Is the Euro harder to escape than the Gold Standard?
by Gonzalo Schwarz
Spanish economist Jesús Huerta de Soto just published a new article entitled “An Austrian Defense of the Euro.” In this paper Huerta de Soto develops an argument based on the lectures given by Nobel laureate Friedrich Hayek in the 1930’s at the Graduate Institute of International Studies in Geneva: “Monetary Nationalism and International Stability.” The essence of Huerta de Soto’s argument is that the Euro is a great obstacle to monetary nationalism, one of Hayek’s main concerns. He mentions in the article that the Euro serves as a strong constraint on the countries.
Nowadays in Europe, when countries are facing a severe crisis, monetary policy cannot be used as a tool to hide the inherent structural problems in the labor market, fiscal scenarios, or other main causes driving the crises. Huerta de Soto sustains that an inability to resort to this tool will force countries to face their problems and enact profound reforms. He argues that the Euro serves as a straight jacket, in some sense more effective than gold, as countries face a bigger challenge dropping out of the Euro than out of the Gold Standard. This is due to the fact that having to create a new currency system from scratch is more difficult than merely de-linking a currency from gold.
Of further note, an essay contest held by the Mont Pelerin Society, and based on the same Hayek lectures and essays, was held recently. The announcement of the winners can be found here.