Monday, February 27, 2012

Why are European countries in trouble?

The Republicans want us to believe that it was social spending-- all that free healthcare and welfare those lazy Europeans get from their governments. What losers! We can't do what they do, or we'll be in the same boat. But that's an easy out for the RepubliCons (as Norman Goldman calls them).

Well, Paul Krugman has an article in the New York Times today explaining the whole debacle. In it he says,

 So what does ail Europe? The truth is that the story is mostly monetary. By introducing a single currency without the institutions needed to make that currency work, Europe effectively reinvented the defects of the gold standard — defects that played a major role in causing and perpetuating the Great Depression.
More specifically, the creation of the euro fostered a false sense of security among private investors, unleashing huge, unsustainable flows of capital into nations all around Europe’s periphery. As a consequence of these inflows, costs and prices rose, manufacturing became uncompetitive, and nations that had roughly balanced trade in 1999 began running large trade deficits instead. Then the music stopped.  
For more read the whole article in his article What ails Europe?  and get a bit of truth today!

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