Deep Integration Is Not the Way to Go: The Economic Pitfalls of Common Currencies (to Say Nothing about the Cultural Fallout)

Memo to Stephen Harper and others who'd like to integrate the US and Canada: it's not the welfare state that causes problems, it's the inability to manage your economy independently.

Today in The New York Times Paul Krugman says about the Euro crisis: "Sweden, with its famously high benefits, is a star performer, one of the few countries whose G.D.P. is now higher than it was before the crisis...(while) spending on welfare-state programs..."was lower, as a percentage of national income, in all of the nations now in trouble than in Germany, let alone Sweden.

"Oh, and Canada, which has universal health care and much more generous aid to the poor than the United States, has weathered the crisis better than we have."

He goes on: " ...the big determining factor for interest rates isn’t the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy’s 7 percent... In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t."