Never said that. I said they would be better off out of the EU, where they could create the money to pay their bills. Perhaps you feel money creation = inflation, but that is not the case. In the U.S. oil prices = inflation, and money creation has not been related to inflation for at least the past 50 years. ( http://rodgermmitchell.wordpress.com/2009/09/24/is-inflation-too-much-money-chasing-too-few-goods/ )

Recently, we have created vast amounts of money and are worried about deflation (oil prices are falling).

Rodger Malcolm Mitchell

The “lie” story–though it accurately describes the Greek mess with statistics–is convenient because it leaves out the part about the yearly revision. It allows the new Greek PM to blame the debt troubles on the old Greek PM, even though the new guy’s party is complicit since the debt is longstanding. It allows Europe and especially French finance minister Lagarde to argue that Greece is an outlier because it lied, and that therefore there can be no contagion between Greece and Spain, Portugal, Ireland. Finally it allows the banks that loaned Greece money to claim, “We didn’t know,” when they actually did know. It also deflects the question, “Why did you loan Greece money?” The answer to the question is that Europe operates on quid pro quos and corporate welfare. Much of the money loaned to Greece returned to the source country in the form of contracts, especially for armament purchases, and many of those loans were initiated after Greek politicians were bribed to make those purchases, as in the case of the multibillion purchase of Thyssen submarines where Greek officials took 83 million in bribes, took out 4 billion in loans, and bought subs that were useless and superfluous for Greek military needs.

Then there’s this comment: “A handful of Eurozone members, and for the most part, small and peripheral ones, were able to nearly destroy the entire union with their fiscal irresponsibility.” Public finances were actually being cut and diminishing in these peripheral countries, and in any case they were in much better shape than corporate finances. The profligacy occurred not at the state level, but at corporate level, especially in banking. The nationalization of bad private finances is what is causing all of this trauma. By focusing on social expenditures, you are deflecting from the true cause of the problem. Economist Paul de Grauwe does a fantastic job pointing this out here: http://voxeu.org/index.php?q=node/5062

Finally, about Rodger Mitchell’s point about Greece becoming more competitive if it could devalue, I agree that normally this would be the route to take, but Greece is a strange bird. Consider: Greece has barely any international investment. Multinationals do not land in Greece because of the bureaucracy and high corporate tax. Therefore, Greece did not lose much international business because of rising costs. Greece’s main sectors are tourism, shipping and banking. You might think Greece lost on tourism as prices rose, but that’s not the case. Visitors to Greece have increased since it joined the euro. It has been a boon for the tourism sector. Shipping obviously brings outside money into the country and remains competitive worldwide (albeit in a slump due to the recession), while banking increasingly reaps profits far afield. in fact, the big banks are making more profit in countries such as Turkey than in Greece. So, Greece is an oddbird in that devaluing inside Greece is not going to matter much in its main sectors, and indeed it may even kill the banking sector. This is probably why the Greek politicians will do almost anything to try and stay inside the euro.

225 years ago, 13 independent nations did exactly that, to form the United States of America. It required each nation to surrender its sovereignty to achieve a whole greater than the sum of its parts.

However, these 13 nations did not have a history of inter-state warfare, jealousy and mutual hatred the Europeans have nurtured for centuries.

Europe’s salvation would be to form a “United States of Europe,” but their histories prevent it. The euro, as presently constituted, is doomed. The EU nations will lose power as monetarily sovereign nations like the U.S., China, Japan, India, Canada and Australia grow in power.

Any nation tossed out of the EU would benefit, by once again being sovereign over its own currency. Greece, for instance, would be far better off, if it were “excommunicated” from the EU.

Rodger Malcolm Mitchell

Would the EU threaten to toss a wayward nation out of the Eurozone, a form of financial excommunication? I can’t imagine that happening.

Why not, Michael? No doubt giving up on the Euro is unlikely, but I seriously wonder if Germany’s tired of carrying the Euro (and PIIGS) on its back and desires going back to flying solo with the Deutsche Mark. Traders would take their currency seriously; Greece less so. But if anyone leaves Euro / tossed out, would these weaker players face the risk of currency runs?