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You might want to stop thinking in scholarly rules. This isn't the economy 101 exam. We have a political as well as an economic problem here.

The debate was about what Greece would do to restore productivity and/or competitiveness and get a grip on its debt.

Why on earth would Greece, in your opinion, want to go the "New Drachma" way? Even though that is, by all reasonable predictions, incredibly painful?

The only advantages are that Greece could

  • create high inflation in a number of ways
  • print serious amounts of money (which creates high inflation as well).

The only reason to go New Drachma is that it wants one of these badly enough.

As long as Greece actually strives for a hard currency, it could stay in the Euro just as well, default or not.

The nice thing about inflation for politicians is that it is comparatively easy to implement, politically, and that it solves their competition problem.

by cris0 on Sat Feb 18th, 2012 at 10:48:49 AM EST
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