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"Krugman has argued that leaving a monetary union and adopting one's own currency allows the option of devaluing your new currency. While this has the effect of lowering wages and increasing prices in the short term, it also makes your products less expensive to global consumers, which gives a boost to exports and eventually to job creation. This economic boost becomes the foundation for growth.
"Indeed, the arguments for California exiting the dollar zone are stronger than those for Greece and Ireland to exit the euro zone...California is doing worse than either Greece or Ireland.."
The article goes on to state that if California withdrew from the dollar and created its own currency it would go from being an economic basket case to being in a stronger position than the rest of the USA. ISTR there are some Constitutional obstacles to states withdrawing from the national currency. Is it possible for a state to withdraw from the dollar without seceding?
No, it's not possible to withdraw from the dollar zone within the USA.
The argument why leaving a monetary zone in Europe is because their economies (and populations) are much more independent that US states. People speak the same language, have a relatively similar culture throughout the US. If the Californian economy does badly, Californians can leave for another state. Greeks would not want as much.
Indeed, one of the bizarre qualities of how the transfer union works in the United States is that the more liberal blue states have been subsidising the conservative red states, even as the red states complain about "big government" and "government welfare", and like to sneer at California – despite its longstanding benevolence toward these states.
omg it is almost as if I wrote this article myself.
No, it's not possible to withdraw from the dollar zone within the USA.
I believe there are Constitutional issues involved, what are the relevant portions of the Constitution that prohibit withdrawing from the dollar zone but remaining within the USA?
If it was possible to withdraw from the dollar zone, I'd guess not only extremely financially troubled states like California would want to leave the dollar zone so as to control their currency, but also libertarian leaning Northern New England and Mountain West states might want to withdraw from the dollar zone in order to return to the gold standard.
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The argument why leaving a monetary zone in Europe is because their economies (and populations) are much more independent that US states. People speak the same language, have a relatively similar culture throughout the US.
While there are not as many regional differences as half a century ago, there still are some. And many states have large populations who don't speak English and/or have co-official languages (usually Spanish but a couple of states have French as co-official)
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If the Californian economy does badly, Californians can leave for another state. Greeks would not want as much.
So how does that explain that the cities with the 2nd and 4th largest Greek populations in the world are not only not in Greece but not in Europe? (Sydney and NYC, respectively). Not to mention that Greeks do well everywhere in the world except for Greece itself.
I doubt any state could devalue a currency faster than The Fed is devaluing the dollar (in order to monetize the huge debt created by Washington). The dollar lost 95% of its purchasing power under their rule, even though The Fed was established to regulate the value of the dollar, and 20% in the last 5 years alone.
As an employee of a company that doesn't deal in exports (like 90% of American companies), I don't see how I'm supposed to benefit from the wages I get, and the savings I have, being deflated. It's the same effect as if we had a stable dollar but I got paid significantly less every year, and sending 20% of my savings principal to Washington for the 5 year period (in addition to current taxes on wages and interest). Isn't it bad enough that wages stagnated in the 1970s while cost of living continued to rise, and employers have increasingly shifted the cost of benefits to workers?
It seems like every policy of our government is meant to equalize us with the Third World. If that is their intent, they are succeeding.
I doubt any state could devalue a currency faster than The Fed is devaluing the dollar (in order to monetize the huge debt created by Washington). The dollar lost 95% of its purchasing power under their rule, even though The Fed was established to regulate the value of the dollar, and 20% in the last 5 years alone.
As an employee of a company that doesn't deal in exports (like 90% of American companies)
Which is unfortunately something that has hurt the US economy even more than it would be hurt in another severe downturn. Notice that the nations that have fared the best in the crisis are those who are oriented towards exports. The size of the US market caused too many companies to get lazy. If the US economy had followed an export-oriented model it would be in better shape today and so would most Americans. Germany has followed an export oriented model and has recovered all the jobs it lost since 2007.
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I don't see how I'm supposed to benefit from the wages I get, and the savings I have, being deflated. It's the same effect as if we had a stable dollar but I got paid significantly less every year, and sending 20% of my savings principal to Washington for the 5 year period (in addition to current taxes on wages and interest). Isn't it bad enough that wages stagnated in the 1970s while cost of living continued to rise, and employers have increasingly shifted the cost of benefits to workers?
It seems like every policy of our government is meant to equalize us with the Third World. If that is their intent, they are succeeding.
True.
As mentioned I could picture certain states, like New Hampshire or Montana, leaving the dollar zone in order to adapt commodity backed currency which would be STRONGER than the US dollar. This would benefit those living in those states.
I believe there are Constitutional issues involved, what are the relevant portions of the Constitution that prohibit withdrawing from the dollar zone but remaining within the USA?
There are constitutional issues involved and no California cannot leave the dollar zone. Article 1 sec. 8 says that the power to coin money and regulate the value thereof is reserved to congress. People have argued that this makes the federal reserve unconstitutional, but that is neither here nor there.
This is a ridiculous idea. All of California's debts are in dollars, not Calibars. Thus, Calibars may certainly be printed (if made legal) but then they would have to be traded on a monetary exchange into dollars. One or a million Calibars would be worth 0 dollars.
There are constitutional issues involved and no California cannot leave the dollar zone. Article 1 sec. 8 says that the power to coin money and regulate the value thereof is reserved to congress. People have argued that this makes the federal reserve unconstitutional, but that is neither here nor there.
It would mean that the Fed as it is right now is unconstitutional unless its independence was ended and it was put under the direct control of Congress.
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