Sunday, Feb 07, 2010
Realist
TBS: Europe Risks Another Global Depression
What are the stronger European countries, specifically Germany and France, doing to contain the self-fulfilling fear that weaker eurozone countries may not be able to pay their debt – this panic that pushes up interest rates and makes it harder for beleaguered governments to actually pay?
The Europeans with deep-pockets are doing nothing – except insist that all countries under pressure cut their budgets quickly and in ways that are probably politically infeasible. This kind of precipitate fiscal austerity contributed directly to the onset of the Great Depression in the 1930s.
Posted by devo @ 05:09 PM (757 views) Add Comment
3 Comments
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1. Nobody777 said...
I may be silly but I dont think the Eurozone will be so dumb to sit back and let the house of cards fall without a fight. It is in nobodys interest to create another depression oil would go below $10 quick that will bust Russia and the other oil exporting nations the collapse of the west will bust China and India as they will have no market to sell its goods so things will be in short supply hence skyrocketing prices and probably all sorts of wars.
I assume the PIIGS accept their problems and Ireland is on the correct course as are the others accepting this problem.
I assume everyone will get together and anounce some kind of assistance to help deal with the current problems probably on Monday,
This will buy time and a bit of inflation with high unemployment is the measure they will or may desire.
The markets a stating very clearly no more exploding government overspending I hope the governments are listening.
For me its odds on they are not dumb however the deflationary risks are high to address this its simple devalue the Euro and the US Dollar that will stoke inflation and high unemployment will keep wage inflation down not nice or easy but it would work.
2. ant said...
Good post: Simon Johnson wrote:
"Another Lehman/AIG-type situation lurks somewhere on the European continent, and again our purported G7 (or even G20) leaders are slow to see the risk. And this time, given that they already used almost all their fiscal bullets, it will be considerably more difficult for governments to respond effectively when they do wake up."
But this was obvious to Pytel a year ago:
http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html
Mainstream economist and analysts have some way to catch up with Pytel.
3. icarus said...
"The IMF is supposed to provide only balance-payments lending". Is this correct? Surely the situation is that if Greece were outside the eurozone (a) it probably would have gone to the IMF for financial assistance in exchange for fiscal adjustment measures (like Hungary, Rumania and Latvia) and (b) it would have been eligible for balance-of-payments assistance - from the EU.