Currency questions, Nixon shock and the Euro

[Perd Hapley]

I'm taking a course on post-war Europe, and as usual my lack of economics is getting in the way.

Would anyone care to explain Nixon shock, and its effects?

Secondly, how does Europe's common currency hamper the German economy?

[drewtam]

Nixon is before my time. But here is a wiki article about it...
http://en.wikipedia.org/wiki/Nixon_shock


The way I read it, the euro is a compromise of many different economies. As a stable economy, Germany needs to keep inflation under control. But they are unequally yoked with unstable economies that really need aggressive inflation as part of a mix of solutions to help avoid default.

I think Germany is getting what it wants [inflation control] and is helping the others with loans/bailouts. Unfortunately, the bailout bucket isn't big enough to keep up with the hole in the boat.

[Scout26]

The Euro is a boat anchor that ties (throttles) the German economy to the rest of Europe.  The original idea was that Germany would pull the other economies to greater heights, however the various finance ministries in "lesser Europe" saw the opportunity to make high stakes gambles confident that Germany (and to a lesser extent France) would pull their chestnuts out of the fire, if it backfired.  The problem is that too many countries (Iceland, Ireland, Greece, Spain, Portugal) are over exposed and therefore are dragging all of Europe down, rather than just their countries.

For a good read on what happened in Ireland (and good explanation of Ireland's options, including a re-valuation, aka screw-your-neighbors), read When the Luck of the Irish Ran Out .  Should be in your library (That's where I got it from to read.)

[Perd Hapley]

What have you been doing in my libarry?!   

[Scout26]

I iz in ur lbarry, stelin ur bukz.