Paul Krugman: Scattered notes on the euro

„‚What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened. If you have been unemployed for five years, with no prospect of a job, it makes no difference whether the money you do not get is denominated in euros, or in drachma.‘ […]

It’s becoming hard to see any path that doesn’t lead to Grexit; it is also, although this is still something few want to accept, becoming increasingly obvious that Grexit is Greece’s best hope. Otherwise, where is recovery ever supposed to come from? Even with massive debt relief, Greece will be forced to run huge structural primary surpluses — that is, pursue tax and spending policies that would produce huge surpluses if the economy were anywhere near full employment — and in so doing keep its economy depressed for the foreseeable future.

Or to put it a bit differently, what would be a straightforward policy problem if Greece had its own currency becomes an almost insoluble mess because it doesn’t. […]

Now, I get interesting mail when I say things like this — much of it along the lines of ‚I can’t believe that a far-left-wing type like you got a Nobel‘. Because a lot of people seem to believe that real economists believe in sound money, preferably gold, and that only socialists believe that there can ever be any advantages to currency depreciation.

Socialists, that is, like Milton Friedman.“


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