Various experts have been saying that Greece’s problems would be mostly solved if the country had its own currency. The Greek population is just over 11 million, somewhere between that of the Chicago and Los Angeles metropolitan area populations. With its own currency, Greece could devalue its debts and pension obligations in real terms.If that is true for Greece, why not for U.S. states with similar or larger populations? Just like Greece, U.S. states have big debt obligations and they also run massive budget deficits (though this is mostly in the form of unfunded pension obligations and therefore hidden).
If Michigan devalued it would be a more attractive place to invest. Workers could continue to earn their former salaries in “Wolverine Bucks”, but the cost relative to goods and services on the world market would be much less. If California devalued, its state pension obligations would be greatly reduced. The state might owe a 51-year-old retired fire chief $241,000 per year or approximately 2410 barrels of oil, but if the state issued Grizzly Bucks instead, the obligation might turn into just a few hundred barrels of oil.
Conversely, if we think it would not be helpful for a U.S. state with a population of 11 million to have its own currency, why do we think that it would be helpful for Greece?
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