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Funny what a chart will do. Coppola only posted the chart to knock it down. Her line is that neither the USA nor the Eurozone are OCAs, and anyway OCAs don't matter (if ever such a thing might exist).

Yet the majority of the comments here are on the charts, the metrics, the meta... ;)

((scratch))

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Apr 20th, 2015 at 11:07:51 AM EST
OCAs seemed like a relevant idea when people could still pretend that monetary policy reigns supreme. What regions of the world can float on the Great Moderation together? As it turns out that is a stupid question.
by generic on Mon Apr 20th, 2015 at 11:30:29 AM EST
[ Parent ]
USA might not be an OCA (I think it is silly to suppose that an OCA could not even exist - we do use currencies. Everyone having his own does not work, having a single one would likely not work either - so there must be some reasonable point in between).

But it is clear that the Eurozone is much less so, and I don't see how this would fail to be relevant.
My take is that the biggest problem is the lack of fiscal transfer, and (but they are linked) the political acrimony between countries.
In the US, despite the history of a civil war, a massive political chasm between the southern states and the rest, pretty much nobody (certainly from the states providing net support) is proposing ending major fiscal transfers. Contras that with the attitude of Germany, and much of the EPP, towards the periphery. I don't see that you could turn that into an OCA even with a single language and totally free movement of workers.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Apr 20th, 2015 at 11:42:38 AM EST
[ Parent ]
Cyrille:
we do use currencies

Indeed we do. But what examples are there of currencies that are not issued by sovereigns? The point about OCA theory is that it shows little interest in that. Mundell's theorising about it posited, one might think provocatively, that a nation state such as Canada might profitably be divided into two OCAs, East and West. This is not going as far as Hayek, (currency issued by private commercial concerns), but it is a neoliberal ploy to separate currency creation from sovereign nation states.

Whether it is workable or not depends on whether one thinks it possible for a non-sovereign to issue fiat currency. That is the experiment Europe is currently engaged in, and the outcome doesn't look too good. Building a single sovereign out of the multiple sovereigns of the EU should have been the horse before the cart. Instead of which, we have multiple sovereigns deprived of monetary and fiscal policy, and a non-sovereign attempting to enforce an OCA by means of "rules".

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Apr 20th, 2015 at 01:10:41 PM EST
[ Parent ]
Mundel grew up and went to grad school while the USA was on either the gold standard or the Bretton Woods 'dollar' standard with the dollar pegged to gold. It was the emanence of major gold flows in 1971 that compelled Nixon to 'close the gold window' and stop the exchange of dollars for gold. Mundel had proposed raising the peg to $45/oz to Nixon during a long plane flight during the '68 presidential campaign, but Nixon was too distracted to listen. Even so, raising the peg for gold would have been a hard sell. The very idea makes most 'gold bug's' heads explode. To them it undercuts the very point of a gold standard while appealing to the 'common sense' of a majority of the electorate.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 20th, 2015 at 01:23:43 PM EST
[ Parent ]

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