Philipp Bagus, professor of economics at Universidad Rey Juan Carlos in Madrid, is a young scholar with a large influence, having forecast all the problems with the euro and having persuaded many economists on the Continent that this currency is no better than any fiat currency. In some ways it is much worse because it has cartelized the management of European monetary regimes and created a terrible moral hazard.
We often hear analysis of the workings of the Fed. Discussion of the European Central Bank is more rare. Bagus compares the two institutions to show a fundamental difference: Member states of the ECB can run deficits and expect them to be financed by the ECB. So Europe has a tragedy of the commons at work with its monetary policy that sets up very dangerous incentives for member states.
With this book, Professor Bagus brings his scholarship to English readers, explaining the background to the idea of European unity and its heritage of sound money. He explains that the euro is not what the classical liberals had hoped for but is instead a politically managed money that is destined for failure.
He writes with a keen sense for economic analytics and empirical detail, offering one of the most accessible and yet rigorous accounts of the emergence of the euro. He predicts its downfall due to political pressures, bad banking practices, and exploding public-sector liabilities.
Professor Bagus brings theoretical power to investigating one of the most important topics in economics today. His arguments and evidence convinced even Jesus Huerta de Soto to withdraw support for the euro. For this reason, de Soto has written the introduction to this important work.
Economist Patrick Barron writes, "Perhaps I lead a sheltered life, but I found The Tragedy of the Euro to read like a great adventure novel. … The European financial crisis proceeds from day to day. This wonderful book will help everyone understand what is really happening and, we hope, provide a lesson for others."
