A hard currency backed by specie like gold or silver imposes sound economic policies on the nations that use them, but currency established by central bank fiat requires sound policies to be established by political mechanisms in concert with the support of the electorate. In the case of the stagnation in Greece, the European Union is effectively imposing fiscal discipline, and Greeks have resisted that outside influence.
In order for Greece to put its monetary house in order, it will require the political will to establish fundamental structural reforms, along with a population that demands leaders who will implement them, argues Jerry L. Jordan, senior fellow with Atlas Network’s Sound Money Project, in a new analysis for RealClearMarkets.
“The Greek economy has become ossified by its regulations, tax laws, labor and environmental laws, pensions systems, cronyism, patronage and corruption in the legislature, as well as barriers to foreign capital,” Jordan writes. “The stagnation of the Greek economy was not caused by foreign-imposed ‘austerity,’ but by domestic policies built up over decades. Greek citizens must now make a fundamental choice—doing nothing is not an option. Either abandon their overwhelming preference for a stable currency offered by remaining in the euro zone, or support politicians who clearly and firmly advocate fundamental structural reforms for the right reason-because it will be good for Greeks in the long run-not because evil foreigners are demanding such punishments for past sins.”
Read Dr. Jerry L. Jordan’s full commentary at RealClearMarkets, “’Foreign’ Money and ‘Austerity’ Haven’t Caused Greek Stagnation.”