A China-USA monetary Union?

Much has been made, while discussing the euro-area crisis, of the fact that countries using the euro have lost the ability to correct their imbalances through changes in nominal exchange rates. So, taking the most extreme example, Greece could not devalue its exchange rate towards Germany to deal with its imbalances. The statement is of course correct, but needs three qualifications.

Target balances and the risk of another "Reparations" problem

The crisis that started in 2007, threatened the global economy with the demise of Lehman Brothers in the Autumn of 2008 and moved to Europe in the Spring of 2010, where it is still not surpassed, has shaken the trust of laymen and economists alike in the ability of economics to predict and manage events. The analogy with physics as a science and engineering as a technique has been found wanting.