Monetary Confession

Any time I read something like this (Yglesias):

If Spain weren’t on the euro, it’s currency would have devalued as a response to the very severe recession they’re having, and the Spanish ones would be cheaper, almost certainly generating more sales and more jobs in Spanish canneries.

I think something like this:

If Arkansas weren't on the dollar, its currency [no apostrophe, thank you] would have devalued as a response to the very severe recession they experience compared to the rest of the US, and its agricultural products would be cheaper, almost certainly generating more sales and more jobs in Arkansas agriculture.

For some reason, I can't stop myself comparing any statement about the EU to the US. There are totally different institutions, different cultures, different degrees of homogeneity, different histories, different norms, everything. But when the "almost certainly"s get thrown around, they've chucked those things out the window too so I feel more license.

There are people who consider what the optimal size for a monetary union is, but most people who comment on letting one state or another break off from the euro don't talk about the benefits they would forgo [at least not every time]. Would the South be better off with their own currency? Would the other states be better off if the South seceded from the monetary union? [Boy, I could get in trouble if someone took that out of context!] What if we let the poorest counties (Hidalgo, Cameron, and El Paso, TX for instance) create their own monetary policy to shore up their 'exports' to the rest of the country? The Libertarian positions seems to be that we would be better off if any bank, or even any person or person-like-entity could create their own currency [bring on the Disney Dollars and CitiGroup Cash], let alone each region of the country. From a governance position, there may be something to said for acknowledging that poorer areas tend to be more poorly governed, so running their own monetary policy might not be in their best interest.

There are trade offs for size and stability, inclusion and lower transaction costs, control of local factors vs. control of externalities, boosting exports and making imports cheaper....

Suppose a slightly different question. Assume we're going to get it wrong. Any monetary union will either be too large or too small. Which mistake is less costly in terms of poverty compared to the optimum?