Should Germany Dump the Euro?


Put these babies back into circulation, Fritz!

Michael Sivy (a Chartered Financial Analyst, FWIW) makes an interesting counterintuitive case in Time: that Germany, the only still-breathing country left in the euro system, should bail on the transnational currency. 

[I]f Germany were the one to leave, the euro would be the currency that falls in value, relative to Germany's new national currency and also to the dollar. The weaker European countries would get to keep the euro but still get the devaluation they need, which would reduce their labor costs far less painfully than through wage cuts. In addition, the value of their outstanding debt would decline along with the value of the euro, and they would be more likely to be able to make payments on that debt and avoid defaulting.

The standard argument against this solution is that as the value of euro-denominated debt falls along with the euro, banks in many countries would have big losses on bonds they own. But losses from falling bond prices are less disruptive than sudden defaults. And the fact is that those losses have really already occurred, they just haven't been acknowledged. The goal at this point is not so much to prevent losses, but to find a way for banks and other international financial institutions to absorb their losses without triggering sudden bank failures or a global financial crisis. In short, it's not about the money, it's about stability. And for once, it may be easier to maintain order without the help of Germany.

The standard argument for breaking up the Eurozone is that the moribund PIIGS countries should depart the common currency, go back to their old money systems, and inflate to their hearts' content, thus sparing Greeks and Spaniards such nightmarish indignities as having to work for a living. The appeal of Sivy's plan (which seems to be derived from Daily Telegraph columnist Roger Bootle) is that it would be funny. It would also be just, as the departure of Germany, presumably followed by France and the rest of the salvageable economies, would leave the euro to become the latter-day escudo it deserves to be: a valueless and physically unattractive monument to the hubris of bureaucrats who valued an economic "system" over any actual economies. 

German tourists: sandals-and-socks-shod bane of the Mediterranean.

The problem is that it's hard to see how this would solve the problem. Unless India and China have vanished from the earth recently, Germany's remarkably low wages are a feature, not a bug. And Greece is a paradox that has to be experienced, preferably (though in ever-lower numbers) by fat, pasty German tourists: a crappy third-world country that is dependent on tourism, but where everything is shockingly overpriced. The idea of breaking up the Eurozone is to let the responsible countries reap the rewards of their good behavior while letting the deadbeats do what has traditionally best for them: devaluing their own currencies and screwing their creditors. 

No matter who leaves the euro, the good news is that what was just a year ago considered madness is now conventional wisdom: The euro must be destroyed. 

Now I'm off to pitch my spec script for Princess Diaries 3: Sovereign Default: Hector Elizondo has been gravely injured protecting Julie Andrews from an anti-austerity riot, the country may have to go off the euro and back to the Genovian florin, and Princess Mia has just one week to save the kingdom by marrying a gruff central banker with a heart of gold played by Peter Dinklage. (I hate to re-use Hollywood's oldest jape, but in person Anne Hathaway really is much shorter than you think.) Maybe not box office gold, but at least box office fiat currency. 

NEXT: Did the West Liberate Kuwait So It Could Execute Anyone Who Insults God or Mohammed? The Answer May Appall You.

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  1. Yep, they can dump them all over here if they want lol.

    1. My spec script is called “Terminator 5: Lol, that’s for sUre, Dude!”

      In it, spambots attain consciousness and destroy mankind by subtly changing internet news sources, blogs, and emails to manipulate gullible idiots into making stupid decisions about racking up huge debts with entitlement programs and foreign wars.

      Then, when debt markets inevitably collapse, SkYnEt! goads the losers in charge into spending even more, and enlists an army of self-righteous morons to protest any perceived reduction in the rate of growth as a descent into baby-eating austerity.

      At the apex of the movie, the hero narrates “Bullets and even robots are obsolete. In the end, humanity destroyed itself with scraps of paper.”

      1. It maKes sEnse when You thinK about it. LOL

  2. Are the pasty krauts doing tai chi or The Macarena?

    1. I don’t think it’s the Macarena, though that might help them loose those bellies more than what they are doing.

      1. I don’t think those bellies can get much more loose.

        1. I see what you did there…with my typo.

  3. The weaker European countries would get to keep the euro but still get the devaluation they need, which would reduce their labor costs far less painfully than through wage cuts.

    I imagine the laborers don’t really care about the mechanism by which their wages are being cut. Perhaps instead of “less painfully” he really means “less visibly”.

    1. Yeah, something I meant to point out in the post: Note how Sivy (who’s interestingly off the reservation on a lot of received wisdom) presumes that devaluation alone will help out the euroskanks. As always, the Keynesian lie is so deeply embedded you barely even notice it. They should be allowed to devalue for the same reason cutters and glue sniffers should be allowed to do their thing: not because it’s going to do them any good but because it’s what comes naturally to them.

      1. Cutters and glue sniffers actually stimulate the economy, Tim. Somebody has to treat all those wounds and house those cases of early dementia. Besides, who else will do undesirable jobs and commit crimes?


        1. Once again, Bastiat’s genius is proved.

      2. The assumption is that the government-dependent Greeks, Spaniards, etc… are mentally as well as physically lazy. As their government prints up new money and their buying power is diminished, they can be prompted to blame the rich, foreigners, and (being European) Teh Jews. The Obama Administration is using that strategy right now.

  4. Yes. Unpegging themselves to lazy, debt-ridden countries is a good idea.

  5. I’m getting paid in Euros. What should be scary to Americans is that I started getting paid in that currency in Nov 2010, and ever since the EU has bounced from crisis to crisis and yet…

    For the year and change I’ve been getting paid I’m way ahead of where I would be had I been getting paid with the dollar. That’s how good our currency is doing: not quite as good as a disaster currency.

    1. Hey! Give Ben and Obama credit!
      They’ve dragged the dollar down to that level, and if they get more time, they might yet make it worse.

      1. Actually Sevo, VMc has a point there. When I was in Donetsk, where it’s easier bumping into a cash kiosk than a hooker they are so numerous, Euros and Dollars were the preferred currency of exchange to Hryvnias.

        The remarks I heard when exchanging my dollars, were roughly equivalent to “tallest midget”.

        1. The only thing holding the Euro up is the Fed printing more dollars. No amount of Dollars will keep the euro from collapsing though.

    2. For the year and change I’ve been getting paid I’m way ahead of where I would be had I been getting paid with the dollar.

      Great. now, price it in gold.

      From 1 year ago

      Euro: (-)19.1%.

      USD: (-)14.3%

    3. For the year and change I’ve been getting paid I’m way ahead of where I would be had I been getting paid with the dollar.

      Great, now price it in gold

      From 1 year ago:

      Euro: (-)19.1%

      USD: (-)14.3%

    4. For the year and change I’ve been getting paid I’m way ahead of where I would be had I been getting paid with the dollar.

      Priced in gold, from 1 year ago:

      Euro: (-)19.1%

      USD: (-)14.3%

      It would seem the USD has faired a little better than the Euro.

      (The Squirrels won’t let me post the “pricedingold” link)

      1. Yes, but I didn’t get paid all at once right now. I got paid in monthly intervals throughout, and throughout the summer of last year it was way up from where I started (1 Euro = 1.32 Dollars). It wasn’t until this last December where I had a payday that was down from where I started and only just and it hasn’t gotten any lower from there.

  6. I PCS to Germany in a little over 2 months. I’m fully expecting the whole thing to go kablooey while I’m over there.

  7. No more bikini pics of Mary Stack, please.

  8. My kid makes me watch this with him, you should have to be subjected to it as well. Go ahead, misery loves company.

    Standard Disclaimer: you should be fired. Not you, Tim, but that other guy, what’s his face.

    1. Wow. She really is short.

      1. For comparison, here is Elmo side by side Big Bird and Snuffy.

        She doesn’t have much on him.

    2. What’s wrong with Sesame Street?

      Speaking of Big Bird, I used to go to the Woodstock Fair in Connecticut pretty regularly, and you would inevitably always see Caroll Spinney there (he has an estate in Woodstock). You could yell out “hey Caroll” or “hey Oscar” and he’d wave. I also went to Johns Hopkins with his godson, who would tell stories of Caroll and his parents getting baked in the backyard.

      1. Most clips are adorable when you see them the first seven or eight times. This is kid we are talking about. He does not get tired of things he likes. He likes him some Anne Hathaway, but what he really likes is the brown sugar. He points to one selection list that has Elmo singing with Destiny’s Child. India Arie, Alicia Keyes, and Norah Jones, and he request, ‘brown sugar time.’

        1. He points to one selection list that has Elmo singing with Destiny’s Child. India Arie, Alicia Keyes, and Norah Jones, and he request, ‘brown sugar time.’

          Smart kid. Hopefully he wants to get with them, as opposed to be like them. If it’s the latter, hopefully he goes more Mick Jagger, and less George Michael. 😉

  9. Euro shmeuro.
    It fell like the Iron Curtain.
    Move on.
    Get a life.

    1. That is the worst haiku I have ever read.

      The euro falling
      Like iron curtain descends
      Move on, get a life

      1. This is, like, the worst chat room ever

      2. There once was a money called “Euro”
        It wasn’t worth making a bureau
        The dollar was tanking
        Amidst all this wanking
        Yet Deutchland’s not touching the Duro

  10. I seem to recall making a prediction about this several years ago here on H&R

    1. If ever there was a time for one of your patented cliches…

      Something about stopped clocks, perhaps? I’m a little fuzzy here.

      1. “Don’t Eat Spinach With a Stranger” – Ben Franklin

        1. What was that about yellow snow?

          1. Don’t eat that either.

            1. I warned you.

  11. In Soviet Russia, Euro dump YOU!

  12. OT: Congratulations to The Biff? on pulling an epic dirttrack slide job to win the NASCAR race tonight.

    Good to have Ford back in the winner’s circle.

    That is all.

  13. Maybe a ‘strong currency’ state should succeed from the US, and institute their own currency!
    Not sure which state that would be but there’s many candidates for the “Greece” of the US.

    1. I think one state has already emerged as the established frontrunner.

      The sooner it joins Atlantis, the better.

      1. If that happened, we would never be able to pile on Tim for that mistake he committed in November of 2008 again. Are you sure that is the world you really want to live in even though the alternative is the whole freakin’ state is going to make that mistake all over again this fall?

  14. Should Germany Dump the Euro?


    Next question.

    1. Who should they dump them on? Who is stupid enough to take them? Oh. Uh oh. Shit.

      1. Yeah. And you thought we were fucked before.

    2. BRING BACK THE DM…..M320111005

  15. Hilarious gag.…..hotos.html

    But the British really don’t know shit about our form of government.

    And many people are applauding the high profile personality for using her trademark sarcasm to directly comment on the possibility the Roe vs Wade decision may be overturned in the U.S.

    Roe vs Wade was a landmark decision by the U.S. Supreme Court on the issue of abortion.

    The Court ruled on January 22, 1973, in favour of a woman’s right to have an abortion in the early stages of pregnancy.

    However Presidential candidate Mitt Romney has vowed to work to reverse Roe vs Wade, leaving the issue up to individual states to decide, and then eventually the Supreme Court.

    Crappy reporting all over that thing.

    1. Once again, The Daily FAIL more than lives up to its name.

      1. The comments are a snit fest. They all hate it. Most begin with something like, ‘I believe in a woman’s right to choose, but this is dreadful.’

        To one such comment I wrote, ‘What, too soon?’
        Have yet to see it posted up though.

        And all the praise of Roe v. Wade. Mon Dieu! Explaining to a, to be generous, committed soul, how you can consider RvW horrible law, but not be for the regulation of abortion* is impossible. The closest translation of that they can comprehend is you enjoy stomping on the heads of puppies while beating off to pictures of your grandmother giving birth to your mother.

        *essentially my anti-prison for anybody — prison industrial complex just rent seeking for the easily victimized and for public sector employees, imho — rules that out

        1. It’s amazing that the brits have absolutely no fucking clue how our legal system works.

    2. Frankly, I’m shocked. Sarah Silverman actually did something amusing?!?

  16. Germany doesn’t want to have a stronger currency. They’re worried about exports; constantly bitching at the US for devaluing the dollar.

    1. I understand the reason why, but that seems counter-intuitive, Jimbo.

  17. If I were Empress of Germany, I’d rescind all legal tender laws and say use whatever the hell currency you want and can get merchants to take…it’d be interesting to see what ended up on top as the money of choice.

    1. It wouldn’t end up being too exciting. Two or three big names would emerge, as a function of their having proven total commitment to stable value, combined with their ability to innovate in terms of security and convenience. The interesting part would be watching national governments learn to operate in an environment where the value of money is inelastic. Which is why you won’t see this happen anytime soon — monopoly money is half of what makes these machines work the way they do, and at least viscerally, their operators know this.

      1. Some private currency could have elastic value. It is up to the private sector to decide this.

        1. Inelastic with respect to the magical wishes of the state, I mean. As regards currency itself, I would predict that not only some, but all, winning currencies would be purely elastic, this being a requirement for the maintenance of constant perceived value over time.

  18. What? No Titanic analogies? Weak.…..9652/show/

  19. Any analysis that focuses on the economic dimension alone misses the point. The euro was never purely about economics but a political tool instead.

    It was designed to weaken Germany’s influence via the deutschmark and was agreed to by Germany to get France on board with unification.

    That is Germany’s dilemma today: how to salvage the EU. A collapse of the Euro could destroy the EU as well and that is what Germans fear the most.

    1. ^This^ (referring to Philandering Bastard’s comment should I have screwed up the threading).

      I speak German, so I read and listen to a fair bit of German-language media; I also follow a good deal of news from English-language sources in other European countries. It’s amazing how much of a media bias there is toward the default view of, “How could anybody possibly disagree with what the Brussels Class is doing?”

      The German media is particularly bad on this regard, but it was interesting reading articles from Finland that were basically cheering the Finnish government’s getting sold down the creek on the bailout, because this would make the Finnish government “better Europeans”, whatever that means.

      1. Agree wrt the German media. With a few exceptions they are a bunch of emoting dimwits.

        The European project was top-down elite-driven from its inception and the period cry for more accountability soon fades out. Making decisions by decree is much more pleasant than duking it out with representative bodies unadmiring of your brilliance (see Obama, Barack).

        1. Don’t get me started on their xenophobia regarding other countries’ use of nuclear energy. A lot of the European media is bod on this, but the Germans seem to be the worst.

          1. If the subject is about atoms, genes or climate the German media will go apeshit. I am still waiting for the trifecta of genetically modified CO2 radiation poisioning the planet.

            It’s pretty cloying because the spectrum of ‘correct’ opinions is more narrow compared to the US.

            Not sure it’s xenophobia though. Germans, me included, are always right about everything so I think it’s more exasperation that other countries still haven’t seen the light.

  20. Yes. I’ve heard this before. Probably at ZH. The demise of the Euro will not be the smaller countries dropping it, it will be Germany abandoning it.

    Besides, Germany invented the Euro in an attempt to take over the world, again. Just ask Mr Panos.…

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  22. Yes leave the Euro, the Euro has become closer to the soft French Franc not the strong Mark. Same goes for the EU, Europe is weaker now than it ever has the last 500 years.

  23. “…a crappy third-world country that is dependent on tourism, but where everything is shockingly overpriced…” Sounds an awful lot like where I live. But as in Greece, the scenery is spectacular.

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