Why It's More Dire in Eire*...

Paul Krugman looks at the housing bubble in Ireland and Nevada...

The populations are similar; the housing bubbles were comparable in their extremity; both currently have roughly 14 percent unemployment.

.... Fiscally, Nevada’s retirees can count on Washington to keep paying their Social Security and Medicare, which amounts to a big transfer into the state now that it’s paying much less in federal taxes.

Oh, and Nevada is in effect getting a federal bank bailout — not so much directly via the FDIC, although there’s some of that, as via Fannie and Freddie: with less than 1 percent of the US population, Nevada is generating more than 5 percent of the F&F losses — losses that are a problem for taxpayers in general, not specifically in Nevada.

So there you have it: optimum currency area theory in action..

Ireland is faced with the combined disadvantages of sharing a currency with Germany but not a budget.

*Yes, I've heard that it's not supposed to rhyme with "fire."

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