Let's do a Krugman, shall we?

Krugman: Were the costs of Greek adjustment unavoidable, regardless of the currency? Could they have been much less, even given the euro? This paper says no; Simon Wren-Lewis is aghast, and rightly so. How can alleged experts have learned so little from so much terrible experience?

I’d like to focus in on one point in particular, which I’m not sure is completely clear in Simon’s argument. We’re all agreed that Greece needed to reduce its wages and other costs relative to those of the euro area core. This could have happened quickly, with no need for high unemployment, if Greece had had an independent currency to devalue — as happened in Iceland. Given membership in the euro area, however, Greece had to go through a period of relatively high unemployment depressing wage growth.

Well, the USA had our own currency, how did we do?

Here we have unemployment for Minnesota and California, two different parts of the same monetary economy.  Does one do more internal devaluation than the other?

Notice the two graphs are quite different.  The problem is that central banks, ours included, tend to cheat, commit fraud and otherwise take the advice of nonsensical economists. California, seen here, is diverging and getting farther off the mark, headed for a disaster as bad as Greece.  Yet, in this case the Keynesian says the common currency saves the day, and in the other separate currencies save the day.

Why does the economist note a process in other economies but not in his own? Because he is often hypnotized by the currency banker. We do not quite understand the process, we need the sociologist to explain it. 

So, next time the economist makes an incomplete claim, check my site; I often correct them.