United States has its own money, the dollar, while Spain operates on foreign money, the euro, why ?

Why can the U.S. government borrow at some of the lowest interest rates ever, while Spain can only borrow at exorbitant rates that threaten to drive it into bankruptcy? The difference isn’t their debt and deficits. In 2011, U.S. debt was 98% of GDP, its deficit 10% of GDP; Spanish debt was 69% of GDP, its deficit 8.5% of GDP. The difference is that the United States has its own money, the dollar, while Spain operates on foreign money, the euro…

The euro was largely an anti-inflationary gamble. The University of Chicago’s Milton Friedman launched the modern anti-inflation movement with his presidential address to the American Economic Association in 1968. Contrary to what many economists then believed, Friedman argued that, higher inflation does not reduce unemployment, and that the best monetary policy was one that kept prices stable. As inflation rose in the 1970s — because of labor-union muscle, two powerful oil shocks, printing money, and other factors — this view gained adherents. Fed Chairman Paul Volcker clamped down on printing money in 1979 and squeezed out U.S. inflation, at the cost of the (then) worst recession since the 1930s…

via Fighting Inflation, Ruining Economies – Jonathan Schlefer – Harvard Business Review.

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