Showing posts with label Euro. Show all posts
Showing posts with label Euro. Show all posts

Tuesday, July 31, 2012

Euro Salvation?

Awhile back, Martin Wolf in the Financial Times wrote that what Europe needs is a solution that is both politically feasible and economically workable. Phillip Bagus demurs by explaining why it might be best to simply let the Euro go.

Bagus concludes:
Intellectual honesty requires us to admit that there are important costs to exiting the euro, such as legal problems or the disentangling of the ECB. However, these costs can be mitigated by reforms or clever handling. Some of the alleged costs are actually benefits from the point of liberty, such as political costs or liberating capital flows. Indeed, other costs may be seen as an opportunity, such as a banking crisis that is used to reform the financial system and finally put it on a sound basis. In any case, these costs have to be compared with the enormous benefits of exiting the system, consisting in the possible implosion of the Eurosystem. Exiting the euro implies ending being part of an inflationary, self-destructing monetary system with growing welfare states, falling competitiveness, bailouts, subsidies, transfers, moral hazard, conflicts between nations, centralization, and in general a loss of liberty.

Friday, May 18, 2012

Latham on Austerity and Its Critics

Kyle Latham
Grove City College Economics major Kyle Lathamm, who is graduating tomorrow, has written the most recent essay published by Grove City College's Center for Vision and Values. Latham's work, "Britain, Austerity, and Lessons of Economic History" is both insightful on its own merits and also instructive of the sort of economics education one can receive here at GCC.

Monday, January 9, 2012

Philipp Bagus on RT's Capital Account

Last Friday, Philipp Bagus, who will be a keynote lecturer at this year's Austrian Student Scholars Conference, was a guest on the Russia Today Network's Capital Account, hosted by Lauren Lyster. He discussed the current economic problems in Europe and how to exit from the Euro. You can watch the whole show below. His segment starts at 2:55.


Friday, August 5, 2011

There's Counterfeiting and Then There's COUNTERFEITING

While away on a recent trip I perused the Financial Times during my flight. A letter to the editor struck me:
Sir, As the European Central Bank and the European Commission fight to save the euro, on a rare visit to a McDonald’s in Nîmes, France, this week I thought for a moment that the fight was lost. When I paid with a €50 ($70, £44) note for a Big Mac, the lady at the till promptly started to tear the note in two. In response to my worried inquiry as to what was amiss, I received the reassuring answer that tearing €50 notes was now company policy, at least in this region, to ensure that they were genuine. The metal security strip resists the action.

While my mind was set at rest as regards the immediate survival of the euro, it does suggest that our currency is not perhaps held in the same regard as the US dollar, which I believe is legally protected from such systematic attack.

While it is, perhaps, charming to think that the the U.S. dollar is legally protected from such physical abuse, it's value is surely not protected.

Counterfeiting works to destroy a money's purchasing power by increasing its quantity. As counterfeiters print phoney dollars and spend them, the demand for goods increases, which leads to higher prices and reduces the quantity of goods each dollar can purchase. This can be a real problem if counterfeiting occurs on a large scale.

How big is the problem? The Secret Service estimated that at the end of 2005 $61 million counterfeit dollars were being used and held throughout the world. It is important to remember, however, that the negative consequences of creating money out of thin air occurs no matter who is doing the counterfeiting. $61 million is a lot of money, but it is clear that private counterfeiters are mere pikers compared to the Federal Reserve, our central money creating machine. During 2005 alone the Fed increased the money supply by $107 billion (with a 'b')!

Now you tell me, who has done more to undermine the purchasing power of the dollar: private criminals increasing the money supply by $61 million or the Federal Reserve who increased the money supply by over TEN TIMES that amount in one year?!? In case you are unsure, you might be impressed that the Fed has increased the money supply by $2.5 TRILLION since 2005!!!