ringledman I agree with much of that thesis. But I think the market (and its rating agencies) must take the lion's share of the blame. Individuals operate in a common currency. I the Duke would dearly love to have my own currency but unfortunately I have to use euros, so when a bank lends me money it assesses my credit risk.
Many countries operate the dollar but are not part of the FED monetary system. They are treated by the markets like any individual, their costs of borrowing are determined by their credit rating. Similarly several countries operate sterling and euro without being part of the respective monetary systems.
The markets made a huge mistake in thinking that the single currency overnight changed the creditworthiness of perennial profligates. As a result these profligates got hopelessly drunk on cheap market credit. The argument now is that the markets have got it wrong in the other direction and that is why the profligates need official bail outs, provided they mend their ways.
Whilst I am on the theme, there are many to blame for the sub prime debacle which has triggered this whole financial crisis but the primary blame is with the mispricing by the markets and their accomplices the rating agencies.
So when I hear commentators implying the omniscience of the markets it does make my eyebrows leap.