The problem with the European Union

Episode 191:  The European Union has a severe structural problem whether the UK exits or remains.

The EU could be a successful trade organization (like NAFTA) if it did not use a single currency.  Theoretically the single currency is appealing because Germany benefits due to a comparative weak currency (thus its exports are “cheaper”) and southern countries (Italy, Spain, etc) benefit from a stronger currency (cheaper imports and lower interest rates).

In practice, the system doesn’t work because it defies market principles.  Germany’s economy grows while southern countries fall deeper into a debt death spiral.

Like a loan shark, the system works as long as Germany is prepared to finance its insolvent customers.

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