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How to solve the Euro problem? It's easy! Warren Mosler explains it all!

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Helsworth
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How to solve the Euro problem? It's easy! Warren Mosler explains it all!


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31.03.2013 17:30
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Roger Mexico
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RE: How to solve the Euro problem? It's easy! Warren Mosler explains it all!

I don't live in Europe, so my perspective isn't especially informed, but it seems to me that what the EU needs is a continental fiscal policy.

If the US was just a currency union and free trade zone with no central planning we'd probably be in the same boat. New York would be Germany, and Alabama/Oregon/etc would be Greece/Ireland/etc. Federal welfare and subsidy policies are effectively a system of cash transfers from more productive to less productive states, which prevents trade imbalances from resulting in a cycle of debt and bailouts. (And military spending has long functioned as a corporatist mechanism for federally coordinated investment--part of the reason that even Republican deficit hawks oppose defense cuts is that their states depend on the jobs created by military consumption.)

I recently moved out of Oregon, which is about to see a bunch of small towns entirely abandoned when their fixed-term federal subsidies expire. (They're old lumber-mill towns that have been unable to run their city governments on local funds since the timber boom ended in the 1970's--the whole state has been sitting at 10-12% unemployment since at least 1990, and probably hasn't seen the same kind of growth as the east coast since the 50's, if ever.) If that kind of thing was always done through loans and post hoc bailouts in response to crises instead of preemptive redistribution to prevent crises, things would get pretty chaotic.

In some ways the EU reminds me of the US prior to the Constitution. Among the events that inspired the Constitution was a debtors' revolt (Shay's Rebellion), which seems to be the ultimate "nuclear option" available to the indebted EU states. Greece could pull out of the Euro and default on its debts, but I doubt France and Germany would be inclined to just sit back and let that happen.

01.04.2013 19:29
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Helsworth
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RE: How to solve the Euro problem? It's easy! Warren Mosler explains it all!

The EU doesn't need a unified fiscal policy in order to get out of this crisis. It needs to have common european banks. That means that the ECB should guarantee the deposits of europeans. It's absurd to have a common currency, without common banks. In essence, the EU needs its own FDIC.


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01.04.2013 20:01
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