Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Austerity and Political Reality

admin by admin
September 13, 2012
in Uncategorized
0
0
SHARES
1
VIEWS
Share on FacebookShare on Twitter

by Dirk Ehnts

homeless-manSMALLIt seems that the reality is starting to sink in that austerity is guaranteed to a) make things worse economically for your country and b) make re-election of the government imposing austerity all but impossible. Mariano Rajoy, who gave his first extensive interview since he became president, has nevertheless stated that the budget deficit is his priority number one (source: EL PAIS).

Meanwhile, Europe’s so-called periphery is getting more and more desperate as society turns into something dysfunctional, at least from the perspective of enlightened self-interest.

Recent news include the looting of super markets in Spain by normal people out of a job (source: Guardian), the return of beggars to Cyprus (source: philenews) and following quotes from Wolfgang Schäuble earlier this week at the Bundestag:

The causes lie in the mistakes of the financial and economic policies which member states have pursued and (the crisis) can only be solved via these.

There is no comfortable way out of that, neither through pooling debt nor by casually using the bank’s printing presses.

Schäuble, of course, is wrong on both the ethical and the technical side. The euro zone problems have originated in the banking system, which built up a portfolio of non-performing loans in the years following the introduction of the euro. The design of the ECB has been faulty, letting the loan portfolio of some countries balloon to obscene size even though real estate bubbles (Ireland, Spain) were clearly in the making. Since member state policies are not the cause of the crisis they cannot be counted on to remedy the situation. (What does “solving” the crisis mean here in Germany? I have the feeling that to politicians it means that all creditors get repaid regardless of how badly they have invested the money.)

George Soros in his recent article The Tragedy of the European Union and How to Resolve It has it basically right (source):

In my judgment the best course of action is to persuade Germany to choose between becoming a more benevolent hegemon or leaving the euro. In other words, Germany must lead or leave.

Since all the accumulated debt is denominated in euros it makes all the difference who remains in charge of the euro.  If Germany left, the euro would depreciate. The debt burden would remain the same in nominal terms but diminish in real terms. The debtor countries would regain their competitiveness because their exports would become cheaper and their imports more expensive. The value of their real estate would also appreciate in nominal terms, i.e. it would be worth more in depreciated euros. The creditor countries, by contrast, would incur losses on their investments in the euro area and also on their accumulated claims within the euro clearing system. The extent of these losses would depend on the extent of the depreciation; therefore creditor countries would have an interest in keeping the depreciation within bounds.

The eventual outcome would fulfill John Maynard Keynes’ dream of an international currency system in which both creditors and debtors share responsibility for maintaining stability. And Europe would escape from the looming depression. The same result could be achieved, with less cost to Germany, if Germany chose to behave as a benevolent hegemon.

The continuation along the path that Europe is on right now will lead to a return of problems that (Western) Europeans haven’t seen in a long time. Technically, the solution to the crisis is easy. Cut down the debts of governments and households to acceptable levels, which is what Iceland did, and then rebuild the euro area institutions along either a roll back of the euro with Germany exiting first or build a better monetary system that avoids the problems that led to this crisis. However, this solution would cause a big political problem to whatever government would agree on it since the debts of some is the wealth of others.

Apart from this financial problem there is still the slight problem of external adjustment. Germany should turn into a net importer and the periphery into a net exporter, the sooner the better. With austerity not helping much to achieve this, other routes must be thought about.

Read more by Dirk Ehnts.


About the Author

Dr. Dirk Ehnts is a research assistant at the Carl-von-Ossietzky University of Oldenburg (Germany). His focus is on economic integration and economic geography, covering trade, macro and development. He is working at the chair for international economics since 2006 and has recently co-authored a book on Innovation and International Economic Relations (in German). Ehnts has written at his own blog since 2007: Econblog 101. Curriculum Vitae.


Previous Post

Poverty, Median Income and Health Insurance Numbers Announced for 2011

Next Post

Facebook: Share Repurchase, Buffett Style

Related Posts

Bitcoin Has Been ‘Killed’ 474 Times But Its Still Alive And Kicking
Economics

Bitcoin Has Been ‘Killed’ 474 Times But Its Still Alive And Kicking

by John Wanguba
June 5, 2023
Japanese Regulators Issue Stern Warning To OpenAI For Data Collection
Business

Japanese Regulators Issue Stern Warning To OpenAI For Data Collection

by John Wanguba
June 5, 2023
What Are BRC-30 Tokens?
Econ Intersect News

What Are BRC-30 Tokens?

by John Wanguba
June 2, 2023
XRP Explosive Boom Results In Record-Breaking Address Activity
Economics

XRP’s Explosive Boom Results In Record-Breaking Address Activity

by John Wanguba
June 1, 2023
What To Consider When Evaluating Low-Code And No-Code Platforms
Business

What To Consider When Evaluating Low-Code And No-Code Platforms

by John Wanguba
June 1, 2023
Next Post

Facebook: Share Repurchase, Buffett Style

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Bitcoin Has Been ‘Killed’ 474 Times But Its Still Alive And Kicking
  • Japanese Regulators Issue Stern Warning To OpenAI For Data Collection
  • What Are BRC-30 Tokens?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish