This summer Roger Bootle won Lord Wolfson's £250,000 prize for the best advice for a country leaving the European Monetary Union (one may assume that this advice is aimed at Greece). Despite his lengthy and repetitive prize submission, Mr. Bootle's recommendations can be summarized in this one sentence: In complete secrecy and with no prior discussion, redenominate all Greek euro-denominated bank accounts into drachma-denominated accounts and devalue the drachma. That's it! There is no need to cut public spending. Quite the contrary, because public spending adds to the Keynesian concept of aggregate demand, and aggregate demand cannot be allowed to fall. Dr. Philipp Bagus offered the truly liberal alternative. He proposed a long period of public discussion about alternatives to leaving the euro, which would allow ample time for Greeks to move their property out of the greedy reach of their own government, should they decide to do so. The currency crisis might be solved in this manner as Greek banks closed and the Greek government shut down its welfare and regulatory system for lack of funds. The Greek government could repeal legal-tender laws, which currently require Greek citizens to transact business in one currency only — always that issued by the state itself. Concomitantly it could reinstate the drachma as a strong currency backed by gold. Then good money would drive out bad, as people freely chose which currency to use.
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Guest Post: Bad Advice For The Greeks
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