Fear mongers have said that the pound is "taking down the Euro." Nonsense.

Remember group projects in school, in which a few people would work together and everyone would get the same grade? You always wanted as many A students and as few D students as possible in your group.

The EU is like one of those groups. It had two A students: Britain and Germany. It also had 26 D students. Now one of those A students is leaving.

The pound is going down for a simple reason: investors are pulling out of crony capitalist companies whose primary value is special privileges from EU regulators. That lowers demand for those stocks, and thus lowers price.

Those investors have started looking for innovating and productive companies instead. In a few weeks or months they will find those companies. At that point, demand for those new stocks (and their prices) will rise.

But what about the euro? Why did the price of the Euro fall? If the pound falls, if anything, the Euro should go up. After all, the dollar and yen did, as people looked for temporary alternatives to the pound. If people believed in the EU, then nothing much would have changed in the euro.

The euro dropped because people don't want to invest in D student economies. A thousand fools don't make a wise man, and 27 D students don't make an A student. That's why the Euro has been steadily declining for years. Free trade is good; but welfare for lazy countries more than cancels out the gains from free trade.

Maybe Germany can carry the rest of Europe, keep bailing out Greece again, etc. Maybe it can't. Maybe it will also exit, and let the D student countries fend for themselves.

The fall in the pound is just temporary rearrangement. If Britain moves towards capitalism and away from welfare socialism, the demand for the pound will go right back up. But the euro?

It would require a massive movement away from current socialist policies and towards a massively freer market. No one would be happier than I if that happened in Europe. I would love to see modern Greece reach the work ethic and greatness of Ancient Greece; I would love to see a France that followed the effective economic policies of Bastiat. I would love an Italy as innovative, resourceful, and hard working as it was in the early Roman republic.

But I doubt that will happen until the EU finally goes the way of the USSR.

In Liberty,

Arvin Vohra
Vice Chair
Libertarian National Committee