

The Euro Zone Has Failed - binjip3
http://online.wsj.com/article/SB10001424052748704875604575280452365548866.html?mod=WSJEUROPE_hps_MIDDLETopStories

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anigbrowl
Czech bounces, bank not happy.

Basically Mr Klaus, president of the Czech republic, defend his country's non-
adoption of the euro because it has left him free to use the traditional
method of dealing with recession by loosening monetary policy - with a lower
exchange rate for their currency, their exports look cheaper to foreign
buyers, and imports are more expensive for residents. This brings in more
money (in a harder currency), keeps more of that money in the domestic
economy, and also allows the government to inflate away some domestic debt as
the economy improves by raising interest rates.

None of these options are available to euro members, any more than they are to
individual US states. So to repair their state balance sheets in a federal
monetary environment, they must make politically unpalatable like raising
taxes or cutting services, and don't have much flexibility in terms of
repricing their external trade. That means pissy voters and a somewhat slower
recovery, because trade gains must come from either reductions in base costs
or improvements in quality, both of which are harder to realize than to talk
about.

On the other hand, these latter things represent fundamental economic
improvements, whereas currency revaluation is something of a sleight-of-hand
that taxes people indirectly and leads to inflation. But for a politician,
that's highly preferable to telling the voters that they are likely to get
less and pay more. So, less fun and freedom for euro-zone politicians who have
to implement austerity programs and persuade their electorate to deal with
financial reality, but (in my opinion) better for their economies over the
longer term, as they'll make needed reforms while the Czech Republic and
Poland only go through the motions of doing so and carry forward their
structural problems.

Sorry that 'summary' is so long - not much of a time saving :-/

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TomOfTTB
I don't disagree with your summary of the situation but I don't think you
portray the point of the article correctly which essentially boils down to
this sentence...

"During its first 10 years, the euro zone has not led to any measurable
homogenization of its member states' economies."

The real question isn't "is there a benefit to having a common currency"
because everyone knows there is. That's simply logic (the money saved in
currency conversion alone makes the point self-evident). I don't think he's
disagreeing with that.

The issue he's raising is whether these disparate nations can maintain their
independence as nations while becoming one homogenized economy. Because
political decisions (like over spending on a social safety net) have an impact
on an economy and on the worth of that economy's currency.

That's the point he's making. He's saying economic realities rely on political
decisions and nations can't be politically independent while being completely
dependent on each other economically

~~~
jacquesm
One reason why there has not been much progress towards homogenization is that
there is a lot of paperwork involved in intra-community trading.

The local tax entities are paranoid about potentially missing out on some VAT
and the rules for getting your VAT back border on the insane, effectively this
causes businesses to prefer to do business with others in the same region.

Paperwork can be a very effective barrier to trade. So because only the larger
companies are used to dealing with the paperwork the smaller companies which
could 'knit' together the member states at the borders are not engaged, which
in turn stops the market from really working well and homogenizing the
economies to the point where it no longer matters where you do business.

~~~
jayruy
Language is another huge barrier to trade, especially in labor markets. In an
alternate, culture-less dimension this problem is solvable by having high
skilled workers move to Germany and low skilled workers move to Greece.

~~~
jacquesm
The labor markets are as fluid as I've seen them since I was born here, there
are lots of Polish, Romanian and Czech workers in more western countries, but
comparatively few people from western countries moving to the east.

I'm more concerned with 'border regions' between countries anyway, and for
instance, between the Netherlands and Belgium and the Netherlands and Germany
there is a lot of cross-border commuting going on, but relatively little cross
border trade between companies in the 5-20 employees range.

Language is not as much of a problem here because there are two things
helping, the Belgians and the Dutch in the border region speak the same
language, and the Germans and the Dutch in their border region have a common
dialect (you can speak that all the way from Aachen to Denmark and have a
reasonable expectation of being understood).

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coderdude
It really, really bothers me when people use "tl;dr" on HN. I see it more and
more each day as people cross-over from Reddit (or worse, Digg) to this site.
I feel like every time I see it I have to train them to not. I would be
tickled pink if there was a filter that would auto-remove such comments and
submissions from this site. It encourages and enables laziness, which is
something this community does not need.

Edit: This was about the previous title to this submission. The submitter
fixed it.

~~~
anigbrowl
I like it. I can generally tell from a tl;dr summary whether the original
material was interesting and/or whether it has been fairly summarized.

~~~
jacquesm
No, you can tell whether the person making the comment was lazy or not, it
won't tell you anything about the original material unless you read that too
to verify the summary was correct.

And it definitely isn't a rule that they are.

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tptacek
Please fix this headline, which currently reads (in its entirety) "tl;dr.
Anyone?". The first 5-or-so submission guidelines (see link below) are about
how to title articles here.

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wazoox
It's not unusual to see such a predictably right-wing rant on the wsj. I
particularly appreciate the long rant on the ill-guided european "social
system" that bogged us down since "the 60s". Hu. Only ex-stalinists can be
such free-trade retards.

BTW I know most HN readers adhere to these views (that in europe are extremely
right-wing) and I'm systematically downvoted because I'm a proud socialist :)

