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The Problem With Centralisation
Arizonomics ^ | October 13, 2012 | Nassim Taleb

Posted on 10/18/2012 10:36:14 AM PDT by arthurus

The European Union is a horrible, stupid project. The idea that unification would create an economy that could compete with China and be more like the United States is pure garbage. What ruined China, throughout history, is the top-down state. What made Europe great was the diversity: political and economic. Having the same currency, the euro, was a terrible idea. It encouraged everyone to borrow to the hilt.

The most stable country in the history of mankind, and probably the most boring, by the way, is Switzerland. It’s not even a city-state environment; it’s a municipal state. Most decisions are made at the local level, which allows for distributed errors that don’t adversely affect the wider system. Meanwhile, people want a united Europe, more alignment, and look at the problems. The solution is right in the middle of Europe — Switzerland. It’s not united! It doesn’t have a Brussels! It doesn’t need one.

(Excerpt) Read more at ...

TOPICS: Business/Economy
KEYWORDS: centralization; economy; euro
Just a short basic reminder about how it all works.
1 posted on 10/18/2012 10:36:14 AM PDT by arthurus
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To: arthurus
Our founding fathers had several different forms of government to chose from when they finally abandoned the Articles of Confederation for our current form of government.

After a survey of historical and contemporary forms of government they selected something very close to the Swiss model. Exciting - Not hardly Pilgrim. Stable - very. Able to evaluate the worth of changes without endangering the nation - You becha! Able to change when needed or advisable - YES.

The above is why the US is the longest surviving form of government (a Representative Republic) in the world. And yet, there are egoistical people out there that want to throw us all under the bus.

Remember this when you go to cast your votes.

2 posted on 10/18/2012 12:11:36 PM PDT by Nip (TANSTAAFL and BOHICA)
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To: arthurus
The issue of centralization is a red herring. That is not true, and his example shows it. Switzerland is decentralized, but has a single (somewhat) hard currency and they are doing fine. We know that what makes for economic growth is a combination of rule of law, liberty, and sound money. How large an area one government rules does not matter, if they rule lightly and honestly. Some areas were happy to join the Roman Empire, when it was well run. Later, when it became rapacious, some areas were happy to defect to the Germanic tribes.

Having a central government is not a problem, unless it is a large, domineering central government, such as that run by desk jockeys in Brussels eager to control everything, down to the curvature of bananas. They deal in fantasy, such that Greek Government Bonds were considered as good as gold on the banks books. This kind of government is always a burden on the population.

Taleb also screws up the part about money - Having the same currency, the euro, was a terrible idea. It encouraged everyone to borrow to the hilt."

What encouraged everyone to borrow to the hilt, was the fantastic idea that having a single currency also meant that there should be a single interest rate for the bonds of every government. Just because the pauper and the rich man, or the idler and the workaholic, both use dollars, does not make them equal risks.

Another encouragement for borrowing was that the EU allowed obscene levels of leverage for their banks and and let them hide it all off the books. Somebody thought it wise to lend to the PIIGS to let them build way beyond what they could sell.

Fantasy fades, and reality bites.

What I want to know, is who it was who proved that Greeks would repay their debts if only they had to do it in a hard currency? That man or woman is truly the most dangerous insane lunatic around.

3 posted on 10/18/2012 5:08:38 PM PDT by slowhandluke (It's hard to be cynical enough in this age.)
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To: slowhandluke

How large an area doesn’t matter. how large a population does.

4 posted on 10/19/2012 3:03:22 AM PDT by arthurus (Read Hazlitt's Economics In One Lesson ONLINE
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To: arthurus

Gold worked across the entire known world in Roman times, as long as honest coins were used. Maybe you are right in that honesty is easier to enforce in politicians in smaller groups.

5 posted on 10/21/2012 5:49:41 AM PDT by slowhandluke (It's hard to be cynical enough in this age.)
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