Anthony I love your show and your personality but Brexit is a fantastic outcome purely for macroeconomic reasons all predicted from a single currency union.
It may force Germany to finally realise they need to continue building on the neo-liberal Euro project to make the common currency work with a central fiscal authority and actual democracy. It’s run by technocrats and mass groupthink ignoring economic reality of depression level output gap losses.
In 1972, for example, the Governor of the Danish Central Bank said: “I will begin to believe in European economic and monetary union when someone explains how you control nine horses that are all running at different speeds within the same harness.”
With mass unemployment much longer and worse than the Great Depression especially poor Greece. Please go and do a show there soon and hear the real stories of schools where the teachers have all left and the cleaner puts videos on for the kids. How can you build a country without education? They can run out of euros but not their own monetary sovereign currency.
Think of Louisiana after hurricane Katrina having to borrow money at high interest rates it can never afford to pay back to rebuild without the US central government providing currency and resources to help it rebuild. That’s the Euro currency. Germany runs an 8% surplus (as a Deutschmark would be much much greater priced and uncompetitive) and do by definition a surplus is someone else’s deficit. You can’t force Southern Europe to run surpluses too with other Euro countries.
Here’s a macroeconomist explain all that was foretold in much greater detail: http://bilbo.economicoutlook.net/blog/?p=33894
It was all predicted well in advance by economists (http://ec.europa.eu/economy_finance/publications/publication16345_en.pdf) but ignored by politicians and everyone who thinks it’s a progressive idea that SHOULD still be an evolving work in progress building on a political union and central fiscal authority – not just monetary QE nonsense which doesn’t work. Banks don’t lend reserves
Sadly neo-liberalism makes us all think we can’t afford things which is true for a currency user but not a currency issuer.
When JFK announced man going to the moon did everyone stop and say “wait how can we afford that”? No she knew that it had the smart scientists already educated from mostly free education, had the manufacturing capacity and resources and could and would do it. Neo-liberalism stops that kind of big thinking in its tracks and acts like the federal government can run out of its own money. It can’t and never will have to default on debts in its own currency.
The UK is fiscally constrained in deficit spending by the Euro yet has its own floating currency. It sets the interest rates (ratings agencies don’t matter for government at all – yes the ones who gave subprime mortgages AAA ratings) and can buy all available resources like labour, infrastructure, education for a sustainable NHS etc available that it wants to in its own currency. It need never default unless the government decides do such a crazy thing.
Sorry for the long post particularly as it’s a good blog but it’s a counterintuitive subject macroeconomics. We need a modern Keynes to re-teach the world the lessons of the past we seem to have lost. Please do a show in the real Greece!
Recommended if interested in more information:
Greenspan succinctly explaining the limits to government spending (pensions) not being money but real resources to Paul Ryan: https://m.youtube.com/watch?v=Ccb_BNdRN80
10 min video (with Spanish questions you should understand even if you don’t speak Spanish) explaining what is wrong with the Euro and how to fix it: https://youtu.be/XMm8lFI4_cU
Free e-book the 7 deadly innocent frauds: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf explains how modern fiat money actually works.