[nordsieck]

> America decided dollars should float in the 70s, and most of the world followed.

Except that a bunch of countries in Europe went back to pegged currency with the Euro[1]. Part of the reason the 2008 crisis hit countries like Italy, Greece, and Ireland so hard.

---

1. Yes - the Euro is not technically pegged; but effectively, it's the same thing. Each individual country in the Eurozone can't engage in independent monetary policy.

[MrRadar]

I mean, the US Dollar is a "pegged" currency under that definition too. A while ago I read an economic analysis that said the US would optimally have five regional currencies (instead of the single one that it has today) to account for internal trade and wealth imbalances.

What makes the US dollar work in practice is the active role the federal government takes to internally rebalance the economy through taxation and spending, particularly with defense spending and social programs like Social Security, Medicare, and the FDIC. People in wealthier states (including myself) like to complain that we get a bad deal because we get less back from the federal government than we pay in but that's a crucial feature of the system that keeps it from getting too unbalanced.

Additionally, in the US the federal government (for all practical purposes) is not required to maintain a balanced budget while the state governments are. This constrains the ability of state governments to issue too much debt while still providing a relief valve for emergency spending needed during economic downturns or other crisis (such as the COVID-19 pandemic).

I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).

[nordsieck]

> A while ago I read an economic analysis that said the US would optimally have five regional currencies (instead of the single one that it has today) to account for internal trade and wealth imbalances.

That seems pretty silly on its face, but I suppose I've been persuaded of stranger things with a good argument.

> I mean, the US Dollar is a "pegged" currency under that definition too.

Yes and no. My point about pegging a currency really is about organizations that tax, borrow, and spend a currency they control. So the US Government has nothing to worry about in that regard. But all of the sub divisions definitely do - various states, counties, and cities regularly flirt with bankruptcy from time to time.

> I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).

I think, that will be a difficult decision point for the EU. I'm just not convinced that enough members want the "United States of Europe". National identity is much stronger in Europe than it ever was in the American Colonies pre-Constitution.

[ivan_gammel]

It will be the last in the long chain of decisions that will span over a few decades, and as such will likely be digestible for the majority. EU was never fast, but at the same time it was consistent in integration effort.

[HillRat]

Turns out having a monetary union but not a fiscal one is really destabilizing when things go wrong!

[KarlKemp]

The Euro was introduced 23 years ago. It has successfully weathered one domestic crisis in addition to the dot-com bust and the 2008 US banking meltdown. Its exchange value has been stable and the Eurozone economies have fared better than, for example, the UK.

I'll take the Euro over any cryptocurrency any day, thanks.

[from]

https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?locat...

On a PPP adjusted basis Italy/Spain/Portugal are no richer than they were 20 years ago. They can no longer devalue their currency like they used to when they ran into trouble.

[govg]

In terms of the Euro, I find it more useful to view the Eurozone as somewhat similar to the US. There's one central monetary policy for really large economies that in a different environment, would have liked to do things independently. It's especially relevant now as US states have GDPs comparable to the Eurozone constituent nations.

[nordsieck]

> In terms of the Euro, I find it more useful to view the Eurozone as somewhat similar to the US. There's one central monetary policy for really large economies that in a different environment, would have liked to do things independently. It's especially relevant now as US states have GDPs comparable to the Eurozone constituent nations.

There is an enormous difference, though: internal mobility/identity.

Germans tend to strongly prefer living in Germany. Greeks tend to strongly prefer living in Greece.

People in Oregon and New Hampshire tend not to have very strong affection for their state.

Which means that, if one area is economically depressed at the same time that another area is booming, the problem tends to sort itself out as people move from the struggling area and to the prosperous one.

In Europe, that just doesn't happen to nearly the same extent.

[JumpCrisscross]

> People in Oregon and New Hampshire tend not to have very strong affection for their state

No, but people in the South have an affinity for the South and people in coastal cities have an affinity for those, too.

[brewdad]

> People in Oregon and New Hampshire tend not to have very strong affection for their state.

Did you miss the article last week on HN where 60% of American adults live within 10 miles of where they grew up? People in the US absolutely have a strong affinity for their states. Just as in the EU, they may choose to leave for better opportunities however.

[jimbob45]

People in Oregon and New Hampshire tend not to have very strong affection for their state.

This sounds like the opinion of a European who has never actually lived in the US. People are much more married to their states than it seems that you'd believe.

[danaris]

And even moreso to their cultural regions.

While someone from (say) Connecticut might not think much of moving to Maine, they would probably feel different about moving to Iowa, Washington, or Alabama.

Here's one of the various maps I've seen of US cultural regions: [0]

It seems to be accurate for the areas I know anything about; I can't speak for it in other places.

[0] https://preview.redd.it/ntsqzyp8uq531.png?auto=webp&s=afb643...

[notch656a]

Just bringing your stuff with you from one state to another could make you a felon, making people very locked in from moving across certain states. Someone in Idaho would become a felon for bringing their (Idaho legal) AR-15 into California while the person in California would become a felon for bringing their (California legal) weed plant into Idaho.

A lot of these states have backdoor ways of keeping out culturally incompatible folks from moving state to state by making mere victimless possession of certain items disproportionately linked to certain American cultures into felonies.

[MomoXenosaga]

Lots of young people in Greece who actually want a job and career prospects move.

This is not new in the 17th century Dutch VOC ships were crewed by destitute Swedes and Germans. Mobility in Europe is high which is why you can get excellent baklava and spaghetti as far as Helsinki. This is why the European Union makes sense.

[govg]

I can't comment on Europe simply because I haven't lived there, but in my experience the US isn't at all like you mention. Sure, there might be states where people are willing to move, but if you think of cultural regions more and states less, people never leave certain areas their entire lives. I'm talking about areas like PNW, New England, Upper Midwest, Southern states and so on. This is very similar to your case, it is just that the US is far more fragmented in some sense, and some states can be similar to others.

[klodolph]

Just to pick an example like “PNW”, if you look at a city like, say, Portland, less than half (44%) of the residents are from Oregon at all.

https://worldpopulationreview.com/us-cities/portland-or-popu...

If you look at where people migrate from,

https://depts.washington.edu/moving1/Oregon.shtml

California and Washington are the major sources (of course!) but (1) California is not PNW, and (2) places other than CA/WA contribute many more migrants.

[tacker2000]

What are you talking about? The euro is NOT pegged and your last sentence doesnt change that.

[hardlianotion]

OP just meant that countries adopting the Euro lost the ability to conduct independent monetary policy, similar to if they had pegged their currency.

[gpderetta]

A bunch of currencies were pegged to a virtual euro a few years before its actual introduction, but those currencies do not exist anymore, so to say they are still pegged doesn't make any sense.

[notch656a]

Euro floats.

[klodolph]

Comment is saying that having Euro as your currency is, in some ways the same as pegging your currency to the Euro. As in “1 Ireland Euro” equals “1 German Euro”.