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To the contrary, conventional economic theory, for all its faults, has been pretty clear all along that the Euro would be problematic for some European countries, and it has pretty clear solutions now -- let some Eurozone countries free of the Euro, and let defaults occur so that bankers bear the costs, not workers in indebted countries.

I'll have to look at that review, but what I see occurring, as Krugman and many others have pointed out, is a stubborn refusal to accept basic, textbook economic theory in the present situation in Europe as well as the US. Force banks to accept the losses on their balance sheets thus and relieve everyone, countries and individuals alike, from a significant portion of their debts. It's not theory that's holding things up -- it's the power of banks to stop any progress regardless of the facts.  

The whole "blame the economists" narrative takes pressure off the people who are really problem -- bankers. They're completely replaceable but have somehow convinced policymakers and much of the public that they are critical to everyone's well being.

by santiago on Fri Oct 21st, 2011 at 08:54:30 PM EST
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