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(As mentioned before, Greece, which is combining fiscal currency with a fixed exchange rate, is an interesting case study).My take, for what it's worth, is that deflation is more likely in the short run, especially as the broad money supply numbers remain so weak.
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Fiscal and currency union did indeed kick-start America's early economic development.
G20 leaders gathered in Seoul to discuss rising tensions surrounding global fiscal and currency imbalances.
Asian policies -- fiscal, monetary, currency and regulatory -- are all focused on avoiding the types of disruptions that have wreaked such havoc on America.
The Greek bailout and the central bank's decision to ease rules on the collateral it will accept for loans "set a bad precedent for other euro area member states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures over time," Joachim Fels, an economist at Morgan Stanley, wrote in a research note.
When markets are proved right, as is most often the case, the fiscal and currency costs of such interventions only make matters worse.
As in every fiscal emergency, hard currency, particularly the United States dollar, has long served as a parallel currency on the black market, and many prices in shops would be posted in US dollars, even during periods when it was illegal to possess foreign currency or to transact business in US dollars.
Like Argentina, Greece has suffered from a fixed currency, fiscal deficits and a growing lack of industrial competitiveness.
This is in spite of a postwar track record of providing a specific treatment of fiscal austerity and currency devaluation only when asked.
To my mind, the answer is pretty clearly No, given the balance of probability.There are two big areas of debate - fiscal policy and currency union.
But this time the risk is that they will do damage, with blunt fiscal austerity and currency wars.Budget cuts are top of the agenda across the rich world.
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