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Per Westermark
02/29/12 17:01
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#186306 - Devaluation of money
Responding to: Kai Klaas's previous message
When a "normal" country gets into a financial crisis, the normal way to solve it is by devaluing the currency. Making the own currency less valued means that foregign products will be expensive. So more of the money will stay in the country. And it will be cheap for other countries to buy products from that country, so foreign money will flow to country.

When having a common currency, you can't suddenly devalue the currency for a single country. So the alternative then is to decrease the salary of everyone in the country giving the same effect. Own products will be cheaper so will sell more on export. Foreign products will be more expensive, so own money will stay.

Problem is that it isn't a politically easy solution to tell everyone that they have to get a reduced salary. So politicians try alternatives - or try to do nothing at all. And the wheel of bad fortunes will spin faster and faster. The problem here is to get the total amount of greek money to get in balance with the perceived value of all products in Greece. One way is to give Greece huge amounts of money. But other countries don't want to "buy" a significant percentage of a country (without getting any profit from it) just because that country have not been run properly.

So the Greece problem will not go away until one or more groups of people have decided, accepted, realized (insert whatever suitable word here) that they have to sacrifice a lot to get amount of money in balance with perceived value of all goods, companies, ...

Have you seen many politician sacrificing their career (and maybe their life) by really, really telling the people that no one will come and buy their country. Or invest money without expecting a lot back. That foreign help will require huge national sacrifices too.

List of 21 messages in thread
Greece Crisis      Satish S Munot      02/29/12 13:06      
   when        Erik Malund      02/29/12 14:42      
      do you mean      AP Charles      05/19/12 00:24      
   Well, ...      Andy Neil      02/29/12 15:33      
      Insufficiant effort      Satish S Munot      03/01/12 00:12      
         war?      Stefan KAnev      03/01/12 02:13      
         war wouldn't solve the problem      Richard Erlacher      03/01/12 06:58      
            War?      Per Westermark      03/01/12 07:22      
               Capital of Greece?      Murray R. Van Luyn      04/29/12 03:06      
   As always...        Kai Klaas      02/29/12 16:23      
      Devaluation of money      Per Westermark      02/29/12 17:01      
         That's exactly the solution ... however ...      Richard Erlacher      02/29/12 20:33      
            Social progress and change is often slow      Per Westermark      03/01/12 03:01      
               (SP)Stander & Poor Ratting      Satish S Munot      03/01/12 10:49      
            return to the Drachma will be cathastrofic      Stefan KAnev      03/01/12 11:38      
               ??      Kai Klaas      03/01/12 13:30      
                  You are right,Kai      Stefan KAnev      03/02/12 00:27      
               I don't agree      Oliver Sedlacek      03/02/12 04:39      
      austerity      Andy Peters      03/03/12 19:34      
         from what I've gleaned from the news ...      Richard Erlacher      03/04/12 08:20      
      New Testament      John D. Maniraj      03/06/12 08:25      

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