The Eurozone Is Still Doomed, Isn't It?

Kevin Drum / Mother Jones

The stock market, a bit to my surprise, has reacted euphorically to today’s official announcement that the European Central Bank will begin unlimited purchases of government bonds from economically depressed countries in the eurozone (though this policy applies only to countries that behave themselves and abide by Germany’s austerity dictates — see yesterday’s post for more on this). This is, of course, not the first time the euro has been rescued. We’ve been treated to a long procession of similar announcements before, and I frankly thought that investors had grown a little more jaded toward them by now. But apparently not. They still want to believe.

I’ve written enough about the eurozone’s problems in the past that I’m not really in the mood for another long post on the subject of Europe’s currency woes. Instead I’ll do a short one and see if anyone tells me I’m wrong. Start with the following axiom:

You can’t maintain persistent capital flow imbalances in a fixed exchange rate area.

continue at Mother Jones:

http://www.motherjones.com/kevin-drum/2012/09/eurozone-still-doomed-isnt-it

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