For those of you who can speak Spanish, the link is here.
During the interview, JHS mentions a couple times that Spain is better off with the Euro than the Peseta. He's coming from a different background than we are in the US, but here we get our hackles up when people talk about any sort of international government extension, money included. I can't imagine too many of us would support the alleged Amero, for instance. Yet here is Jesus Huerta de Soto saying that without being in the Euro, Spain would be going through an inflationary recession, which is the worst of both worlds.
Any thoughts on this?
Every decent man is ashamed of the government he lives under - Mencken
If a respected economist like him says something, it's worth thinking about.
They may have been better off not going in, but now they are there he may be right. What he is saying is that money printing is the worst evil, since turns all purchasing power to zero, and not having their own money stopped that
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It's easy to refute an argument if you first misrepresent it. William Keizer
Smiling Dave: If a respected economist like him says something, it's worth thinking about.
Amen.
Smiling Dave:What he is saying is that money printing is the worst evil, since turns all purchasing power to zero, and not having their own money stopped that
Sure, I understand, it just struck me as strange. I am so used to preferring government as local as possible - if it's going to exist anyway - that his comment gave me a bit of whiplash.
Do you think it's true? Is Spain better off with the Euro than the Peseta?
I was shocked too.
As for is he right? How do I know? Im an amateur.
Keep in mind that many of the former national central banks were much more inflationary than the ECB is today. Italians, for example, were used to paying with bills that featured a lot of zeros before the introduction of the euro. All in all, local government is much more preferable than a centralized state as propagated by EU intellectuals. In this case, there just happened to be historical and sociological tendencies that mediated the reckless inflationary policies of many European states through the creation of a European central bank. It's not in any way a representative example of the success of big government.
Sphairon:In this case, there just happened to be historical and sociological tendencies that mediated the reckless inflationary policies of many European states through the creation of a European central bank. It's not in any way a representative example of the success of big government.
Good answer.
I believe Huerta de Soto is well known for this controversial stance in libertarian circles, though Philipp Bagus's new book about the Euro supposedly got him to change his position.
I don't know much about the Euro and nothing at all about Spain's financial position, but I can understand why something like the Euro could be preferred to the (practical) alternatives.
Of course Spain is better off with the Euro. They (along with Greece, Italy, and Portugal) are able to live their socialist lifestyles at other's (Germany) expense. Who wouldn't want this type of relationship?
It's similar to the United States having the world's reserve currency. As Americans, this benefits us, because we live off the productive capacity of the producing nations. Our service sector economy is propped up because of it.
One of the main "weaknesses" from the mainstream point of view is that Spain cannot devalue its currency in the face of deflationary pressure. That is what Huerta de Soto is talking about. The problem is that instead Spain is hostage to the ECB's monetary policy.
What a lot of (American) libertarians seem to forget is that the euro is actually relatively more independent compared to the dollar. Furthermore; the euro is also more independent than the previous national currencies. The Belgian frank - I'm Belgian - has a worse track record than the euro so far and I think, all things considered, that the Belgian civilians were lucky to have the euro. Our government would otherwise have inflated our currency tremendously by now.
The good thing about the euro is that the political influence in the ECB is relatively small ànd in so far that there is political influecen, it's comming from the European union, which has a lot of conflicting (monetary) ends, so they can just basically ignore it. Hurray for the lack of democracy on the European level! :p
In any case; I'm not defending the euro per se. Just sayin' that it's not as bad as it use to be. And I also don't really agree with all the economists who keep saying that the end of it is near. I really don't see any reason to. Did the dollar stop because California was bankrupt? :x
I'm not an economist, so please take my comments with a grain of salt. And I will be reading Bagus his book after my exams. But really; the euro is a tat more complicated than some Americans give it credit.
The state is not the enemy. The idea of the state is.
From what I can understand it seems Professor Huerta de Soto thinks Spanish bureaucrats and politicans are even less trustworthy when it comes to money than German and French ones, their only weapon being steady monetary inflation to make the country more palatable on the cheap (no need for complicated and politically suicidal "reforms") and to effectively debase a steadily growing national debt.
There's no telling if Spain (or other parts of Europe) would fare better or worse than their doing no without the euro because the euro was just part of much more complex "masterplan" that included much more than a single currency. And right now dropping the euro is not an option for "second tier" members like Spain: the future of the currency lies in Berlin.
In these days I was thinking about real, everyday price inflation we experienced since the euro kicked in at the beginning of 2002. First year was really bad, followed by two and a half more year of steadily increasing prices. Halfway through 2005 it slowed down, then picked up again in 2008, slowed slightly in 2009 and came back with a vengeance in 2010. Except for fuel prices when crude oil prices collapsed at the end of 2008 we haven't experienced declining prices usually associated with a recession: we have entered the "worst of both world" scenario, an inflationary depression with no end in sight.
US, you are not alone.
I can't speak or understand Spanish, but if he does say what you claim, then it's really no surprise. It's no secret in Europe that it seems to be culturally ingrained to spend like drunken sailors in several of the "Latin" countries (e.g. Italy, Spain, France). If the monetarily-conservative Germans weren't holding the Euro by the balls, inflation would go out of control in Europe. The way I see the Euro, it's nothing more than politicians from non-German countries handing power over to the ECB and begging their more conservative members to keep the non-German countries in line. The whole "trade is cheaper with a unified currency" deal is only a marginal side benefit when compared to how much better off countries like Italy and Spain are now that they don't have 20% inflation.
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As Hoppe is fond of reminding us, competition for the production of goods is desirable, but for the production of bads (inflation) you do not want competition. The fact that the ECB locks European states out of monetary policy is a safeguard for the European people.
The ECB can and will still inflate however, which is how Spain had such a big real estate bubble.
The fallacies of intellectual communism, a compilation - On the nature of power
krazy kaju: I can't speak or understand Spanish, but if he does say what you claim, then it's really no surprise. It's no secret in Europe that it seems to be culturally ingrained to spend like drunken sailors in several of the "Latin" countries (e.g. Italy, Spain, France). If the monetarily-conservative Germans weren't holding the Euro by the balls, inflation would go out of control in Europe. The way I see the Euro, it's nothing more than politicians from non-German countries handing power over to the ECB and begging their more conservative members to keep the non-German countries in line. The whole "trade is cheaper with a unified currency" deal is only a marginal side benefit when compared to how much better off countries like Italy and Spain are now that they don't have 20% inflation. As Adrian Healey said the euro is much more complicated than conservative German bureaucrats reeling in their inflation happy colleagues. I really cannot wait to get my hands on Bagus' book to learn more about the intricancies. Together we go unsung... together we go down with our people | Post Points: 5
What Huerta de Soto said was that Spain would be going through hyperinflation if weren't on the Euro standard, thus, Spain should be thankful that it it's on the Euro standard.
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
It would all be the exact same case if the entire Latin America were using the American dollar, and it certainly was the case, considering that Argentinia's use of dollar reduced its inflation from 1400% to 4%. Shocking.
Jonathan M. F. Catalán: One of the main "weaknesses" from the mainstream point of view is that Spain cannot devalue its currency in the face of deflationary pressure. That is what Huerta de Soto is talking about. The problem is that instead Spain is hostage to the ECB's monetary policy.
It seems to me a case of remote government, by chance, being more fiscally sane than what the more local alternative would have been (arguably). In the long run, though, I would prefer, if I were a Spaniard, more local government.
Stranger: As Hoppe is fond of reminding us, competition for the production of goods is desirable, but for the production of bads (inflation) you do not want competition. The fact that the ECB locks European states out of monetary policy is a safeguard for the European people.
So that raises an interesting question: as long as politicos and bureaucrats operate under the foolish idea that what is good for exports is good for the country, is something like the Euro a better (less bad) idea?
There was a lot of support for the European Union early on in Spain because the autonomous regions found it as an opportunity to reduce the power of Spain's central government, in favor of these regional governments (specifically, Cataluña and País Vasco). After it became obvious that this wasn't going to be the case, support for the European Union began to wane, because it wasn't apparent that the European Union was any less interventionist than the Spanish central government. To clarify, it's not a question of interventionism, as those regional governments tend to be extremely interventionist (and almost socialist), but of which government commits to the interventions. Apparently, local tyrants are better than 'foreign' tyrants.
What surprised me of Huerta de Soto's opinion is the wide availability of literature that warns against pan-national currencies, including Hayekian and Misesian arguments against the post-WWII bancor (Keynes' alternative idea at Bretton Woods). Mises warns against such currencies in Human Action, noting that the competition for inflation is more dangerous, or just as dangerous, than inflation by a local central bank.
Darn it, Jonathan.
I was carrying around the idea that if we could allow all foreign currencies as legal tender in a single country, then inflation by all those foreign countries would be limited when it leads to outflow of reserves from one inflating central bank to the less inflating central bank.
Usually, inflation that causes outflow of reserves leads to capital controls.
But surely capital controls are a crude and inefficient solution. On the government's part, I mean.
Will they eventually block foreign withdrawal of money completely? A bank can only attract as many deposits as depositors in general are willing to trust with them. And if there is a bank that does not allow them to withdraw money abroad, people might be less inclined to use its services.