The best eurocrisis exposé ever. Period.

[admin]

There really isn't anyone better in explaining the eurocrisis and what needs to be done now than Paul de Grauwe, the author of authoritative textbooks on this topic and gifted with an ability to make even the most complex accessible to the many.

Here is his 2012 London School of Economics presentation, it's simply the best.

[Petrovale]

I have my doubts
But let’s give it a try...

Many with an historical conscience are so disgusted at today's political and economic stagnation that they would be willing to leave the EU and emigrate tomorrow.
We need real political leaders with real constituents in banking, industry, labor and other institutions to create a new consensus and action plan going forward.

Our problem is that we have created too many Harry Potter academics, autistic technocrats and statistical slaves.
Will the real political entrepreneurs and engineers please stand up, and offer solace to the populace !?

I believe this is what Paul De Grauwe, from his Political Economy chair at LSE, should have said.
I anxiously await the insights of other European schools, with a tad more Politics than Economics.

I have my doubts
But let’s give it a try...

[admin]

As it happens, Paul de Grauwe also used to be a politician. I really can't find fault with his presentation, it's the best I've seen so far (which isn't surprising for those familiar with his work), but then again, I might have a high "harry potter" content myself..

Still, I think the first step towards action is understanding, and there are few who offer better understanding on this topic than De Grauwe.

[Petrovale]

Definitely a good presentation.

Just missed the political spirit.

Best,

Petro

[ArtM72]

The Eurozone kind of reminds me of pre Civil war US. Two fundamentally different economies, north and south, in need of integration. I think that unity in the US finally came with the advent of air conditioning in the south. Until then the unified country with a central bank allowed disparate states to hold each other up.

Maybe it wasn't a/c. Land grant colleges? College football national championship series?

[admin]

Well Art, Europa has the Champions Legue, which is basically a cartel, but nevertheless..
Real Madrid - Manchester United; Arsenal - Bayern Munchen; Barcelona - AC Milan
It's pretty good stuff, although not for the smaller countries
http://shareholdersunite.com/2008/05/18/...-football/

[admin]

Here is what Krugman had to say about a newer De Graauwe paper:

Paul De Grauwe and the Rehn of Terror

Nobody has taught me as much about the euro crisis as Paul De Grauwe, who brought to the fore a crucial point almost everyone was overlooking: the importance of self-fulfilling debt panics in countries that no longer have their own currencies. Now he has a new paper with Yuemei Li following up on that insight, and offering yet more evidence of the incredible unwisdom of European economic policy.

What De Grauwe and Li show is that the rush to austerity in Europe largely reflected the surge in sovereign debt spreads after Greece got in trouble; the bigger the spread, the harsher the austerity. But it turned out that the spreads didn’t reflect underlying fiscal fundamentals. De Grauwe had already made that point by comparing the UK with Spain; similar fiscal outlooks, wildly different borrowing costs. Now he has another piece of evidence, the spectacular decline in spreads once the ECB signaled its willingness to buy sovereign debt if necessary, thereby removing fears of a self-fulfilling liquidity crisis.

Meanwhile, all that austerity has taken a terrible toll. De Grauwe and Li offer us yet another revealing scatterplot, using announced austerity measures in 2011:

But hey, Keynesian economics can’t be right, can it?

And they also show that countries pursuing austerity have by and large seen their debt positions worsen:

But take heart. Olli Rehn of the European Commission, last heard declaring that the big problem with austerity isn’t that it doesn’t work, it’s the fact that economists keep publishing studies showing that it doesn’t work, says that the only thing we have to fear is fear itself:

Mr. Rehn insisted that Europe’s belt-tightening policies were working and would lay the groundwork for a recovery. He said the European economy should expand in 2014, with growth reaching 1.6 percent across the Union and 1.4 percent in the euro area.

“We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation,” he said in the statement.

Well, that’s all right, then.

[ArtM72]

And yet another irony established. American Republicans accuse President Obama of aspiring to European style democracy even while they promote the failed European fiscal austerity model.

Sometimes I wonder if all remaining Republicans are all short sellers :-)

[admin]

And yet another irony established. American Republicans accuse President Obama of aspiring to European style democracy even while they promote the failed European fiscal austerity model. Sometimes I wonder if all remaining Republicans are all short sellers :-)

Well, I don't know about that, Art. There is nothing intrinsically wrong with the Republican ideal of having a small state, that's perfectly legitimate and traditionally a characteristic of the US. I, in fact, wouldn't want to change that as for me the world is a laboratory so it's more interesting if it's more diverse, as there are more "experiments" going on simultaneously to distill conclusions from.

Where I part is that there is no economic necessity for a small state (look at the Nordic countries, or Germany, or the Netherlands), what matters is not the size of the state, but the efficiency of it's policies and institutions.

Also, now, a time when the private sector is deleveraging still, is about the worse time to embark on reigning in the state.