> It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.
I read this a lot but I don't quite understand why--How does a unified currency prevent the domestic economy in Greece from being cheaper than importing German goods?
Why can't the local Greece industry lower prices (as it would effectively with a falling local currency), thus driving more domestic purchasing and exports since it would be comparably cheap to neighbouring countries?
The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.
> The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.
That's exactly right. The key point is time.
If you have to wait for your economy to contract, you're still borrowing tons of money to keep the country afloat. You're paying high interest rates on that debt, while at the same time you're losing tax receipts as more and more people are no longer paying taxes but instead are on the dole.
> The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.
Not only that, but if you want to "lower the prices in Greece" (i.e. deflation), you would have to lower the wages of everyone at the same time. That is politically very hard to do.
Because of technology. Fishing in Ithaca costs more than importing fish. The sea in the island is amazing, full of fresh fish. Yet nobody eats fresh fish in restaurants because there are no fishermen left! Same goes for most of other products, in conditions parity there is no way for a Greek corp to fight on price domain a big German corp.
I read this a lot but I don't quite understand why--How does a unified currency prevent the domestic economy in Greece from being cheaper than importing German goods?
Why can't the local Greece industry lower prices (as it would effectively with a falling local currency), thus driving more domestic purchasing and exports since it would be comparably cheap to neighbouring countries?
The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.