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The same mistake made at Bretton Woods, and for exactly the same reason, failing to solve exactly the same problem.

Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 10:30:54 AM EST
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The overwhelming dominance of one player?

It is very difficult for a political process/negotiation to solve that problem unless all the other payers have a united and coherent opposing position.  So far the Eurozone crisis has seen a conspicuous lack of solidarity of anyone with or for anyone else.  It's every member for themselves at the moment with the majority keeping their heads down and hoping not to have to get involved.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 10th, 2011 at 10:38:20 AM EST
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The problem is the macroeconomic instability resulting from the tendency of trade balances to grow more lopsided with time. The solution is the introduction of penalties on net exporters. The difficulty is that, until a crisis hits, there is no incentive to do anything, and after the crisis hits the exporter of last resort has everyone else over a barrel.

See: the US at Bretton Woods, China at the G20, Germany in the Euro.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 11:03:31 AM EST
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