Posted on 12/09/2012 10:38:45 PM PST by bruinbirdman
Like the generals of the First World War, Europe’s leaders seem determined to send wave after wave of their youth into the barbed wire of tight money, bank deleveraging, and fiscal austerity a l’outrance.
The strategy of triple-barrelled contraction across a string of inter-linked countries has been the greatest policy debacle since the early 1930s. The outcome over the last three years has been worse than forecast at every stage, in every key respect.
The eurozone has crashed back into double-dip recession. It will contract a further 0.3pc next year, according to a chastened European Central Bank. The ECB omitted mention of its own role in this fiasco by allowing all key measures of the money supply to stall in mid-2012, with the time-honoured consequences six months to a year later.
The North has been engulfed at last by the contractionary holocaust it imposed on the South. French car sales crashed 19pc last month, even before its fiscal shock therapy -- 2pc of GDP next year. The Bundesbank admitted on Friday tore up its forecast on Friday. Germany itself is in recession.
The youth jobless rate has reached 58pc in Greece, 55.8pc in Spain, 39.1pc in Portugal, 36.5pc in Italy, 30.1pc in Slovakia, and 25.5pc in France, with all the known damage this does to the life-trajectory of the victims and the productive dynamism of these economies.
EU policy elites blame "labour rigidities". The United Nation’s economic arm UNCTAD counters that the EU demand for "wage compression" is itself perpetuating the crisis.
The labour share of total income has fallen to a 60-year low, eating away at demand. This is a formula for perma-slump. In a thinly veiled attack on Berlin, Frankfurt, and Brussels, the UN decried the "political blockade" against any solution to the crisis
(Excerpt) Read more at telegraph.co.uk ...
Hey, it’s for real, policy or no policy. Face it.
Does this mean that Austrian Economics is not working in practice, and that Keynsian Economics might be needed?
America will pull further away. The growth gap between the US and EMU is 2.6pc this year, the highest since the 1990s. Citigroup said it will widen to 3.4pc in 2014 and continue at extreme levels through the decade. This will have dramatic compound effects over time. Such is the fruit of Europe’s "policy choices".
At least we're doing better than the Europeans.
So they’re finally calling it a depression? Interesting. So good to know Obama is following Europe’s example. We’ll have our own depression in no time. Yay.
AEP has maintained all along that the market will out. Socialist (Kensyan?) economics have been the ruin everywhere.
However, in order to cushion the impending economic disaster from social disorder, governments should avoid austerity shock with prudent money printing policies.
AEP sees no alternative to the implosion of the European Monitary Union.
yitbos
The article talks about a “bad equilibrium,” similar to a Nash equilibrium, that locks everyone in place, unable to improve the situation. In an ideal “Austrian” world, prices of labor and assets would decline until the markets cleared. In a Euro world (and to a lesser extent in the U.S.), prices — especially labor rates and rules — are “sticky,” making it very difficult for the market to adapt.
Keynesian economics might achieve the same market clearing through inflation, making the real prices lower by making the same dollars worth less. A Keynesian approach can potentially loosen the Nash equilibrium, making it possible for the market to operate again.
Inflation, the universal tax/equalizer. But the EU Constitution/Treaty prohibits money printing/Eurobonds as a means of shoring up "sovereign" governments' economic shortcomings.
yitbos
Wait until the countries actually cave and give in to what the EU is demanding of them. Suddenly, pow! no more recession.
I don’t know what all these terms mean, but I can see that Europe, esp. the European Union, has FUBARed itself into a second world status and aiming for Third World Status.
I blame most of it on the European socialists of all stripes. They never looked at America’s success with free enterprise, i.e. never looked to the West, only the East.
Who says that Communism didn’t win in Western Europe?
‘Austrian economics’ has never been practiced.
He claims that Europe is practicing “austerity,” yet budgets are not shrinking.
Instead, the “rate of growth” of budgets has been cut, sometimes to zero.
He claims that countries are not borrowing enough money, yet 5 Western Europe countries have borrowed so much they risk default.
He claims interest rates are too high, yet Germany, Holland, and Austria have rates close to the USA benchmark.
Only the countries that might default have seriously high rates, which is what you would expect as an investor.
He claims that a strong Euro is destroying Southern Europe, but not ONE country has even threatened to leave the Euro.
Finally, Ambrose has totally misled readers about the original conception of the European Monetary Union that was approved by voters.
They voted for a common currency that central bankers would keep within tight limits. They voted for reasonably free trade, for reasonably free movement of labor within the Euro Zone, and for reasonable government spending by all members of the Euro Zone.
They did NOT vote for a Central Bank that would guarantee or purchase sovereign debt by printing money.
Germany did NOT vote to bail out debtor nations with German Euros.
Europe did NOT vote to allow national budgets to be written by unelected Euro bureaucrats.
The proper course in Europe is to keep the Euro strong.
NO country will voluntarily leave the Euro if that happens.
If some countries default, so what?
A few of the banks that were forced to buy these crappy bonds will collapse, but most banks will just be reduced in size and value and will struggle through.
The defaulted countries will be back in the bond market the next day, selling at much shorter maturities and much higher interest rates.
Tough.
They'll do it, and not ONE of them will leave the Euro.
The central problem is that the Euro imposes a uniform monetary policy and facilitates the flight of liquidity from impaired economies that need monetary expansion in order to grow (Greece, Italy, Spain, and Portugal) to those stronger nations that prefer a tight control on the money supply and that control EU monetary policy (primarily Germany and France).
For Greece and her crippled sister nations in the South of the EU, more borrowing does nothing to remedy the lack of economic growth because the stimulus provided by new borrowing is rapidly dissipated as the new liquidity quickly flows across the border to better investments in safer havens in the North of the EU.
The best resolution would be to permit the impaired countries to again issue their own national currencies so that they can bolster their money supply. This, along with structural reforms to reduce the portfolio of bad loans and cuts in taxes, spending, and regulatory burdens would offer a way out of the current impasse.
The central problem is that the Euro imposes a uniform monetary policy and facilitates the flight of liquidity from impaired economies that need monetary expansion in order to grow (Greece, Italy, Spain, and Portugal) to those stronger nations that prefer a tight control on the money supply and that control EU monetary policy (primarily Germany and France).
For Greece and her crippled sister nations in the South of the EU, more borrowing does nothing to remedy the lack of economic growth because the stimulus provided by new borrowing is rapidly dissipated as the new liquidity quickly flows across the border to better investments in safer havens in the North of the EU.
The best resolution would be to permit the impaired countries to again issue their own national currencies so that they can bolster their money supply. This, along with structural reforms to reduce the portfolio of bad loans and cuts in taxes, spending, and regulatory burdens would offer a way out of the current impasse.
Stamp out the UN. Make the leave your country. Stop funding them as evil terrorists.
LLS
LOL! Wow, the article doesn't even attempt objectivity.
I lived in Europe for 4 years. Let me tell you, there is one HELUVA difference between the work ethics of northern vs. southern Europe.
You visit Greece, and every street has a bar or coffee shop with young, middle aged, and old men sitting around arguing about.......well.....everything.
You go into Germany or Norway, and even the elderly women are working.
AEP fans on Freeper. Unusual. Detractors, too. Means some freepers like to read stuff. Ping for later.
I think we agree on that.
We disagree on the solution.
Wouldn't it be reasonable to expect that nations like Greece address the problem that there exist "better investments in safer havens in the North of the EU"? Naturally, there is little that Greece can do to change the quality or safety of investments in the North. But just what exactly stops Greece from increasing the quality and safety of investments in their own nation?
Do we wish Germany to emulate Greece or Greece to emulate Germany? Which is the wiser course?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.