Comment by fleitz | Hacker News Reader

Comment by fleitz | Hacker News Reader

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Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency. NYC and LA are MUCH further apart than Berlin and Athens. I fear your view of the modern economy is rather mercantilist and zero-sum rather than the capitalist view that the economy grows via increases in productivity. (Personally, I feel we are moving away from the productivity view towards an attention based economy)

Most of the arguments in regard to national economies make little sense in smaller geographic contexts, there is little worry that NYC is 'stealing' jobs from Wichita because of the various subsidies in NYC compared to the idea that China is 'stealing' jobs from the US. No one worries about the trade imbalance between Iowa and Alaska.

Why are we not worried about cheap Kentucky labour spilling into San Francisco? Most of the arguments made with regard to trade policies and imbalances are irrational, especially in light of the reserve currency status of the US dollar.

"Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency."

The problem is that you cannot have monetary union without political union.

EU rules notwithstanding, Germany and Greece are run by different governments, with different laws, constituencies, and operational capabilities (or lack thereof, in Greece's case).

As far as I know different states in USA have different laws (e.g. in Philadelphia you can't buy single bottle of beer in supermarket). Different states have different taxes. Some laws are nation wide but that's the same in Europe. If country does not put laws into its law base it should pay penalties (and you don't even have to be member of euro-zone for that). The only real difference between USA and EU is language however even that is not big problem (e.g. my country lost about 18% of population because of emigration to richer EU countries).

You are missing the elephant in the room. The US federal government spending accounts for around 20% of the GDP. A large portion of the automatic stabilisers including social systems (as limited as they are in the US) is shouldered by the federal government.

This is a huge stabilising momentum for the economy, because the government does not have to (and indeed it should not) reduce its spending due to financial pressures. There are no financial limitations to how much money the US federal government can spend.

(There are other considerations - in real terms, i.e. real capacity of the economy - that put a limit on how much spending would be wise, but since utilisation drops in an economic crisis, the room for additional non-inflationary government spending actually increases.)

None of this exists in the Eurozone. All spending within the Eurozone is done by actors that are financially constrained, and therefore there is much less momentum to carry on stability in case of a crisis.

Your answer is really good. Therefore I have dig a little bit deeper.

"As of September 2004 the U.S. Congressional Budget Office reported that federal government spending for 2004 was projected to be $2.293 trillion, or slightly less than 20% of the GDP. Of that, $159 billion was for net interest, $486 billion for defense, $492 billion for Social Security, $473 billion for Medicare and Medicaid, $191 billion for various welfare programs, $136 billion for "retirement and disability" benefits, and $64 billion was projected to be spent elsewhere." (from http://en.wikipedia.org/wiki/Government_spending)

Therefore your numbers are correct. It is big work to find numbers for the same year but for example military spending between EU and USA can be compared:

"The combined defence budgets of the 27 EU member states in 2008 amounted to €284.9 billion ($406,7 billion). This represents 1.63% of European Union GDP[2], second only to the US military's €477.4 billion ($620.5 billion) 2008 defence budget, which represents 4.5% of United States GDP." (http://en.wikipedia.org/wiki/Military_of_the_European_Union)

In this case we still have different agents but military spending has indirect economic effect on different EU countries (e.g. military airports in countries that do not even have its own war air planes).

Still your argument is really strong having in mind social security of federal budget's spending. Europe Union has its own budget as well but it is way smaller compared to US federal budget (about 1-2% of EU GDP vs 20% of USA).

Finally it is not very good to mix EU and Euro zone (because not all EU members have Euro).

New York and LA share a single central bank and a single set of federal law that is equally valid in both cities. Berlin and Athens have neither of these advantages. The Euro zone - while cool - is probably not quite cool enough to survive (my layman's perspective).

NYC and LA are culturally far closer than Germany and Greece. For a start, NYC and LA speak the same language.

More importantly, a New Yorker and an Angeleno pay the same federal taxes.

And they can switch places without hassle: labor mobility is a big part of what makes the US currency union work.

Actually there is Labor mobility between the States of the EU.

If you have an EU passport, mobility between EU countries is a piece of cake.

> mobility between EU countries is a piece of cake.

The whole "different language" thing stands in the way of this. Plus, the Okies never had to deal with Californian "nationalism" in the 1930s, while, on the other hand, if you're Polish, Romanian or Bulgarian and you've gone to Western Europe in search of a better job you're always looked at as a foreigner, a guy who "has come to steal our jobs and destroy our identity".

On a legal level, yes. But outside of software and some other "internationalized" areas, the lack of common language makes it kind of hard

Could you explain about 20% population loss to EU in Baltic states (Lithuania, Latvia, Estonia)?

In some professions (especially construction), the workforce is already mobile inside EU. In most others, it isn't. And this is mostly due to language issues.

The EU, unlike the USA, is much less centrally controlled, and has much less tax raising powers. In fact, it has none. We have 'european taxes' or 'federal taxes' here in EU.

So one country can do crazy things with it's finances, and the other countries can't really stop it.

We have 'european taxes' or 'federal taxes' here in EU

That should obviously be "We have no 'european taxes'..."

Your questions were all asked and answered by America's founders, hundreds of years ago. The EU is nothing like the US -- it's more like a collection of barely unified city-states bound more by treaties than a shared constitution.

The reason the Greek crisis may be more important than the introduction of the Euro is precisely because it may mean the downfall of the Euro, at least in some commentators' opinions. I don't personally have any insight into what might happen if/when Greece defaults.

Your summation of the EU actually sounds a lot like what the US started out as, save their constitution appears in multiple treaties. Almost all the properties that we think of a constitution as having are present in the EU treaties.

The founders certainly never envisioned a single unified fiat currency, in fact they were pretty much of the opposite view: Section. 10.No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

The founders mostly envisioned that the unifying currency would be gold and silver, it's understandable that the court would let early USD stand as it was effectively gold, however post 1933 (gold becomes illegal) / 1973 (US withdraws from Bretton Woods) it's difficult to make the argument that USD complies with the constitution, or any state law recognizing USD as payment of debt.

The constitution would only allow enforcement of the USD at the interstate commerce level but at this point interstate commerce means pretty much anything the Federal gov't wants to regulate that wasn't explicitly granted in the constitution.

This is a little off topic, but do you have any links to more information on the theory of "attention based economy"? It sounds quite interesting.

http://en.wikipedia.org/wiki/Coase_theorem http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-...

Think of it this way, all forms of social media are basically measuring attention. Pageviews, average visit, etc. Facebook is worth $70 billion because it can monopolize 15 minutes of the average users' attention per day. When people say that Win Phone 7 is doomed the underlying assumption is that developers will not give it attention and consumers will not give it attention because developers have not.

"When people say that Win Phone 7 is doomed the underlying assumption is that developers will not give it attention and consumers will not give it attention because developers have not"

Well... if this is a representative illustration of that "attention-based economy" idea, then I'd argue we've already had that for centuries now.

I assumed something along the lines of "being able to pay for my groceries simply by trading in some of my attention"... such as watching ads or simply spending my valuable time in the store -- both of which I arguably already do, except I still pay cash too.

How Coase relates to the social media "attention economy" idea on the above Wikipedia page: "This article needs attention from an expert on the subject."

I see.

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