Tuesday, 20 January 2009

More on the euro

We've got intellectual pygmies like Will Hutton telling us that we should join the euro:

Will Hutton, journalist and executive vice chair of the Work Foundation and co-compiler of the report, argues that failure to enter the Euro would risk ‘endemic inflation’.

The we've got real intellectuals like the most recent Nobel Laureate in Economics, Paul Krugman.

So what can Spain do? It needs to become more competitive — but it can’t have a devaluation, because it’s a euro country. So the only alternative is wage cuts, which are desperately hard to achieve (and create big problems for debtors.)

Contrary to what everyone seemed to be saying even a few weeks ago, being a member of the eurozone doesn’t immunize countries against crisis. In Spain’s case (and Italy’s, and Ireland’s, and Greece’s) the euro may well be making things worse.

And Britain’s plunging pound, unpopular though it is, may turn out to have been a very good thing.

So who are you going to believe? A two bit journalist or someone recently awarded the highest accolade in the intellectual world?

Toughie that one, isn't it?


Dave Cole said...

Paul Krugman, referring to Gordon Brown shortly before his award of a Nobel prize for economics:

"Luckily for the world economy, however, Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis."

Tim Worstall said...

It is worth noting that Gordon Brown most certainly has not been pushing for us to join the euro. Indeed, it's commonly assumed that he's the guy who stopped Blair taking us in.