Komivesian Economics Reinforced: November 11, 2011

In Paul Krugman's excellent New York Times piece titled "Legends of the Fail" (November 11, 2011) I find reinforcement for two fundamental ideas in Komivesian Economics', Plum Local IV.

.

(1) We do, indeed,  handicap poor countries when we make them borrow in somebody else's currency. 

Komivesian Economics: "Poor countries ... must repay their debt using one of the world's hard currencies ... Too often, some lucky citizens in the debtor nations manage to hoard hard currency that comes in through loans, while their governments hoard only the debt. Such problems hobble government and exacerbate the dichotomy between rich and poor in debtor nations, but damage is not restricted to debtors. The world suffers waste." and much more.

.

Krugman:

 "What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies."

.

(2) Money is a magic invention that makes it easier for a country to invest well in itself and its citizens. 

Komivesian Economics: This idea appears throughout Plum Local IV, but it starts with "A Better Money Legend" and a mythical country saving itself through the near-miracle of money.

.

Krugman:

"... since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem."