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."
Showing posts with label austerity. Show all posts
Showing posts with label austerity. Show all posts
Wednesday, February 29, 2012
Monday, September 26, 2011
Another Market View
Sept 26th, 2011
Earlier, we posted the BBC interview with American stock trader and analyst, Alessio Rastani. His pronouncement was basically that the sky will soon be falling and the grounds wil shake. Seriously. Here's a somewhat less alarmist (although not by much) report from Europe via PBS.
Earlier, we posted the BBC interview with American stock trader and analyst, Alessio Rastani. His pronouncement was basically that the sky will soon be falling and the grounds wil shake. Seriously. Here's a somewhat less alarmist (although not by much) report from Europe via PBS.
Watch the full episode. See more PBS NewsHour.
Monday, August 15, 2011
Roubini Raises The Alarm Level
Aug 15th, 2011
Many people find Nouriel Roubini's work dry and dispassionate. You generally don't see him on television. After all, his style is more academic than political. He is certainly no hyper-partisan of the Krugman or Stiglitz mode. All that said, Roubini got a lot more attention last week than usual. In an interview with the WSJ's Simon Constable, he told it like it is in the same measured tones that have made him a less than household name.
You don't cut taxes when you go to war. The stimulus was too small. The deficit is "Bush's fault." You don't "front load" austerity in a crisis. Rather, you apply that pressure when an exit from recession is secure. Rising income inequality naturally leads to civil unrest.
However, this observation at the 5min 10sec mark sent out a shock wave:
"Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process."
God help us. He is usually right. No one more accurately predicted the collapse of 2008.
The fact that we now have an ascendant movement in American politics which greets proven centralized monetary policy with charges of "Communism" only makes the disaster more likely.
It's all common sense... unless you are a devoted Fox viewer.
Many people find Nouriel Roubini's work dry and dispassionate. You generally don't see him on television. After all, his style is more academic than political. He is certainly no hyper-partisan of the Krugman or Stiglitz mode. All that said, Roubini got a lot more attention last week than usual. In an interview with the WSJ's Simon Constable, he told it like it is in the same measured tones that have made him a less than household name.
You don't cut taxes when you go to war. The stimulus was too small. The deficit is "Bush's fault." You don't "front load" austerity in a crisis. Rather, you apply that pressure when an exit from recession is secure. Rising income inequality naturally leads to civil unrest.
However, this observation at the 5min 10sec mark sent out a shock wave:
"Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process."
God help us. He is usually right. No one more accurately predicted the collapse of 2008.
The fact that we now have an ascendant movement in American politics which greets proven centralized monetary policy with charges of "Communism" only makes the disaster more likely.
It's all common sense... unless you are a devoted Fox viewer.
Tuesday, August 2, 2011
Quote Of The Day - Here and Now Edition
August 2nd, 2011
"Despite years and years of study by economic historians that we shouldn't repeat the mistakes of 1937, we seem to be doing it again."
-- Economist Lawrence Katz condemning the "debt deal" and our misplaced obsession with "austerity measures."
-- Economist Lawrence Katz condemning the "debt deal" and our misplaced obsession with "austerity measures."
Wednesday, June 1, 2011
Quote Of The Day
June 1st, 2011
"Mere parsimony is not economy. Expense, and great expense, may be an essential part in true economy."
--Edmund Burke
Tuesday, May 17, 2011
Quote Of The Day
May 17th, 2011
"It is a trick among the dishonest to offer sacrifices that are not needed, or not possible, to avoid making those that are required" -- Ivan Goncharov
Monday, September 27, 2010
The Austerity Movement
Sept. 27th, 2010
From the Financial Times comes coverage of the current European economic crisis and how the E.U. is handling it.
"In a letter to all 27 EU finance ministers, Wolfgang Schäuble (the German Finance Minister) said he “chiefly supports” the stringent proposals to be unveiled Wednesday by José Manuel Barroso, European Commission president, which include millions of euros in fines for countries that fail to cut sovereign debt levels.
But the letter and a position paper, obtained by the Financial Times, also goes further, suggesting EU development and agricultural funding should be suspended for repeated violators. It also proposes that voting rights in the powerful Council of Ministers be suspended for countries that fail to meet fiscal benchmarks."
One has to wonder if the punishments being proposed for failing to meet bureaucratic targets might actually aggravate the disparities in financial strength or industrial stability amongst E.U. members. Could the strictures of the sort suggested lead to unfinished infrastructure or even diminished programs to prevent famine and combat drought?
Time will tell.
From the Financial Times comes coverage of the current European economic crisis and how the E.U. is handling it.
"In a letter to all 27 EU finance ministers, Wolfgang Schäuble (the German Finance Minister) said he “chiefly supports” the stringent proposals to be unveiled Wednesday by José Manuel Barroso, European Commission president, which include millions of euros in fines for countries that fail to cut sovereign debt levels.
But the letter and a position paper, obtained by the Financial Times, also goes further, suggesting EU development and agricultural funding should be suspended for repeated violators. It also proposes that voting rights in the powerful Council of Ministers be suspended for countries that fail to meet fiscal benchmarks."
One has to wonder if the punishments being proposed for failing to meet bureaucratic targets might actually aggravate the disparities in financial strength or industrial stability amongst E.U. members. Could the strictures of the sort suggested lead to unfinished infrastructure or even diminished programs to prevent famine and combat drought?
Time will tell.
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