Wednesday 24 March 2010

and for something completely different, a Finnish joke...

   About the Euro and the cost of not being to devaluate because Portugal is in the Euro zone, a Finnish friend mentioned the following joke (I hope I am able to reproduce it properly): - devaluation would be like being in pants in some street of Finland with -21, it keeps the essential parts warm for a short period, it is problem afterwards.
In essence, devaluations are a short-term policy measure, and the long-run benefits of committing not to use often are probably larger than the short-run gains and long-costs of their repeated use, thus, the perception of this cost of the euro, unable to devaluate, is actually a benefit over the long run. Any debate on this?

1 comment:

  1. Actually, your Finnish joke is not Finnish and is a bit different in the essence and in the context. It was told by a famous central banker (whose name I cannot recall) that said that inflation is like wetting in your pants: at first, the warm sensation feels nice and comfortable; the problem comes when all the wet parts cool down...

    (comment sent by email, by an identified reader
    I decided to post it,

    Pedro Pita Barros)