Friday, October 12, 2012

Just when I thought I came across a good Reason.com article...

...I made the mistake of reading it in its entirety.

Matthew Feeney has a good start explaining that excessive spending is not the root cause of the crisis in Europe. You could only plausibly say that about one of the problem countries - Greece. But then he ends with this:

"The reality is that the euro-crisis is a lesson on easy credit and monetary policy. This is not to dismiss the fact that many of the Euro Zone nations were spending too much money. However, as other countries in Europe have demonstrated, it is possible to have similar levels of debt and not face the fiasco being ejoyed by the Greeks and Spaniards."

Ah yes. Easy monetary policy. It was because the central bank of Germany was being responsible with the mark and the central bank of Spain was being recklessly inflationary with the peseta that Spain is in a crisis right now.

Hmmm...

Well he's right about one thing: monetary policy is an important thing to think about when we consider the causes of the Eurocrisis. And "easy credit" is a little nebulous on exactly what we're talking about, so I'll give him that too. But I don't know about this monetary policy point.

2 comments:

  1. It is a lesson about easy credit and monetary policy, i.e. when you are in a situation like Europe's, you need easy credit and monetary policy to get out of it.

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