Ultimately, an economy can only sustain itself if it produces more than it consumes. That’s a lesson that the Soviet Union learned the hard way decades ago, explains Atlas Network Sound Money Project Senior Fellow Jerry Jordan in a column for Forbes, but Greece seems determined to continue its high levels of spending and consumption at the expense of others rather than creating an economic climate that would foster investment and growth.
“Increasing prosperity comes from innovations and entrepreneurial skills that create things of greater value. European lenders aren’t seeing this from Greek borrowers,” Jordan writes. “Sound money provides an environment where all observed price changes can be understood to be signals that real values are changing—something is happening to either the supply of or demand for something—so resources can be shifted toward the relatively more valued, and away from the relatively less valued. When money is not sound, a form of static is introduced into the marketplace; mistakes are made, resources are mis-allocated, prosperity is eroded.”
If Greece opts to leave the eurozone and reinstitute a national currency that it devalues in order to continue the government’s wasteful spending, it will be choosing a path of “stagnation and economic decline,” Jordan argues.
Read Jerry Jordan’s full analysis at the Forbes website.