that home has intrinsic value, the homeowner is saving. To the extent it gains value against the dollar it transfers wealth from non-homeowners. In fact this is the express goal of the current Fed policy.

Ireland faces a situation of genuine societal collapse. The unemployment, lack of social services, etc. affect everyone regardless of who is a saver or not. I'm advocating that in a dire situation the best course of action be taken. In Ireland's case that would be devaluing the currency. There is too much public debt and raising taxes, lowering pay are not viable solutions.

The monetary policy, yes. But taxes are different for example.

Reply on news.ycombinator.com