Financial Systems and Italian Cruise Ship Captains

Econintersect:  Caveat – This is a summary of economic news followed by a rather pointed editorial comment (so labeled).  Picture is of unemployed and underemployed university educated youth in Civita Castellani, Italy.  Their stories are told in The Guardian article linked as a source at end of this article.  Click on picture for larger image.

See end of article for 1 February 2012 update.

There are a lot of news stories about sovereign debt problems in Europe.  Many are talking about possible contagion of bank insolvency triggered by sovereign debt write downs, haircuts and defaults.  The unprecedented growth of central bank balance sheets in an effort to solve the problems with massive increases in liquidity (quantitative easing) doesn’t seem to be getting any economic improvement.  The problem seems to be that there is no growth.  We say “seems” to be the problem because underneath the apparent problem is the fundamental pillar that is crumbling, the real problem:  Unemployment.

The unemployment problem is most manifest in the young.  The real problem in Europe is unemployed youth, as shockingly summarized in this graph from Zero Hedge:

Click on graph for large image.

From The Guardian:

Eurozone unemployment is at a record. According to Eurostat, the EU’s statistical office, 16.3 million people are out of work in the 17 countries that joined the euro. The story of a lost generation is becoming the scandal of a continent. In Spain, 51.4% of those aged 16-24 are jobless. In Greece, the figure is 43%.

Zero Hedge summarizes the scariest part of the situation:

… the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be “someone’s” fault that there are no job opportunities for anyone.

Editor’s comment: Instead of pouring trillions of euros into banks why isn’t the money paid to the disenfranchised to make things for each other to buy?  Here is a quote from Steve Keen’s “Debunking Economics” (2011), page 369:

…if you believed that the most important thing was to restore economic activity, then the bank bailout is the least effective way to do this!  Profits and wages do rise because of the bank bailout, but the rise in income is far greater when the firms or workers receive the bailout than when the banks do.

All this prompts a rhetorical question:  Are the leaders of the financial systems and the central banks of the world all populated with Italian cruise ship captains who, having run their ships on the rocks, refuse to consider the fate of their passengers in their rush for self-rescue?

Sources:

• Europe’s Lost Generation:  how it feels to be young and struggling in the EU (The Guardian, 28 January 2012)

• This is Europe’s Scariest Chart (Zero Hedge, 30 January 2012)

• “Debunking Economics – Revised and Expanded Edition” (2011) by Steve Keen; Zed Books, London|New York

• $15 Trillion Central Bank Balance Sheets (Fictitious Capital) (GEI News, 31 Janaury 2012)

Hat tip to Russell Huntley.

Update: 7:48 pm (New York time) 1 February 2012