Tuesday, July 24, 2012

Who First Warned About The Euro? The WSJ Weighs-In

Who are the five? Oh, my goodness it is Bell [now Kelton], Mosler, Forstater, Wray and Godley.
Read it at Economonitor | Great Lead Forward
Who First Warned About The Euro? The WSJ Weighs-In
by L. Randall Wray

How sweet it is. Good to see recognition where recognition is due.

35 comments:

mike norman said...

This is outstanding!! Bravo!!

Major_Freedom said...

Wynne Godley wrote:

[I]f a government stops having its own currency, it doesn’t just give up “control over monetary policy” as normally understood; its spending powers also become constrained in an entirely new way. If a government does not have its own central bank on which it can draw cheques freely, its expenditures can be financed only by borrowing in the open market in competition with businesses, and this may prove excessively expensive or even impossible, particularly under “conditions of extreme emergency.”...[I]f Europe is not to have a full-scale budget of its own under the new arrangements it will still have, by default, a fiscal stance of its own made up of the individual budgets of component states. The danger, then, is that the budgetary restraint to which governments are individually committed will impart a disinflationary bias that locks Europe as a whole into a depression it is powerless to lift.

Doesn't the logic of this position tell us that the same problems will occur if individual states within the US do not have the legal authority to issue their own currencies? And supposing each state did have the legal authority to issue its own currency, and applying the same logic once more, does it not tell us that the same problems will occur if individual cities within a state do not have the legal authority to issue their own currencies? And supposing that each city did have the legal authority to issue its own currency, and applying the same logic yet again, does it not tell us that the same problems will occur if each individual person within a city does not have the legal authority to issue their own currency?

If the solution to problems of legally enforced central banking that creates a legally enforced society of monopoly currency issuers, and non-issuing currency users, is to decentralize the monopolies in the direction towards equalization of legally authorized currency issuers and legally mandated currency users, then doesn't it stand to reason that the optimal currency system is one in which there is in fact equalization of legally authorized currency issuers and currency users? In other words, a free market in money production at the individual level? Let individuals issue debts in whatever commodity other individuals are willing to pay for it, and let us find out which commodities become dominant?

Major_Freedom said...

L. Randall Wray wrote:

As currently designed, the EMU will have a central bank (the ECB) but it will not have any fiscal branch. This would be much like a US which operated with a Fed, but with only individual state treasuries. It will be as if each EMU member country were to attempt to operate fiscal policy in a foreign currency; deficit spending will require borrowing in that foreign currency according to the dictates of private markets.

This quote isn't so much as a warning of the Euro as it is a description of it.

Major_Freedom said...

Mathew Forstater wrote:

Under the EMU, if investors are at all hesitant about any one member’s debt, they can buy another member’s debt without incurring currency risk, since there is no exchange rate variability among the currencies of member countries. Because member nations now are dependent on investors for funding their expenditure, failure to attract investors results in an inability to spend. Furthermore, should a member’s revenues fail to keep pace with expenditures due to an economic slowdown, investors will likely demand a budget that is balanced, most likely through spending cuts. In other words, market forces can demand pro-cyclical fiscal policy during a recession, compounding recessionary influences.

Again, using Mathew Forstater's logic, the same argument leads to abolishing country level central banking, and adopting individual "central" banking. That way, if an individual is spending more than they earn, such that the private market lends less to them, then they too will have to reduce their spending, thus contributing to a decline of their standard of living. Is this so wrong? For an individual who borrowed and spent too much, to change their lifestyle and live within their means? Should we worry when individuals who borrowed and spent too much relative to the collective opinions of every other individual in society who can potentially lend to that person, that maybe the problem isn't his inability to print money for himself, but that he is making the wrong choices that should be rectified, which will result in him experiencing short term pain and decline in his standard of living?

If MMTers can accept that an individual who lives beyond his means, and borrows and spends too much such that every single potential lender refuses to lend more to them, should be dealt with by lending less to him, and thus letting him experience the consequences of his past profligate actions, so that his standard of living comes back down, so that he again lives within his means, then why not accept the same thing for two people? Or three people? Why not accept that should lots of people live beyond their means, should they borrow and spend too much, such that others are not as willing to lend to them as before, that they experience a reduction in their standard of living as well, that they again live within their means?

If it is wrong to print and spend money for the sake of sustaining a single individual's profligate lifestyle, so that he can go on borrowing and spending too much, the costs of which are of course externalized onto others who are legally obligated to accept that same currency for tax purposes but who live within their means, then it is also wrong to print and spend money for the sake of sustaining more than one individual's profligate lifestyle, so that they can go on borrowing and spending too much, the (greater) costs of which are also externalized on others who are legally obligated to accept that same currency for tax purposes but who live within their means.

Major_Freedom said...

Stephanie Bell wrote:

Countries that wish to compete for benchmark status, or to improve the terms on which they borrow, will have an incentive to reduce fiscal deficits or strive for budget surpluses. In countries where this becomes the overriding policy objective, we should not be surprised to find relatively little attention paid to the stabilization of output and employment. In contrast, countries that attempt to eschew the principles of “sound” finance may find that they are unable to run large, countercyclical deficits, as lenders refuse to provide sufficient credit on desirable terms. Until something is done to enable member states to avert these financial constraints (e.g., political union and the establishment of a federal [EU] budget or the establishment of a new lending institution, designed to aid member states in pursuing a broad set of policy objectives), the prospects for stabilization in the Eurozone appear grim.

Again, using Stephanie Bell's logic, if the constraints of using a foreign currency must be lifted for countries by having legally authorized country issued currencies, which by the way creates a second class of non-country individuals mandated into accepting it for tax purposes and thus only moves the problem to another level of privilege and problems for the non-privileged, then so should the constraints of using a foreign currency be lifted for individuals as well, by having legally authorized individual person issued currencies. That is the only way of abolishing the problems being cited by MMTers as a reason for why countries should have monetary sovereignty. Merely shifting the monopoly from a supra-state authority, to a state authority instead, doesn't solve the alleged problem of borrowing and lending in legally imposed "foreign" produced currencies.

Nothing of what I said should be misconstrued as an advocacy for 300 million different physical currencies in the US, only that the "problems" being referenced by MMTers aren't actually problems of currency, but of bad behavior on the part of certain individuals. What state authority monopoly currency does is reward bad behaving states who borrow and spend too much, the costs of which are incurred by those not in the state but are forced to use the state's currency for taxation purposes.

Isn't a more fair and just world one in which INDIVIDUALS incur the costs of their bad behavior? If individuals borrow and spend too much, that they, and those who lent them money, incur the costs of this bad behavior, rather than having those costs externalized on those who are living within their means and not lending to bad borrowers?

MMT logic, despite it's seeming value free accounting, seems to keep attracting and being an excuse for nationalist socialism in the area of money production. That the state, but nobody else, should be "unrestrained" in the area of borrowing and spending, by having a force backed monopoly over currency production, so that they can externalize the costs of their bad behavior onto those forced to accept the currency for tax purposes?

Tom Hickey said...

Major Freedom, according to the US Constitution, art 1, sec. 10, the state are permitted to issue bullion coin. Isn't that what you advocate? It's already perfectly legal in the US.

Major_Freedom said...

And Austrians already explained decades before MMTers about the problem of fiat currency regimes, Euro style or US style.

MMTers can claim only a superficial victory for the Euro, because the main problem is monopoly of currency issuance.

I can claim the US dollar system a disaster on the same basis by saying that because there are states, cities and individual people who are going bankrupt in not being able to pay back their debt denominated in a "foreign" currency, they too are dragging down "nominal spending" in the country and bringing about a correction, which most economists misleadingly call a "recession."

Isn't the US dollar system of individuals not having the legal authority to print dollars, of those who borrow and spend too much, who then go bankrupt, isn't this "pro-cyclical" in individual "fiscal policy", which "compounds recession influences"?

Or is it only a problem when the state is constrained in its spending? Then we're supposed to worry about the poor poor state and those they give money to, living within their means and reducing their spending down to their income?

Why is it that if 40 million people go bankrupt and lose their homes, they shouldn't be freed from the chains of the "foreign" US dollar system, but if those in control of states, like in Spain, Greece, and Italy, if they go bankrupt, they should be freed from the chains of the "foreign" Euro system?

Where is the logical consistency in MMT?

Major_Freedom said...

Tom Hickey:

Major Freedom, according to the US Constitution, art 1, sec. 10, the state are permitted to issue bullion coin. Isn't that what you advocate? It's already perfectly legal in the US.

The "constitution" contract died with the deaths of its signers. It is not applicable to anyone alive today.

Citing country law is just begging the question. I am challenging the country law at its core. I am not trying to force the constitution on you or anyone else. It is a piece of paper.

By what right did the signers of the constitution have to result in their contract being imposed on the unborn trillions of years into the future?

Nobody has the right to sign contracts on behalf of the unborn. The constitution has no authority. It is a myth.

Even if the constitution was written in a way that I agreed with top to bottom, I would still hold it has ZERO authority over myself, or anyone else.

Major_Freedom said...

Tom Hickey:

To be clear, the constitution does not grant the feds any explicit authority to monopolize currency through a fiat central bank.

Yes, the constitution says the individual states can regulate the currency, but it says only gold and silver shall be legal tender. I am against mandatory currency, gold or paper.

You need to stop straw manning me as someone who wants the state to IMPOSE gold and silver as money by law. I do not want a mandatory gold standard. I want monetary competition at the individual level. Let the best money win fairly, in accordance with respect for property rights.

Tom Hickey said...

Major Freedom, I guess you'll have find some playmates that agree with you and start your own world somewhere. Maybe you could hook up with Peter Thiel and his Libertarian Island project.

Major_Freedom said...

Tom Hickey:

Major Freedom, I guess you'll have find some playmates that agree with you and start your own world somewhere. Maybe you could hook up with Peter Thiel and his Libertarian Island project.

I'm already a financier. The first full time settlement won't be available until at least 7 years from now, but that is the expected start date, barring any major snags.

In the meantime however, I'll remain in the playground with you children.

Anonymous said...

Major_Freedom: but Europeans have almost no collective control over this body; it's officials electing officials over in the ECB. One of the reasons currency sovereignty is ever worth having is to better exercise democracy, rather than some kind of aristocracy twice removed from the citizenry.

We can argue about what size is optimal for democratic bodies, and there is no shortage of debate to be had there, but I suppose an issuing body can easily cover a populace of arbitrary size if it's willing to adopt a job guarantee program. If you get right down to it, there's scarcely any other reason one would want to adopt a fiat currency in the first place, if we're subsuming the role of macroeconomic stabilization into the JG.

Anonymous said...

Major Freedom, you are talking about some nice ideas. Anarcho-capitalist ideas are really nice, just like utopian communist ideas are. I am not saying anything against It or for It. Let's just first make the best with what we have. I am sure you agree that government is not going to disappear in next 5 years or in next 25 years. Neither are we going to win if we lobby for communism. Don't you think life is full of compromises? Let's make the best with what we have. How about full employment and price stability? Our other choice is high unemployment, sluggish ecomomic growth and still no communism or anarcho-capitalism. You don't really believe that your eyes are going to see life without government, do you? That's why I'm saying that you are talking about fairy tales, not because I want to insult you. How about having Keynesian golden age of capitalism all over again for a start? What do you say?

Dan Kervick said...

Doesn't the logic of this position tell us that the same problems will occur if individual states within the US do not have the legal authority to issue their own currencies?

No. As the Godley quote says, part of the problem in Europe is that it has "no full-scale budget of its own", but instead "by default, a fiscal stance of its own made up of the individual budgets of component states."

The problem isn't purely that Europe created a centralized European monetary authority, but that it did so without creating a centralized European fiscal authority. There is no European central government that can spend money into the national economies by drawing on the European monetary authority directly, or even by carrying out fiscal transfers.

The US has a central government that can and does ameliorate the economic imbalances among the US states via fiscal policy. The recent version of that government has neglected some of its responsibilities in that area, and made stupid policy by allowing states to endure contractionary budget crunches, but the federal economic infrastructure that was already in place has helped the US to avoid some of the European problems.

Dan Kervick said...

Why not accept that should lots of people live beyond their means, should they borrow and spend too much, such that others are not as willing to lend to them as before, that they experience a reduction in their standard of living as well, that they again live within their means?

Fallacy of composition. If one man burns down his house due to reckless play with fireworks, he should bear all or most of the cost of its repair. But if millions and millions of people play recklessly with fireworks at home and the office, and if some of them work in the gunpowder factories, their recklessness can burn down the whole country - including the homes of countless people who conducted their affairs prudently. The country can't afford to assign all the costs of rebuilding to the reckless, and endure years of stagnation and decline, just in order to punish the wayward.

More importantly, in the present situation the United States and Europe are clearly living far below their means, since there is massive unemployment of human and material resources. The problem is that the decentralized private sector lacks the consolidated economic capacity to re-employ those resources quickly and effectively. Government has that capacity, and so organized collective action is required.

Libertarians want a world of more isolated and less coordinated economic actors, and sometimes imagine that we actually live in such a world. But we're all connected, antisocial libertarian rogues notwithstanding

Anonymous said...

MMT keeps trying to validate its flawed theory by claiming they were the only ones who predicted the Euro crisis. Join the club people.

Eichengreen said the EMU was suboptimal as early as 1994.
http://www.princeton.edu/~ies/IES_Studies/S76.pdf

Martin Feldstein made similar comments in 1997.
http://www.nber.org/feldstein/fa1197.html

Tom Palley specifically said bond vigilantes might attack as a result of flawed fiscal sovereignty:

http://www.thomaspalley.com/docs/articles/international_markets/european_monetary_union.pdf

These papers were all written before the "famed" MMT predictions. So get lost with your claims that you predicted all of this before anyone else. You didn't. Not to mention, stop claiming Godley as an MMTer. He wasn't.

Tom Hickey said...

Major Freedom, there is no law against free banking in the US, either. As Hyman Minsky said, anyone can issue their own IOU's. The trick is getting others to accept them in exchange.

Institutions wanting access to the FRS interback settlement system and govt guarantees must join the govt system, and free banking entrepreneurs apparently don't think that they can compete successfully this.

Greg said...

Its impossible to live beyond your means. If you did it it the means are there. Even if someone else did it for you the means are there.

The only problem that arises with borrowing is estimating your future income. If you knew for sure a certain nominal income was always available you would know a minimum you would be able to use to service debt if needed.

Peter said...

@ anonymous

One thing you'll notice about MMTers is that they constantly lie and attack everyone else in an attempt to justify their ideology. The attempts to claim they were the only ones to predict the Euro crisis is just more of the same from them.

Norman here likes to claim MMT "got everything right" even though he scoffed at Peter Schiff on live TV when he said there was a housing bubble in 2006. That's an MMTer making one of the worst predictions of all time.

(Vulgar attack coming in 3, 2, 1....)

Anonymous said...

It is amazing!Where ever one look on internet some corny libertarian jump up ramblin about constiution and liberty with no connection to the subject.Is Major (i guess he really is a Major in the Army working for the big bad goverment and the Military and use a Tax funded computer in his ambition to abolish his own job)I guess Mike and Tom,let him post just for entertaiment and to show how muddy thoughts that pop up in the head of Govemental employed Libertarian from i guess, south of the Mason–Dixon Line!A little House Troll it seems.

Tom Hickey said...

MMT keeps trying to validate its flawed theory by claiming they were the only ones who predicted the Euro crisis.

Evidence, please.

MMT economists have argued that they are the only ones that got it right for entirely the right reasons. Others got it partially right but did not provide a full explanation.

It's true that Godley was not "MMT," but he and some with MMT economists cooperated and collaborated.

See "Can Goldilocks Survive?" by Godley and Wray (POLICY NOTE 1999/4 | April 1999, Levy)

Major_Freedom said...

Anonymous:

but Europeans have almost no collective control over this body

I have zero control over the Fed.

money4nothingchicks4free:

you are talking about some nice ideas. Anarcho-capitalist ideas are really nice, just like utopian communist ideas are.

Communist ideas are Utopian and not possible to be put into practise because of a lack of a price system for the means of production. Anarcho-capitalism is Utopian but it is possible to be put into action because there is a price system for the means of production.

Let's just first make the best with what we have.

Yes, let us work with what we have, money, and make it better by abolishing the monopoly control over it.

Let us change society for the better.

I am sure you agree that government is not going to disappear in next 5 years or in next 25 years.

With that attitude, of course not. But with enough people with my attitude, it is possible. Statism is not inevitable.

Don't you think life is full of compromises?

Compromising with evil makes the good impossible. Grey still has black in it.

Let's make the best with what we have.

Yes, let's make the best of money by abolishing the monopoly control over it. Let us not try to abolish money. Let's be realistic.

How about full employment and price stability?

The state does not and cannot bring that about, short of slavery.

Our other choice is high unemployment, sluggish ecomomic growth and still no communism or anarcho-capitalism.

So you're saying high unemployment and sluggish growth are inevitable?

You don't really believe that your eyes are going to see life without government, do you?

They said the same thing to negroes in the 19th century just before slavery was abolished.

That's why I'm saying that you are talking about fairy tales, not because I want to insult you. How about having Keynesian golden age of capitalism all over again for a start? What do you say?

You mean doing what will result in 1970s stagflation? No thanks. We can do better.

ggm said...

@Peter/Anonymous

Your side has lost. Best to be cordial in defeat.

Many people got the "what?" right (Euro crisis), but they failed to describe the correct "why?", and the "why?" is the most important part.

Most natural philosophers of the 17th century could predict that an apple would fall to the ground when when the stem which held it to the tree gave way. Newton provided a proper mechanical explanation for both cause and effect. In doing so, he he gave us a theory which could also be used to make many thousands of accurate predictions.

Likewise, MMT is a framework which can be used to successfully predict macro policy effects. To the extent that Eichengreen, Feldstein and Pally offer any economic framework, it is much more limited and/or relies on traditional Keynesian models, not original ideas (no offense to these authors, who at least were not telling us the apples would never fall).

Major_Freedom said...

Dan Kervick:

"Doesn't the logic of this position tell us that the same problems will occur if individual states within the US do not have the legal authority to issue their own currencies?"

No.

Why do you not think so?

As the Godley quote says, part of the problem in Europe is that it has "no full-scale budget of its own", but instead "by default, a fiscal stance of its own made up of the individual budgets of component states."

The same thing is the case in the US under Federal Reserve central banking. There are 300 million individual budgets, 300 million individual "fiscal" stances of borrowing and spending.

You don't seem to get the logic here. Something is barring your mind from getting past country level thinking.

The problem isn't purely that Europe created a centralized European monetary authority, but that it did so without creating a centralized European fiscal authority. There is no European central government that can spend money into the national economies by drawing on the European monetary authority directly, or even by carrying out fiscal transfers.

That same problem arises whenever any mandatory central banking system is imposed on individual private property owners. The creation of the Fed was the creation of a centralized monetary system, without abolishing individual level fiscal planning, borrowing, and spending. How can a system of centralized banking and 300 million individual fiscal agents work? If a single monetary authority and 24 fiscal agents cannot work, then certainly one central bank and 300 million fiscal agents is insanity. For individuals borrow and spend in the Fed's currency, by law, due to have to pay taxes in the Fed's currency, which is the EXACT same discrepancy between monetary and fiscal phenomena as a European central bank being instituted alongside 24 fiscal agents, only the problems seem even worse because of the greater discrepency.

The US has a central government that can and does ameliorate the economic imbalances among the US states via fiscal policy.

But it has 300 million agents who cannot, because they are forced to use the Fed's currency.

The recent version of that government has neglected some of its responsibilities in that area, and made stupid policy by allowing states to endure contractionary budget crunches, but the federal economic infrastructure that was already in place has helped the US to avoid some of the European problems.

What you're saying is not workable. One monetary authority with 300 million fiscal agents who are legally obligated to accept the Fed's currency, simply cannot work.

Major_Freedom said...

Dan Kervick:


"Why not accept that should lots of people live beyond their means, should they borrow and spend too much, such that others are not as willing to lend to them as before, that they experience a reduction in their standard of living as well, that they again live within their means?"

Fallacy of composition. If one man burns down his house due to reckless play with fireworks, he should bear all or most of the cost of its repair. But if millions and millions of people play recklessly with fireworks at home and the office, and if some of them work in the gunpowder factories, their recklessness can burn down the whole country - including the homes of countless people who conducted their affairs prudently.

Fallacy of exaggeration. The entire country does not burn down in a recession. Many people are affected, but not everyone.

If people conducted their affairs prudently, then they would not be affected by other people's houses burning down. If they are affected, then that's their fault for living close to those who deal with firecrackers.

For me, if I conduct my affairs prudently, and I do not take on huge debts, and I save, and I can live comfortably in the case I temporarily lose my job, then you have no right to externalize the costs of government activity on me and everyone else who acted prudently. Not everyone loses in a recession. You are exaggerating and pretending that without mommy and daddy state, then 300 million people will lose. That's ridiculous.

The country can't afford to assign all the costs of rebuilding to the reckless, and endure years of stagnation and decline, just in order to punish the wayward.

But those costs will be internalized to those affected, not externalized to everyone. Why should the prudent suffer for the transgressions of the imprudent?

More importantly, in the present situation the United States and Europe are clearly living far below their means, since there is massive unemployment of human and material resources.

That is a consequence of living beyond their means prior, and the state preventing individuals from correcting and coordinating their behaviors due to the distorted price system.

The problem is that the decentralized private sector lacks the consolidated economic capacity to re-employ those resources quickly and effectively. Government has that capacity, and so organized collective action is required.

False. The market is far more adept at getting resources into action than government.

Libertarians want a world of more isolated and less coordinated economic actors, and sometimes imagine that we actually live in such a world. But we're all connected, antisocial libertarian rogues notwithstanding

False. Libertarians understand how individuals coordinate their behavior in the division of labor, and how the state hampers this coordination by printing and spending money, deluding investors into believing real demand is there when there is not sufficient capital. Libertarians want more coordination and less violence. That does not mean anti-social behavior. That is nuts. It is nuts to believe that social behavior requires violence against innocent people. Humans are not all connected. They are separated. I am not you and you are not me. I have my own thoughts and desires that are not yours. We can make mutual gains by trade. If violence is introduced, one of us will gain at the expense of the other. Libertarians want to promote gains through talking, trading, and visiting, and abolishing violent behavior.

You statists need to learn the difference between voluntary interaction, and violent interaction. The latter is not "social", it is ANTI-social.

Anonymous said...

Amartya Sen has much to say about the libertarian idea of
properties and the wonders of market economy. He has at
various times scrutinised the libertarian theories and their rights
or entitlement-based ethics and criticised them for giving a too
simple and one-dimensional solution to complex social moral
problems. Sen especially criticises the libertarians for not giving
credible answers on how to handle situations where rights and
liberty are mutually dependent on each other. Their
deontological ethics must be supplemented with consequenceevaluations to enable them to give an adequate formulation of
rights and freedoms.
Sen gives an example in On Ethics & Economics: “If person
A is violating in a serious way some right of B, e. g. beating him
up badly, does person C have a duty to help prevent this?
Further would C be justified in some minor violation of some
other right of person D to help prevent the more importantviolation of B's rights by strong-armed A? Could C, for
example, take without permission – let us say by force – a car
belonging to D who is not willing to lend it to C, to rush to the
spot to rescue B from being beaten up by A.“
8
Not according to
Nozick's entitlement system (and other libertarian versions as
well) since C is not obliged to help B and is obliged not to
violate the rights of DOmitting to act in such a situation does
not violate anyone‟s freedom according to libertarians

Ramanan said...

Here's a Feldstein article that appeared in the Economist in 1992:

The Case Against EMU:

http://www.nber.org/feldstein/economistmf.pdf

Tom Hickey said...

Good find, Ramanan. Hits the high points.

Ramanan said...

Oh that was referred to in "Maastricht And All That".

Tom Hickey said...

Feldstein's piece in The Economist appeared June 13, 1992, and Godley's "Maastricht And All That" in the Oct 8, 1992 issue of LRB.

This was being discussed in economic and policy circles at the time, and others were likely giving advice but not publishing about it at the time. But as far as date of publication goes, it seems that Feldstein is out in front so far.

Ramanan said...

Yeah although Godley had a few articles before that as well.

Many American economists thought it wouldn't work when the Treaty came out.

y said...

Individual states aren't permitted by the constitution to coin money. They can however make gold and silver coin legal tender within the state. US government currency is legal tender across the US. States can't change that, but they can declare gold and silver coin to also be legal tender.

Matt Franko said...

Major,

"I'm already a financier. The first full time settlement won't be available until at least 7 years from now, but that is the expected start date, barring any major snags."

Are you telling us that you are involved in financing these settlements?

If so that is wild man!

Can you post some links? To info on these settlements. I'll post them up here at Mike's in the spirit of "we report you decide" type of context.... wild!

rsp,

Matt Franko said...

Major,

This from Feldstein's paper at Ramanan's link:

"Slowing the growth of wages is a painful process, accompanied by a high level of unemployment,
declining property values and the widespread failure of New England banks. New England could deal
with the transition in a much less painful way if there were a flexible "New England dollar" that could be allowed to decline in value relative to the currencies of America's other regions
."

Sounds like you and Feldstein are on the same page here....

rsp,

Adam2 said...

Major Freeman - Have you read the "Capitalists, Con Men, and the Making of the United States" book by Steven Mihm.

I predict counterfeiting to be rampant in a society without state sanctioned money.