I've posted on this before and the ignorance of this topic is alarmingly widespread, given how eager people are to opine on the matter.
Posters appear to have this idea that a small nation like Ireland or Greece or Portugal can simply exit the Euro, set up a new version of their old currency, and merrily continue trading.
Sadly, it's not that simple.
We can, of course, introduce a new currency, but the problem is when we try to buy stuff using the new currency.
Market speculators can, and will, chew this new currency to shreds. The only way to prevent this is by having a huge mountain of money, several tens of billions of US dollars, to use to defeat the speculators. But, paradoxically, if we had such a mountain of money, we wouldn't be in a crisis.
One easy way for speculators to kill the new currency is via naked short selling.
Short selling is a trick that speculators use to profit from a fall in the price of an asset. Imagine you know the Japanese yen is going to fall in price by 10%. To profit from this, you borrow a billion yen from a bank, for example, with a promise to return the yen 10 days later. Then you sell the yen for US$100m. Then the yen falls 10%. You buy back the billion yen for US$90m. Then you give back the billion yen to the bank, and keep the US$10m.
The naked version of the above short sale is the same, except you don't have any yen. Instead of trading actual yen, you trade a contract, a promise, to supply yen. It's not entirely different to bluffing in poker. You convince the opponent that you have a great hand, even though you have nothing, and you gain lots of money despite having a losing hand.
As investopedia points out, "Naked shorting is illegal because it allows manipulators a chance to force stock prices down without regard for normal stock supply/demand patterns."
So what happens to a Wall Street trader who is discovered illegally selling short naked? Typically, he will be fined maybe $200,000, which his multi-billion-dollar employer will pay. Then he'll go back to business as usual. So the fact that it is technically illegal is very, very, VERY little protection.
So how do you fight a naked short seller who wants to force down the value of the Punt Nua? The same way you fight a bluffer in poker: you put down the money to see his hand.
And what if you don't have enough money to see him? The bluffer wins.
So for Ireland or Portugal or Greece to set up a new currency on their own, they need to have a big mountain of US dollars to call the bluff of the short sellers.
Imagine we want the punt nua to be worth half a dollar, in order to make our exports more competitive. But the short sellers offer eighty billion punt nua for only $20bn US dollars. If we had $20bn US dollars, we could call their bluff. The short sellers would be forced to find eighty billion punt nua in order to honour the contract. They would have to pay a premium to get the eighty billion punt nua.
But if the Irish central bank doesn't have the $20bn US dollars, they can't call the bluff, and this kind of process can force down the value of the punt nua until it's totally worthless.
This is why I've suggested pooling our resources with other nations in a debt crisis. By putting our resources together, we could have enough reserves to maintain the value of the new currency.
This would only be temporary, for about a decade. We would use this time to build up a large US dollar reserve (like China did). Then, Portugal and Greece could re-launch their own currencies, with enough reserves to defend them.
But right now, none of us have sufficient reserves to defend a new currency on our own, so either we pool our resources, or we just accept Germany's current programme of never-ending economic collapse.