Krugman compares the Euro to the gold standard, in that, a Greece or a Portugal on their own can't print currency. They're stuck with a Euro that is somewhat finite like gold. They can't just create it out of thin air. But the European Central Bank can print Euros and they are, so it is, in fact, being created out of thin air.
Krug doesn't like the gold standard because it is vital that we have monetary policy managed by human intelligence. That would be the folks at the Federal Reserve, other world central banks, the federal government and of course the big banks. Weren’t these same folks running the show before 2008?
The situation is the western governments have saddled themselves with entitlement programs they can't nearly pay for. So in Europe, and the United States, the solution is to cover the shortfalls by borrowing money. What we're seeing is the weak sisters in Europe ala Greece etc. beginning to fall. Nobody in their right mind would loan these folks real money!
So how does a Greece cover the checks it needs to write? Is Germany going to loan them the money? Is France going to borrow more money so they can loan it to Greece? Are FF, T-M-T, JBS and Krugman going to buy Greek bonds? How long will Euro members allow the ECB to loan printed money to Greece/Spain/Portugal…… as the Euro sinks, dragging them all down?
Here is the thing folks. They throw enough printed money at a Greece to keep them from drowning today, and maybe for the next 6 months. Then what? Will Greece then have it’s financial house in order? Will Greece have made huge cuts in entitlement spending, raised taxes and shazaam have a balance budget? Or will they be back needing another fix?
Let me tell you something folks. This is what Krugman is talking about when he refers to “managed by human intelligence“. They aren’t fixing the problem they’re putting it off. And the massive debt problem isn’t solved with more massive debt, it is made worse. Much worse.