Random notes (or I am too lazy to write anything cogent today)

Financial Policy and the EU

Sorry if I was not terribly clear about how EU finances work (thank you, Herr Doktor Johnny.)

Perhaps the greatest problem that has confronted the European Union and its predecessors has been the coordination of monetary policies. One of the most infamous inflations in history, the German Great Inflation of 1923- 4, is one example. Since the 1950s, the western European states have sought to coordinate their financial policies in order to support the health of the entire system and to avoid trade wars between member states. The major concerns have always involved inflation and debt. Their have always been specific limits as to how much the national debt of any one state can grow with respect to GDP and how much currency can be devalued. There are no specific guidelines as to states can spend the moneys that are either achieved through taxes and borrowing. Should a state plan to violate the EU limits, it becomes a matter for interstate diplomacy: others states adjust their currencies and financial policies so that the shifts are not as shocking to their economies. The European Currency Unit, the predecessor to the Euro, is an example of monetary diplomacy. Whenever a state (usually France) desired to devalue a currency in order to encourage exports, others would adjust their policies to compensate. The effect was described as "the Snake." Ultimately, these are only targets: they do not dictate the fine details of how national economies would run.

The Euro is a different matter. It started as a German project because its citizens were alarmed by the implications of the Deutsch Mark becoming a reserve currency (they actually cared about hurting people in foreign countries.) This also merged with their efforts to keep debts down throughout Europe (Germans fear that debts cause destabilization, which is largely true.) The states that currently belong to the Euro zone have adjusted their economies to take into account the debt and inflation limitations such that they can support national health care programs. Britain, which has remained nationalistic and refuses to acknowledge the grander vision of the Union, has never adjusted its policies and has always been the EU laggard. Its health care is comprehensive and universal, but it depends on excessive borrowing where those of France, etc., do not. The larger problem, however, for Britain is not that its health care is too expensive, but it has not adjusted financial policies (as well as business strategies) to support it. I will admit that this may not be fair. Britain has reached a high-level equilibrium trap: its economy cannot reform. But Britain needs to join the Euro in order to survive. Its deficits and borrowing will not currently permit it. Britain can do what it wants, snubbing the EU and further damaging their economy in the process.

The good news is that whatever is left of the British comprehensive health care system will probably be better than whatever the US has.

Mike Watt is coming to town

He tours only once every two-three months, but I always feel the need to see him play.