Key to Europe’s recovery is lower wages – but it is not happening and trusting money

 Krugman talks about how wages in the peripheral Euro zone (Greece, Spain, Portugal, Baltic, Ireland) have not come down.  Basically after a financial crisis and recession wages have to be reduced in order for that country to regain competitiveness (if workers in the US and Mexico or China earned the same then companies would just build plants in the US, where most the consumer market is).  But Krugman’s point is that wages are real hard to be reduced – who would accept lower wages and it legally it is difficult.  Basically the crisis countries will not get out the slump until their wages come down – but there is no evidence this happening (besides Greece) so he does not see much of a room for recovery any time soon --- thus unemployment will stay high.  This is proof that the idea of the Euro was bad from the start - if these countries had their own currency they could have started a recovery by making their national currency worth less (devalue) and thus wages would have been reduced.

In his Monday column he finds a similarity between people’s desire for gold and the new digital currency ‘bitcoins’.  He sees this as big misunderstanding of people who don’t trust government and think it is just printing money and making everyone poorer, but Krugman  He thinks it is silly to think that gold or bitcoins is any more reliable that the dollar.