A euro parable: the couple with a joint account

Ken Rogoff writes on the euro in this FT article.

17 replies on “A euro parable: the couple with a joint account”

Rogoff made me smile. The ‘joint account’ metaphor I think is over extended (pun ) 🙂 The metaphor says more about the regard for financial well being over the value of relationships, the triumph of greed over commitment 🙂
Re “A pre-nuptial joint bank account is a very unstable route to marriage”, don’t agree with that; don’t believe they are necessarily connected unless you are a Mr Micawber from Dickens, “one who is poor, but who lives in optimistic expectation of good fortune”…perhaps some in joining the euro were guilty of that 🙂 But I agree the credit union system, a better metaphor,
of the EMU, hasn’t worked. The only question is how clean the extraction can be made with the least pain, for all concerned!

“Currency union without political union is an unstable halfway house.”

Would currency union without full political union but a unified banking resolution system work?

@ seafóid

Re “Currency union without political union is an unstable halfway house.”

If they got political union, next up they’ll be saying

‘Currency union with political union is an unstable halfway house.’ They would be right. There will always be conflict between the needs of the private banking sector and politics. The answer is to replace the private banking sector with ‘public banking’

Read what Ellen Browne says here about The Bank of North Dakota


Perhaps the unions in Ireland now mobilising against the Compact/ESM can raise the collateral required to set up a public bank in Ireland that will respond more to their needs than the disastrous response to Ireland’s commercial needs we’ve had from Ireland’s private banks.

Rogoff needs to get real. His parody although somewhat amusing fails to capture the dependence of the core on the purchasers in the periphery. Neither does it capture the capital flight from periphery to core which has destroyed the peripheries.

His summary is probably correct. The euro will not work. It was great while it lasted, particularly for Germany.
Next step is the euro breakup and the competitive devaluations.

@Joseph Ryan

That’s going to be a problem. Competitive devaluations. How low can we go?

This is definitely one for you Dork.

Looks like a few managed to share a ‘joint account’ quite well here.


@Bond Eoin Bond

I was assuming Joseph was talking about a Euro-wide breakup and each country trying to ‘out-devalue’ the other to make themselves more competitive once they had switched to their new Punts/Pesos/Pieces of Eight currencies.

But even without a Euro-breakup, those are big figures needed in PT, Sp and Italy. I was only speaking to a lovely Portugese lady on the way somewhere this afternoon ànd she was telling me people were giving up the ghost in Portugal and couldn’t afford to live/engage with normal trade/life these days and a lot were going back to self-sufficiency, subsistence farming (she claimed the same thing is happening in Greece), young people in particular returning to parental home and working a field or two.

Is that true I wonder? Is that what faces us? Fortunately, I already grow my own veg for a spot of r’n’r. I wouldn’t mind a couple of chickens. Maybe even the odd pig. It’s got to be better than the daily grind…..

@ Bond

nice link tks…””Our results suggest that, for some euro area countries – notably Greece and Portugal, but arguably Spain as well – the task of regaining fiscal and external balance through cyclical adjustment alone appears large, to the point of being insurmountable.””

That’s Goldman saying bye bye bye to the euro…

The only question is how quickly this will happen now. I believe in the history of the euro we are being slowly nudged across the top of a rather flattened bell shape curve; but when we reach the cliff or downward slope, things will happen a lot faster…..

This could very well happen with subsequent fall outs between Germany and France post French elections. Also I believe it of some concern the 20% swing http://www.bbc.co.uk/news/world-europe-17823889 towards Le Pen electorate noticed by Hollande to comprise many who are leftist and do not share Le Pen’s xenophobia, have voted with Le Pen. I believe a lot of these must be anti euro and this is the only reason they’ve voted for Le Pen.

It would appear a large number of voters across Europe and Ireland are currently disenfranchised re their opposition to the euro and their wish to leave the euro. There is the concern as happened pre 1930 that voters swept along by economic concerns re the euro, may be hoovered into support of far right causes, they may later regret supporting. Let’s hope the far right in Europe are not the big gainers in the mess.

I’m glad to see Colm suggesting that monetary reform should be on the agenda.

We can no longer expect banks to create the money supply, and even if they did they it would come with a corresponding debt.

A significant source of debt free money is needed.

Imagine how corrupt we would be if we struck oil …..oh wait.
Not really , the find off Cork would just keep the railways and some buses going.
We import the majority of our oil products in a refined form anyhow….Whitegate is the backup , unfortunetly there is no backup to the backup.
We could do with a rail / oil distribution system to the North West & Midlands although driving around the Bogs is becoming a minority sport despite them being the most active long distance private car users in the state back in the day.

Average annual Km by private car & licensing of county 2008
Letrim : 19,588 KM (max)
Roscommon : 19,499
Longford :19,427

Cork : 16,100 Km
Dublin : 12,886 KM (min)

The 2009 /10 transport omnibus could turn these figures on their head… who knows.
Should be interesting anyhow.

I am surprised at Krugman. I thought he would like Rogoff’s metaphor about the chef getting pale, missing work and ending up in a worse state. He is basically saying a lack of unity and solidarity will lead to destructions. Is Rogoff advising us to get out of the euro now? I think so.

Well done again, Krugman.
Spot on. Rogoff seems to have bought into the German narrative.

@Niall Mc Geever

Paul Krugman responds to Rogoff’s FT article:

It is typical Krugman – punchy, basically correct and destined to be ignored by Europe’s Sehr Ernsthafte Leute as they avoid eye contact and make wheedling noises that boil down to truth being a function of what is politically expedient.

It’s a shame about Rogoff, a clever man but he has the tendency to side with the wealthy and powerful when offered the choice. Not a man of the left, as one biography I read of him noted delicately.

Colm Brazel:”There is the concern as happened pre 1930 that voters swept along by economic concerns re the euro, may be hoovered into support of far right causes, they may later regret supporting”

– The perennial justification for enforcing political union, too.
Ignoring the fact that for Ireland, engagement with the EU has brought us under the only degree of influence from the far right that exists here (via the 15% or so support for these parties across europe that has ensured their presence in the EC), it all smacks of frightening us with the bogeyman.
If right-wingers are gaining ground, it is through adopting or over-emphasising anti-euro policies that were absent or peripheral to them up to now.

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