Thursday, November 3, 2011
It doesn't matter if the whole world is insolvent...
It doesn't matter if the whole (currency-using) world is insolvent. As long as liquidity is supplied by governments (central banks and fiscal authorities) then the whole thing can be sustained like that indefinitely. You'll have a generation or more of sub-par growth and expanding poverty, but there won't be a financial collapse and some people will actually do very well as the public sector divests itself of valuable assets for pennies on the dollar.
While the financial situation remains quite stable, the political situation becomes very volatile and dangerous.
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The Europeans from Greece, Ireland and Spain say they are much better off since they joined the Euro. Even under austerity and the recent chaos. What held back their economies when they had their own currencies? I was thinking the benefits of the Euro have more to do with free borders and movement of people and goods. They say credit is cheaper for consumers now. It is odd.
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