Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Europe clings to scorched-earth ideology as depression deepens
The Telegraph ^ | 12/9/2012 | Ambrose Evans-Pritchard

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 ...


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; News/Current Events
KEYWORDS:

1 posted on 12/09/2012 10:38:49 PM PST by bruinbirdman
[ Post Reply | Private Reply | View Replies]

To: bruinbirdman

Hey, it’s for real, policy or no policy. Face it.


2 posted on 12/09/2012 10:42:20 PM PST by dr_lew
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman; All

Does this mean that Austrian Economics is not working in practice, and that Keynsian Economics might be needed?


3 posted on 12/09/2012 11:41:33 PM PST by gleeaikin
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman
Buried at the end of the article is this:

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.

4 posted on 12/09/2012 11:42:54 PM PST by AZLiberty (No tag today.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman

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.


5 posted on 12/09/2012 11:49:39 PM PST by athelass (Proud Mom of a Sailor & 2 Marines - Now home safe from Afganistan. Merry Christmas!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: gleeaikin
"Keynsian Economics might be needed"

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

6 posted on 12/09/2012 11:50:36 PM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
[ Post Reply | Private Reply | To 3 | View Replies]

To: gleeaikin

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.


7 posted on 12/09/2012 11:54:12 PM PST by AZLiberty (No tag today.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: AZLiberty
". . . market clearing through inflation . . . 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

8 posted on 12/10/2012 12:12:18 AM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
[ Post Reply | Private Reply | To 7 | View Replies]

To: bruinbirdman

Wait until the countries actually cave and give in to what the EU is demanding of them. Suddenly, pow! no more recession.


9 posted on 12/10/2012 12:17:30 AM PST by Olog-hai
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman

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?


10 posted on 12/10/2012 12:24:52 AM PST by MadMax, the Grinning Reaper
[ Post Reply | Private Reply | To 8 | View Replies]

To: gleeaikin

‘Austrian economics’ has never been practiced.


11 posted on 12/10/2012 1:06:15 AM PST by Misterioso ( "Those who grant sympathy to guilt, grant none to innocence." - Ayn Rand)
[ Post Reply | Private Reply | To 3 | View Replies]

To: bruinbirdman
I have completely lost confidence in Ambrose.

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.

12 posted on 12/10/2012 1:29:29 AM PST by zeestephen
[ Post Reply | Private Reply | To 1 | View Replies]

To: gleeaikin
Where exactly have the principles of Austrian Economics been put into practice in Europe? The central bank has interfered (Why should it even exist?). Governments have interfered (Rothbardians would argue against their existence.). What has been in place in Europe for decades is a Keynesian approach. It has been an abject failure.
13 posted on 12/10/2012 1:31:48 AM PST by Buddy Sorrell ("I'm dead sober, Andy, but I expect I'll get over it." - Otis Campbell)
[ Post Reply | Private Reply | To 3 | View Replies]

To: gleeaikin
Not really. Because of the Euro, the situation is profoundly different than what the Austrian and Keynesian schools of economics contemplated.

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.

14 posted on 12/10/2012 2:00:18 AM PST by Rockingham
[ Post Reply | Private Reply | To 3 | View Replies]

To: gleeaikin
Not really. Because of the Euro, the situation is profoundly different than what the Austrian and Keynesian schools of economics contemplated.

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.

15 posted on 12/10/2012 2:01:22 AM PST by Rockingham
[ Post Reply | Private Reply | To 3 | View Replies]

To: bruinbirdman

Stamp out the UN. Make the leave your country. Stop funding them as evil terrorists.


16 posted on 12/10/2012 2:07:12 AM PST by Rapscallion ( OBAMA: You own it now. See if you can govern it.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: athelass
We have been in a depression... some need to stop believing the lies and propaganda of the US government and their lapdog presstitutes.

LLS

17 posted on 12/10/2012 2:49:52 AM PST by LibLieSlayer (WOLVERINES!)
[ Post Reply | Private Reply | To 5 | View Replies]

To: bruinbirdman
"The North has been engulfed at last by the contractionary holocaust it imposed on the South."

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.

18 posted on 12/10/2012 3:01:49 AM PST by SkyPilot
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman; AZLiberty

AEP fans on Freeper. Unusual. Detractors, too. Means some freepers like to read stuff. Ping for later.


19 posted on 12/10/2012 7:47:24 AM PST by campaignPete R-CT (campaigned for local conservatives only)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Rockingham
Rockingham said: "... 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."

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?

20 posted on 12/10/2012 12:17:24 PM PST by William Tell
[ Post Reply | Private Reply | To 14 | View Replies]

To: William Tell

Even if the Greeks be made to behave like Germans — which seems unlikely — that would be the task of a generation. In the meantime, some solution must be found that permits monetary expansion in Greece and other debt impaired Eurozone economies. Otherwise, Greece and her sisters in the South will suffer chronic economic stagnation no matter how much lending they receive.


21 posted on 12/10/2012 1:18:21 PM PST by Rockingham
[ Post Reply | Private Reply | To 20 | View Replies]

To: Rockingham
"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 "

Kinda like every EuroZone country is using a foreign currency over whose value they have no control.

yitbos

22 posted on 12/10/2012 5:12:53 PM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
[ Post Reply | Private Reply | To 14 | View Replies]

To: bruinbirdman

Except for Germany, which, sets the terms for the entire Euro zone. Other countries tolerate this because German cash is now keeping the Euro afloat, while the cost for Germany is offset by being able to buy and sell throughout the Eurozone on favorable terms. And, although no longer issued, the German mark is still a valid currency.


23 posted on 12/11/2012 9:27:01 AM PST by Rockingham
[ Post Reply | Private Reply | To 22 | View Replies]

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.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson