Wednesday, November 16, 2011

Marshall Auerback on the Eurozone

An interesting talk here by Marshall Auerback (from the Levy Economics Institute), the proponent of modern monetary theory (MMT). As Auerback says, the fundamental problem with the Eurozone is the lack of a union-wide fiscal policy, and the fact that member nations have given up their monetary independence.


  1. To what extent is it valid, this comparison between Treaty of Versaille debts imposed on German government and the debts taken up by Greece government? Baron Skidelsky, writers of Counterpunch, (and now Marshall Auerback too!) say that it is ironic that Germany - which was once a victim of the same national debt problems that Greece has - now demands financial hardships in Greece that were similar to what Germans in the past once faced. And Counterpunch writers claim there is a double standard in that Germany benefited from debt repudiation.

  2. In my view, it is a very valid comparison. And I would add more. The president of the Bundesbank say that the prohibition to monetize government deficits is the main lesson for Germany of the hyperinflation and the II World War. That is false. The lesson of the hyperinflation was the Marshall Plan. The hyperinflation was due to balance of payments problems (Germany had to pay in gold the equivalent to 2 months of exports in only one day, that's when the hyperinflation started).

  3. Looks like libertarians (including me) were wrong about euro. Libertarian theory claimed currency unions would facilitate more money printing (because there would be less currency competition). As it turns out, eurozone means less money printing. Germans do not want to pay for Greek debts via inflation tax etc. That's nice. But there can be no keynesians without money printing, which, sooner or later, has to pay off the mountain of debts as soon as the economy busts after keynesian debt-driven artificial boom. No more currency unions for keynesians then. Actually that perfectly fits the pattern of collectivism always leading to national autarky (like say that of North Korea). You want to steal your nation's poor people's money, you don't really want to be bothered with any foreign economic factors.