Brit Humor

I think this apology would be even better if delivered while being held out a window, upside-down, by Herr Schäuble.

 

The Euro

I do enjoy reading Krugman, and I understand his continued hammering on the Euro (note: NY Times article link), but it kind of seems like shouting at the wind.  No matter how bad an idea the single currency was, and no matter how imperfectly it was implemented, unwinding it seems nearly unthinkable.  There was a moment of opportunity to do so when interest rates were all over the map, but it has mostly passed (of course it is likely to come again), and it passed because no one in the Euro-zone wants to go back.  I would rather hear ways to make the Euro function, than continued harping on why it was such a bad idea/implementation. 

The US does [fairly] well with a single currency (yes, I know, we have a fiscal union as well) and our states have a fair amount of autonomy, so it seems like the Euro could be made to work without complete fiscal integration.  e.g. Implement some baseline values--min wage, max retirement age, min retirement income, min unemployment benefits--that the various nation-states would be able to go above and beyond if they wished.  All of this would be covered by a Euro-zone tax that would be a % of GDP, with the individual nations able to determine how to levy that tax on their citizens.

Reading

I read and enjoyed the Mistborn series by Brandon Sanderson, which makes me want to read the Wheel of Time (I know, this is probably backwards for a lot of people, but meh).  I just saw that he has a new Mistborn novel.  Now I have to get up to date with A Song of Ice and Fire so I can read it.

Priced Out of Housing

David Atkins is having a go at this debate, but generally, I think he comes up short.  He goes off this piece from realtors, and accurately points out that whatever housing recovery we are having makes the problem worse.  His conclusion:

Keep in mind that policymakers are as we speak attempting to inflate the value of real estate, even as current prices make the traditional American Dream an unrealistic fantasy for most young adults.

The economy is broken, and none of the asset inflaters in government are even aware enough of the basic problems to even attempt a fix.

is not very good though.  The fix for this problem actually is inflation--just general inflation, not housing only.  By holding house prices down, current owners are worse off.  By raising those prices in an environment where overall inflation is very low, prospective buyers are worse off.  The best situation is to have higher general inflation.  That means higher income for prospective buyers and declining value of debt in real terms for existing homeowners.

However, the federal reserve isn't actually willing to do what is necessary in this regard (despite the fact that they are the only entity with that ability), so we are left with next best options.  In this case, because real estate has been a major drag on the economy, there is some hope that inflating house prices would lead to broader economic recovery, which would produce the necessary wage growth.  I'm not actually optimistic because 1. housing seems to be at a good point now, and so further price inflation may be bad, and 2. the fed is likely to kill any recovery by raising interest rates once inflation goes a tad over 2%.