In fact, we devalue play.

In fact, we devalue play.

And we devalue it in three areas.

And we devalue it in three areas.

Moreover, the eurozone itself is a mini gold standard, with heavily indebted members unable to devalue their currencies, because they have no currencies to devalue. So, given that Chinese growth, too, is slowing, the world economy seems destined to crawl along the bottom for some time yet, with unemployment rising in some countries to 20 or more.

If Greece leaves the euro after it defaults, it can devalue its new currency, thereby stimulating demand and shifting eventually to a trade surplus. Such a strategy of default and devalue has been standard fare for countries in other parts of the world when they were faced with unmanageably large government debt and a chronic current account deficit.

Even young indigenous teachers who are trained in such traditional institutions quickly learn to devalue their own culture and adopt the official assimilationist pedagogical model.

We cannot turn our backs on these basic values and the duties they impose on all countries and Governments. To do so would devalue our common humanity.

The only question is the scale, timing, and manner of its breakup. Greece, and probably other Mediterranean countries, will default and regain the freedom to print money and devalue their exchange rates.

But ERM members monetary policies remained home grown, which, no surprise, occasionally led to fiscal imbalances. When capital markets smelled a problem among ERM members, they invariably shorted the most vulnerable currency and pushed that country s authorities to devalue.

From this perspective, the crisis countries would not be spared painful retrenchment as long as they remained in a monetary union that includes competitive countries. The only way to avoid it would be for them to exit the euro and devalue their new currencies.

America s current account deficit was approaching 3 of GDP and its top four competitors had massive surpluses and negative GDP growth. In order to correct these imbalances, the five countries signed the Plaza Accord, in which they agreed to intervene in currency markets to devalue the dollar.

In fact, currency devaluations were critical to ending the Great Depression. As Barry Eichengreen and Jeffrey Sachs demonstrated in 1984, while abandoning the gold standard had an immediate negative impact, it quickly spurred recovery, with the first countries to devalue their currencies escaping depression earlier than others.

But, since none of these countries has a national currency to devalue, they must substitute internal devaluation for external devaluation. They have to cut wages, pensions, and other costs in order to achieve the same gain in competitiveness needed to substitute external demand for internal demand.

From 1995 to July 21, 2005, China s authorities held the now unified exchange rate constant at 8.28 yuan dollar (plus or minus 0.3 ). They subordinated domestic monetary and fiscal policies to maintaining the fixed exchange rate even during the 1997 98 Asian crisis, despite great pressure to devalue.

From 1995 to July 21, 2005, China s authorities held the now unified exchange rate constant at 8.28 yuan dollar (plus or minus 0.3 ). They subordinated domestic monetary and fiscal policies to maintaining the fixed exchange rate even during the 1997 98 Asian crisis, despite great pressure to devalue.

In fact, China knows full well that currency wars are self defeating. During the 1997 Asian financial crisis, China s economic situation was much worse than it is today, but the government still resisted the temptation to devalue the renminbi and the country managed to emerge from the crisis virtually unscathed.

This distinction between foreign and domestic debt is particularly important in the context of the euro crisis, because eurozone countries cannot devalue to increase exports if this is required to service foreign debt. And the evidence confirms that the euro crisis is not really about sovereign debt, but about foreign debt.

In 1991, Swedish voters broke the reign of the Social Democrats, electing a coalition government under conservative Prime Minister Carl Bildt, who called his program the only way. Bildt tried to follow Schlüter s lead, but, in 1992, Sweden was forced to devalue though his deregulation of markets did work well.

That September, concerns about public debt and the British government s ability to enforce austerity led to a run on the pound. Rather than trying to mount a last ditch defense of the fixed exchange rate, the government, at the suggestion of the Bank of England, agreed to abandon the gold standard and devalue the pound.

Those crisis countries that do not want to take it upon themselves to lower their prices should be given the opportunity to leave the eurozone temporarily in order to devalue prices and debts. In other words, they should take a kind of euro sabbatical a proposal that has now also been taken up by American economist Kenneth Rogoff.

The Greeks, for their part, have been putting their national identity ahead of their pocketbooks, in ways that economists do not understand and continually fail to predict. It is economically irrational for Greeks to prefer continued membership in the eurozone, when they could remain in the EU with a restored national currency that they could devalue.

Many have questioned whether agonizing reforms are entirely necessary if the country returned to the drachma, they suggest, it could implement interest rate cuts and devalue its exchange rate, thereby engineering an export led recovery. But, given Greece s small export sector, not to mention the weakness of the global economy, such a recovery may be impossible.

Depreciation of the euro would be the best medicine for restoring international price competitiveness to the periphery countries and reviving their export sectors. Of course, they would devalue on their own had they not given up their currencies for the euro ten years before the crisis (and if it were not for their euro denominated debt).

As investors fled the country because of fear of devaluation (in a period in which the Argentine Government was promising never to devalue the peso, fixed at one to one with the US dollar), interest rates rose and bank deposits fell. This deepened the recession in 2000 and 2001 and led to a rising budget deficit because of declining tax revenues.

If Italy, Spain, and France were not part of the eurozone, they could allow their currencies to devalue weaker exchange rates would increase exports and reduce imports, eliminating their current account deficits. Moreover, the increase in exports and the shift from imports to domestically produced goods and services would strengthen their economies, thereby reducing their fiscal deficits as tax revenues rose and transfers declined.

The three Benelux countries, along with a few other smaller EU nations, are opposed to the new European president being from a large nation. And there are also those who fear that a political heavyweight in the job might eclipse the EU Commission s President, former Portuguese prime minister José Manuel Barroso, who has just been confirmed for a second five year term, and devalue the role of the foreign policy chief whose authority Lisbon is due to beef up.