>> This series of statements is so blindingly stupid that the mind boggles. Currency devaluation is collective economic punishment, period. It is theft. Financially responsible citizens, who work, live within their means, and manage to save up a small amount of wealth have their earning potential and wealth destroyed to pay for the rapacious spending of irresponsible politicians.

Far from being lethal, a fixed exchange rate forces politicians to accept political responsibility for the consequences of their fiscal irresponsibility. By contrast, a floating currency allows politicians to offload the consequences of profligate spending onto the currency. Our current situation in America is instructive. There has been no recovery in our capital markets when measured in real, constant dollars. On a trade-weighted dollar basis the DJIA remains at about 7600. Yet the Obama administration, understanding that Americans are incapable of dividing by decimals, are crooning over a DJIA back up over 10,000.

Moreover, you and Krugman both miss the mark. A fixed currency has nothing to do with the problems facing Greece (or Spain or Italy). The lethal combination for Greece is the combination of an inverted population pyramid due to declining birth rates and a welfare state designed to shift wealth from the shrinking population at the lower end of the pyramid to seniors. I believe it was Maggie Thatcher who said that the problem with socialism is that sooner or later you run out of other people’s money. Greece will soon learn the meaning of this phrase. Italy and Spain, who also suffer from an inverted population pyramid coupled to a welfare state, will follow in due course. California, New Jersey, and several of our other bankrupt states will eventually suffer the same fate unless pension systems are nationalized (look for this in 2013 if Obama is reelected). See the pattern?

Uggh, you Country Club Republicans make me crazy. In your philosophical core you are a statist through and through, indistinguishable from a Democrat. It’s no wonder the Republican party is collapsing. Why bother?

Many U.S. states are close to Dubai-like insolvency and, after the artificial stimulus wears off and the U.S. economy faces the aftermath of corporate cutting to the bone, we can expect more to join them.

More likely, Congress will simply dish out more money to failing states (Michigan comes to mind here), and the “stimulus” to those states will become permanent.

If the Canadian “solution” is so effective, why are policymakers in the US so afraid of a weak dollar?

And secondly, we in Canada know that the medicine we imbibed in 1993 included deep and often painful budget cuts and the imposition of the federal goods and services tax – Canada’s value added tax. It meant that the military budget was starved, social programs were starved, and so was capital investment in the modernization of manufacturing, because it was easy to make export sales – even with outdated technology. I don’t see any political faction in the US seriously advocating deep cuts to military spending or a significant new tax. The polarization of US politics suggests Americans aren’t nearly ready for higher taxes or cuts to the spending they hold most dear. And yet even bigger pain lies ahead when the big entitlement programs really kick in.