Simple Solutions for Greece, et all

So Greece has been in the news a lot recently, as a predictable culmination of a sequence of intentional steps which have brought the world to this point. To recap, an abbreviated summary:

• Greece develops a culture of entitlement, with an economy heavily dependent on tourism and healthy government benefits for the people, such as government pensions and a retirement age of 50
• Greece joins the EU to establish a common currency, which helps their tourism industry, but like other socialist-leaning countries ignores the nominal requirement to be nationally fiscally sound
• Greece runs up large deficits which they cannot pay, requiring initial bailouts, which are granted because the EU is afraid of collapse should a member state default (and due to pre-existing financial rescue efforts and organizations, such as the IMF)
• Greece doesn't change any of their policies, or enact any meaningful reform, and in a couple of years obviously needs further handouts to pay their ever-increasing bills
• The EU government balk at funneling any more of their citizens' wealth to the effectively financially (and arguably morally) bankrupt Greece
• The people of Greece double-down, and elect a pure socialist ruler on the premise of giving the colloquial finger to Greece's international creditors, while increasing the government benefits for the people (method of paying bills is unspoken, of course, since it doesn't exist)
• Greece's government goes to the EU and demands more multi-billion euro handouts, but the EU countries have developed a modicum of common sense, and rebuke the idiotic demands
• Greece's prime minister doubles-down again, calling for (and winning) a referendum from the people of Greece to say "FU" to their creditors, because somehow (in the prime minister's logic) this will make them more likely to throw their money into the black hole of Greece's bankrupt system
• Greece submits a new proposal to get a new handout, which is just as absurd as the previous ones, but inexplicably the EU states consider agreeing to it (or at least pretend to, which is equally absurd)

So that's where we are, going into this weekend. It would, of course, be monumentally stupid (as well as a financial betrayal of their own people) for the EU countries to give Greece any more money, but that's not what I really want to write about. What I'd like to consider, instead, is how to conceptually fix the EU's charter to prevent the inevitable repeats of the Grecian meltdown (looking at you, France, and other unsustainable socialist "economies").

See, the real problem is not that hard to solve (looking past political issues). What Greece needs, and indeed what the EU needs in general, is for the member states to be required to denote all of their own borrowing and governmental obligations in their own state currency. Note that this currency might not even need to exist in any physical form; rather, all that is required is an electronic market for currency exchange between the individual nation-state currencies and the euro.

How would this help? Well to start with, countries would no longer need bailouts; they could, in cases of high debt, simply create more money to pay those debts (since all debts are, by charter/definition, denoted in the national currency). Creditors will, of course, demand interest rates proportional to the risk of devaluation through monetary creation, but that's a good thing: the demanded rate will be a direct reflection of how successful the monetary policies of the states are perceived. Moreover, the country could never run out of money, again by definition.

What about the people? Well, it turns out that the proposed scheme would address many of the governmental fiscal policy issues automatically as well. Overwhelming pension obligations? A non issue: the would be denoted in the national currency, and devalued automatically. Too many highly paid government workers? Not for long, as effective salaries are reduced through monetary devaluation. Essentially, the unsustainable debt load would fix itself, automatically.

Is that bad for the people? Well, that's a more complicated question. In the short term, it would certainly be painful, there's no question. However, it could actually be beneficial in the longer term, as perceptions and behaviors change by necessity. With the advent of devaluations and inflation, the countries would be forced to confront economic realities, with much more real-time feedback. Moreover, it would be much more difficult to create unrecoverable circumstances, as the economy would be constantly adjusting to economic reality. Thus, hopefully no more politicians winning elections by ignoring reality, as the realities would be much more obvious to the electorate.

Lastly, perhaps the most important question: would it work? Well, I think it would... but that's just my opinion, I could be wrong.