Backlash Over Eurozone Austerity Measures
http://thedianerehmshow.org/shows/2012-04-25/backlash-over-eurozone-austerity-measures
There’s new evidence of economic and political strains among euro zone countries: On Monday the prime minister of the Netherlands resigned following the failure of his coalition government to find a way to meet deficit reduction targets. First round election results in France have raised doubts about President Nicholas Sarkozy’s political future. Spain has fallen back into recession. Italy, Belgium, the Netherlands and the Czech republic remain there, but the European Central Bank is not likely to come to the rescue once again. Please join us to discuss what’s ahead for the euro zone and its potential political and economic impact on the U.S.
Guests
Desmond Lachman
resident fellow, American Enterprise Institute.
Simon Johnson
professor of entrepreneurship at MIT's Sloan School of Management, a senior fellow of the Peterson Institute for International Economics and author of "White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You"
David Smick
global macroeconomic advisor, founder and editor of The International Economy magazine and author of "The World Is Curved: Hidden Dangers to the Global Economy".
Comments
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I watch the unraveling of European socialism with great interest, we are racing in this direction ourselves. It appears to me what we see in Europe is mass insanity, where do these people think the money is going to come from to prop up their beloved welfare state? Whether or not the euro survives at all or these countries are either forced out of the euro or opt out, the only path left other than the needed entitlement cuts is runaway inflation through currency manipulation. Either way severe austerity is in their future. In this country we have the same mass insanity on the left and right, whether it be the social welfare state or national security. Quite frankly I see little difference in the U.S. in practice by both parties on these issues.
"Reaganomics","Trickle Down","Supply Side","Job Creator",it fails everywhere,and it always has,despite all the alias`s ....
Deregulate - Defraud - Deny........
For the past few years the Oligarchs have been touting the amazing benefits of a Malthusian economy. They have used every media outlet available to convince the “Little People” that we were greedy and lazy and worthless. They have accused us of being the main culprits in the global economic debacle. At the same time they were using the global banking system to steal everything that wasn’t tied down.
Now they are afraid that we are waking up and they are beginning to worry that we are starting to connect the dots. This is usually when they implement their strategy of fear and distraction. This is when they try to convince us that we need to be afraid of “The Other” the nebulous boogey man that hides under our collective bed.
Ask yourself this question. How much was cut from the Greek domestic budget and how much was cut from the Greek defense budget. When you find the answer you will begin to see what’s really going on here.
In this country alone in the past few years, we have given the Oligarchs over 15 trillion dollars in low interest loans and outright grants after they turned the global financial system into something resembling a Las Vegas casino. Yet when we the “little People” ask for a little financial justice we get told that any action to help us would be considered a moral hazard.
Remember my fellow peons.
SOYLENT GREEN IS PEOPLE
These governments that are struggling have a long history of corruption in government. Is it possible to reverse decades of corruption in order to make them fiscally responsible?
uselesseater wrote: "Yet when we the “little People” ask for a little financial justice we get told that any action to help us would be considered a moral hazard"
They are not asking for a "little" they are demanding it all. The amount of material wealth required to maintain these levels of socialism does not exist. As far as moral hazard, they are miles past it and are living the consequences of ignoring it decades ago..
moral hazard Noun: Lack of incentive to guard against risk where one is protected from its consequences
In economic theory, a moral hazard is a situation where there is a tendency to take undue risks because the costs are not borne by the party taking the risk.
The US is spending our trillions to police the world, stop the insanity and invest in America. The failures of the prior administration may take a decade for this country to recover.
The failures of the prior administration may take a decade for this country to recover.
pror and "CURRENT"!!!, you forgot CURRENT.
Strangely enough, it seems that no one ever considers the possibility that it is not possible to continually "grow" an economy. There are already too many people chasing too many goods with too little money. And when the money gets too low, then we through in unfettered credit. Which makes everything worse. A lot of people seem to think the solution lies in various political theories; all of which are flawed. All of these "isms" are part of the problem and none of the solution
The root problem is human nature and it's primary characteristic: greed. And, alas, human nature is an unsolvable problem.
Most likely we will continue as we are, and eventually find a solution (sort of). It will work for maybe 20 years IF we are lucky. And then we will have another crash. Such is the lesson of history: we just never learn from our mistakes. Why? Because of human nature.
What I'm missing in debates such as these is, apart from all the analysis why it's so bad and why Europeans are mainly idiots, what can be done in future and what is LIKELY to be done by European politicians, who generally seem overwhelmed and even less able to make long-term decisions than normally.
I would for instance like to hear your guests comment on what happened and is still happening in Iceland, as a possible mode for, say, Germany, a much larger country in terms of population and economic footprint.
Also, I would like to hear how the systemic over-lending in the Western World can be reduced to zero again. And again how LIKELY it is that Western politicians will go that way. Currently, I see neither Obama nor Romney making this a major theme in their respective campaigns...
P.S.: I'm a Berlin listener of your show.
Post industrial..
We are being destroyed by design.
The U.S. has been downgraded Twice, AA
They won't report this in main stream flatulent media.
No one in EU should listen to any advice originating in Great Britain. After all, that country was and is in a continuous decline. I do not think Britain belongs in EU in the first place.
We should scrap globalization and replace it with regional trading blocks. Lot of push to globalize came from US when it was a manufacturing power. Now we are victims of the globalization in the race to match the lowest possible salaries and living conditions.
libertarian r us wrote:
"The amount of material wealth required to maintain these levels of socialism does not exist."
The problem is not socialism, the problem is the size of the world population, period. As of March this past year the world population passed 7 Billion people.
We have put the human race in mortal danger simply by over populating. The planet was never meant to support the number of people we now have. Actually, the planet probably couldn't support even half of the current population. But we are not doing anything to stop the population growth.
Solutions.....well there are plenty. Although none of them will solve the problem immediately and the ones that solve them immediately are, well....not very nice.
Growth, growth, growth. That's always the economists' answer to everything.
Yet, our finite planet is reeling from all this growth, which despite the top priority given it, never seems so solve humanity's problems or make us any happier. We're going to suck the orange dry. What will our great grandchildren think of us?
Moreover, economists seem to have no understanding of the absurdity and unfairness of modern banking, which allows private banks to usurp money-making powers from governments, getting rich while enslaving the people in a web of debt.
Perhaps the two issues are related, in that the vast bulk of the money they create is debt, so that there's never enough money to pay the interest on that debt. This guarantees economic collapses every so often, but they can be delayed if there is enough growth, much like a Ponzi scheme.
Sovereign governments, not private profiteers, should create the people's money.
Teece Bowman wrote: "The problem is not socialism, the problem is the size of the world population, period. As of March this past year the world population passed 7 Billion people."
Since little can be done by governments to limit or cut back on world population other than going Nazi, it's off the table politically. It's pretty obvious no one really knows what to do with all these problems on such large scales, we are all pretty much victims of circumstance. I have been on the perils over overpopulation bandwagon for quite a while but it does appear the predictions of what is sustainable were overblown. What we do know is from time to time the earth climatically hick-ups all on it's own and mass extinctions follow. Who knows where were going but we all want to maintain what we have at least. My belief has always been to keep it simple, going back to the basic expectations people once had when life was not so easy seems like a good idea.
EU plan,use Conservative Austerity............FAILURE
U.S. plan,use Liberal Stimulus...................SUCCESS
On days like today, this message board is of almost zero value. The crazies on the left versus the crazies on the right - kind of like the House and the Senate. We cannot borrow and spend our way to prosperity. Likewise, we cannot cut our way to cultural affluence and a civilized marketplace.
And so it goes.
It is NOT their "beloved welfare state." Both Spain and Ireland had fiscal SURPLUSES before the financial crisis hit. The banks of Germany and France over-lent to private sector interests which folded in the financial crisis such that tax revenue fell and the social safety net costs rose. Spain had a lower debt to GDP ratio than Germany and a LESS GENEROUS safety net.
What you are saying is that the rich bankers should be able to walk away from the catastrophe THEY caused and leave the middle and lower classes to puck up the costs. Another case of "Privatize the gains and socialize the losses."
I hope the European citizens are smarter than so many Americans seem to be as they swallow Republican talking points that have NO relation to real facts.
Only the REAL crazies are asking to "borrow and spend" forever.The realists note that borrowing, at the interest rates (ten-year) Treasuries are being purchased is practically free. If enough is borrowed to put the unemployed back to work, their purchasing will rise, aggregate demand will rise, businesses will invest and hire and the U.S. economy will off on the pent-up demand from cutbacks over the last three years.
Then, and only then, the U.S. can address its unbalanced taxation system and put healthcare spending controls in place, then watch fiscal deficits diminish.
With the huge effects of the prior administration, the failures of the current one lie in not somehow doing the impossible, namely getting a bigger stimulus. Remember, the amount in the ARRA is about the same as the CUTS made by the states. In other words, the stimulus effect that did occur was only because the stimulus happened BEFORE the states' cuts.
I want to thank David Smick for his cogent comments.
DonB, you of course overlook that government meddling and mismanagement in Europe was the root cause of all the problems they now face in the euro-zone. Just like here in the U.S.
More borrowing here in the U.S. is the last thing we need. Bailing out the banks is a side story in this unfolding drama. Why give the same government that caused the housing crisis more money to throw it down another rat hole, we have too many GSA's now.
http://synonblog.dailymail.co.uk/2010/11/first-the-potato-now-the-euro-h...
"The ECB insisted upon low interest rates for the eurozone to help the sluggish German economy. But what suited Germany was all wrong for Ireland, turning healthy growth into a debt-fuelled property mania.
First the Euro-enthusiasts across the EU fostered the idea that, since all the members of eurozone shared a single currency and had promised to adhere to strict limits on debt and inflation, they were all equal in risk".
"Waves of immigrants arrived from all over the world, flying in to work in the booming economy which one Irish prime minister promised could only become ‘boomier.’ For the first time since the potato famine of the 1840s, the population of Ireland began to grow.
Believing him and eager to cash in on ever-soaring property prices, the Irish began a credit binge that drove up levels of personal debt to the highest in Europe.
Meanwhile the Irish Government enjoyed a tax revenue bonanza - and responded by letting public sector pay and spending rip so that today Ireland has the highest paid public sector in Europe."
StLouis wrote:
"On days like today, this message board is of almost zero value. The crazies on the left versus the crazies on the right - kind of like the House and the Senate. We cannot borrow and spend our way to prosperity. Likewise, we cannot cut our way to cultural affluence and a civilized marketplace."
Thanks for the input, it adds so much to the conversation. lots of "value"
This constant talk about bailing out the banks, code for the evil rich. Since anyone who cares to investigate for honest reasons can only come to the conclusion the housing crisis was government created. Policies for affordable housing, artificially low interest rates, a failure to recognize an overheating housing market and raise interest rates. At the time of the collapse governments around the world were scared of a financial meltdown and did everything they could to prevent major banks from collapsing, this is all they could think of to do. Governments realize their sustainability lies in the hands of privately held wealth, governments do not create wealth they live off of it. With out a functioning financial system that investors have some reassurance in, governments would collapse and all the people that depend on them would in turn be left flat. That's right they did it for the "poor" and the middle class nanny staters like you!
No monetary confederacy has ever worked in the past. So either the Euro unravels starting at the peripheries, or they fully federalize fiscally. Germany cannot be asked, as a separate nation, to *NOT* beggar the workforces of Greece for the sake of keeping their own strong currency.
Germany's strong trade balance sheet enables a strong currency, which in turn keeps the relative cost of imported energy lower which in turn, balanced against their exports, feeds back to their strong currency.
Historically Greece (like Italy, Spain and Ireland) practiced monetary devaluation (inflation) in order to mitigate their tax haven stimulus gambits. So long as Europe shoves hard currency austerity down Greece's throat, Greece has little to lose by leaving the Euro.
In the US, 40+ American municipalities were already in recession by 2007 in great part due offshoring. Couple that w/ the debt bubble & an economic crisis was inevitable. In Europe, instead of "off shoring" to Greece, a great deal of commodity manufacturing went to Asia.
Part of the European impetus to offshore to Asia were stronger reg's, creating incentives to offshore where reg's are more lax. But the debt bubble mushrooming in Ireland, Spain, Iceland was entirely a creation of the American trade deficit washing its way back from Asia into global real estate.
Just yet another phase of arolling worldwide depression. It's been a veiled depression in the USA because our U3 stat under-reports unemployment, but the U6 stat says it all: 18% REAL unemployment in the USA. And we're also undergoing actual austerity in the state & municipal budgets, with little real benefit.
So again, currency valuation is being placed before actual economic activity, to the extent that further deficit stimulus is being eschewed for the sake of maintaining the global monetary position & satisfying debt holders (USA, Canada, China).