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JonDE is offline
Jan14-12, 10:02 PM
P: 58
Quote Quote by MarcoD View Post
All arguments you make can be made for the US too. Does Michigan pay for California's spending (or debt level), and does the US need to break up over that?
In a way it kind of does. If California was going through a recession and Michigan wasn't, California would be bringing in less then its share of federal tax. Whatever it was minus in this instance would be added to the federal deficit which the whole country is responsible for. To be the same as the countries that are involved in the Euro, in the above example, the US would have to tax California at a higher tax rate (to make up for lost tax revenue) while intentionally spending less money in California. Neither of these happen IRL.
The argument that Michigan doesn't pay for California's state debt is true and so that point is relevant, but what is state tax compared to federal tax? Federal taxes have to be at least 4X larger (couldn't find an exact number, and I'm really not gonna spend time to calculate it)

Quote Quote by MarcoD View Post
There is no long term problem unless there isn't enough money being pumped to the deficit states from the surplus states. Until now, that probably happened with public debt, financial markets, the free commidity market, and other means.

Honestly, the system is pretty damned good since governments are, need to be, run like companies, and there's one central bank overseeing the banking system and currency.
I admit that this is good in theory, but are any countries actually run like companies?

Quote Quote by MarcoD View Post
There are only two questions: Are the debt levels of the individual economies too high to be sustainable in this system? (I would say no, except for Greece.) And second, is there enough money being pumped around between the states?

The first is debatable, if not, then Eurobonds. The second is probably okay at the moment, with the addendum that the surplus states probably will need to pay some for Greek pensions, which honestly, is a whatever. And a second addendum that part of the current mess is the result of sending too much money to the periphery, not too less.

Everything else: The balance of trade, the external debt, the amount of money, the number of assets, look okay for the Eurozone. Most of the news, therefor, is short-term humbug. It can all be solved, and since it can be solved, it will be solved.

(There's also the point that devaluing in current day markets might not work as good anymore as it used to, since everything is hedged anyway.)
I agree with most of this. The debts of most of the countries aren't especially high, with one or a few exceptions.
Although I disagree with one part, that since everything can be solved, it will be. Politics don't always work in the best manner to solve problems.
Also can you elaberate on the hedging part. I understand hedging from an investors standpoint, but I admit don't know anything for a country as a whole, or for an entire currency.