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Source link: http://archive.mises.org/2374/the-myth-of-the-fiscal-straitjacket/

The Myth of the Fiscal Straitjacket

August 20, 2004 by

Why the EU 3% limit for budget deficits was chosen (as opposed to 1% or 2%) as the yardstick for profligacy is not altogether clear. However its apparent sanctity in relation to the euro stemmed from political debates over European Monetary Union, chiefly that the German and French governments, the avant-garde of the currency, chose 3% as the absolute limit. With central banks, there are no limits. [Full Article]

{ 2 comments }

Dennis Sperduto August 20, 2004 at 9:43 am

As this article starkly illustrates, having the EU police its member nations, especially regarding debt levels and deficits, is akin to the proverbial fox guarding the chicken coupe. Or, maybe in this case the fox and the chicken are one and the same. There will continue to be more of this type of nonsense in both the EU and U.S. until (at least) the following fundamental economic/financial reforms are implemented and strongly enforced: the complete renunciation of Keynesian economics and its fallacies; a return to a commodity monetary standard; an end to fraudulent fractional reserve banking and credit expansion; both international and domestic free trade; and, extremely limited government spending and taxation.

Steven M August 20, 2004 at 10:59 am

Europeans have a strong affinity for socialism. Only those who have sunk rapidly and deeply into its ethical-financial pit have some realization of its negative impact on the economy: Former Soviet Union states, Spain (regrettably returning to a kinder-gentler socialism due to their country’s pursuit of the war on terror). Of course, there is a huge European intelligentsia that have all sorts of arguments for the failure of socialist economies “corruption”, “organizational inefficiencies”, “financial straight jackets”, etc. that are fixed, they claim by just choosing the “right” bureaucrats, rather than by limiting or eliminating their power.

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