Wednesday, November 30, 2011

6 Ideas for the Ash Heap of History

From Tyler Cowen, at the new special issue of Foreign Policy, "100 Top Global Thinkers 2011":
4. The eurozone is for pretty much everyone in Europe. By now, it should be obvious that a 17-nation eurozone was a bad idea. The only questions left are how many countries do not belong and how painful will it be to push out those that shouldn't be there. Whether or not you think the current patchwork bailouts will work (probably not, see No. 5 below), just what, precisely, are those bailouts fighting to defend? No one knows anymore. The peripheral countries, like Greece and Portugal, used to think that if they suffered through a bit of deflation from eurozone membership, they still could benefit from the lower borrowing rates enjoyed by stronger economies like Germany. Now they're getting the deflationary pressures, stronger than ever before, but without the low borrowing rates. So what's in it for them to remain? What's in it for Germany and Finland and the Netherlands? It's hard to see.