What Really Ails Europe?

Feb 29th, 2012

Paul Krugman explodes the popular Republican and German narratives. As they read from eerily similar scripts which blame social safety nets and prescribe more and more "austerity," he explains why the former isn't true and the latter simply isn't working:

"...the creation of the euro fostered a false sense of security among private investors, unleashing huge, unsustainable flows of capital into nations all around Europe’s periphery. As a consequence of these inflows, costs and prices rose, manufacturing became uncompetitive, and nations that had roughly balanced trade in 1999 began running large trade deficits instead. Then the music stopped.

If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.

Now, understanding the nature of Europe’s troubles offers only limited benefits to the Europeans themselves. The afflicted nations, in particular, have nothing but bad choices: either they suffer the pains of deflation or they take the drastic step of leaving the euro, which won’t be politically feasible until or unless all else fails (a point Greece seems to be approaching). Germany could help by reversing its own austerity policies and accepting higher inflation, but it won’t."

Quote Of The Day - Collapsing Euro Edition

Dec 3rd, 2011

"If Merkel gets her way, Europe is on the edge of a major deflationary spiral. What this could do to the euro area, the entire EU (Britain is by no means immune), and the US is alarming. If that were to happen alongside the euro disintegrating, we have the most serious crisis in Europe since the Second World War."

-- Andrew Sullivan on the continuing collapse of the Euro and the possible results of Angela Merkel's schemes.

The Euro - A Matter Of Days?

Dec 3rd, 2011

The pronouncements and dire warnings are coming at a rapid clip...

England is drawing up "emergency plans" in the event of the currency's collapse while Austria's Finince Minister speaks of "vicious" solutions. All eyes, however, are still on Germany where discussions have coalesced around Chancellor Angela Merkel's insistence that the answer to the Euro question lies in the nearly total sacrifice of member state sovereignty.

Bailing Out The Euro?

Dec 1st, 2011

It is certainly beginning to look that way. RT reports:

"The Obama administration always denied such speculations. But after a Monday meeting this week with the two top European officials, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso, US President Barack Obama said the European debt crisis is of“huge importance”to the United States, and that Americais“ready to do our part”in keeping the economy overseas afloat.

No further details of what he meant by"our part"were offered — probably because any attempt by the administration to hand out taxpayers' money to overseas banks would meet furious opposition in Congress and across the country.

But only two days later, the Fed, which is not accountable neither to Congress nor . . . basically anybody else, announced this deal.

Under the agreement, the FED lends dollars to the ECB, which has to transfer the money to European banks. Now it will be two times cheaper: the central banks must now pay the Fed a private-sector overnight lending rate plus 0.5 percentage point; they previously paid plus 1 percentage point. And there's no doubt that European banks that lost money on junk debt obligations of European governments will line up for almost free American cash."

Yes, this seems remarkably bad. That said, we've allowed the globalists to create so interwoven a collection weaknesses that we really might not have a choice.