Thomas Bray has a nice, if short, piece asking, “Will Europe’s new money last?” He and I and maybe even you already know the answer is “probably not,” although Bray goes after what I call the soft, cultural reasons. The French just like the Euro because it got rid of the Deutschmark, the Germans like the ECB being in Frankfurt, the Italians like having a currency that’s a little less comic-opera than the lira, the Belgians think they’ll really run the show, etc.


VodkaPundit says the Euro won’t for just one hard economic reason: Labor has to be exactly as mobile as a currency is widespread. Are unemployed Germans really going to move to Greece during a downturn in Germany, if Greece is where the jobs are? Hell no. It’s not like a broke Texas oil worker migrating up to Oklahoma, is it? So the money supply and interest rates (the most common ways of fighting recession) will stay too high in Germany where the jobs aren’t, and too low in Greece where the jobs are (in this fictional example). Germany will stay mired in recession while Greece goes into semi-ballistic inflation.

Smart? Nope. Europe will figure it out — hopefully before they do an Argentina.


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