Monday, June 18, 2012

Still a Greecy Mess

My first petulant post-Greek-election comment: this is a triumph of wishful thinking.  Actually, there was no good option in this election.  At the moment Greece is out of good options.  This declaration of faith in European unity and the power of austerity does nothing but prolong and deepen the anguish, and in the end Greece may still default and exit the Euro.  The terms of trade between the GIPSIs and the rest of Europe, but primarily with Germany, must change, and within the Euro that can happen only by inflation in Germany or deflation in the GIPSIs.  Of these two, inflation is the best choice; it's easy and and the discomfort is fairly mild.  Deflation takes a very long time, and creates tangle of bankruptcies and broken contracts, a generation---or more---of lost potential, and masses of human pain.

Still, no one knows the future for certain.  I hope this works for them.  

PS: I just read Krugman's response, which contained this line: 

                    "So they will now have the ability to continue pursuing an 
                      unworkable policy. Yay!"  

It's good to have my petulance seconded at the higher and more dignified levels of economic debate.

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