One excuse reason why my posting frequency is down is that for all of the major issues that I have been following, the policy makers and mainstream commentators seem to be going round in endless circles, desperately trying to avoid doing the right thing. The corollary of that is that the independent bloggers have been stuck repeating themselves in pointing out the right thing! Case in point, the various modest and indecent proposals to save the Eurozone from implosion:

The indecent proposal, for instance, which I wrote on July 19th, holds that the only cure that addresses the crisis at its root is a clean-slate restructuring of banks with massive asset writedowns and debt-to-equity conversions, accompanied by a managed split of the single currency into the Northern Euro and the Southern Euro. Instead, all the efforts of the Euroland political-bureaucratic-banking elite since Italy’s bond yields first broke out in July start from two masochistic premises: refusing to recognise banks’ losses and keeping the single currency together! And that is why all the efforts are going in circles, i.e. nowhere.

I had called my North-South Euro proposal the “indecent proposal” (in contrast to Yanis Varoufakis “modest proposal” – a recipe to keep things going pretty much as they have been going), and I have been keeping track (of sorts) of other academics and pundits who sign up for some variety of my indecent proposal from time to time. The latest addition to my informal little list is Asianomics senior economist V. Anantha Nageswaran:

The better thing is to create two euro-currency areas. One is the Euro-mark and the other is the Euro-II. “Euro-peso” will have image issues. It Is best to allow these countries—Spain, Portugal, Italy, Greece and Ireland—to adopt the Euro-II. France should think deeply about joining this. It might be better off doing so.

Nageswaran’s post One euro is not enough from mid-November expands nicely on the multiple rebalancing benefits, direct and indirect, that would accrue from such a bold move. The one benefit Nageswaran missed in my opinion is probably the biggest one, and that is confidence. The evaporated confidence and animal spirits of bond markets, consumers and businesses may well stage a comeback once if Europe does the right thing and gives one Euro to its core and a different Euro to its periphery.