Thanks for visiting this blog, created in July 2012 out of great concern for the fate of the €uro currency area, once again on the verge of collapse due to the economically ill-advised and heartless austerity policies imposed on Greece, Spain and other heavily-indebted €uro area countries by a christian democratic German chancellor impressed with the budgeting skills of Schwabian housewives. Meant to reduce the public debt and put the countries back on a path to economic growth, these macro-economically idiotic policies are doing anything but cause "pointless misery" as Paul Krugman so aptly describes it (Bloomberg, July 23-29, 2012).

Instead of reducing public debt, the austerity measures set in motion a vicious cycle of economic contraction, rising unemployment and poverty, lower tax revenues, private capital flight, and rising public debt shares as the economy declines faster than the public debt. What’s more, the austerity-driven ‘blood, sweat and tears’ policies recommended to the European periphery derive from the same economic doctrine that brought us to the brink of disaster in 2008. These policies are not only misanthropic and counterproductive to economic growth and debt reduction in Europe, but will prove explosive for the €uro currency area unless a drastic change of course takes place - and soon.

While I do not pretend to have ‘the’ solution for the €uro crisis, I would like to offer alternative economic perspectives and views on current events, and hope to chart a more humane path toward a balanced, socially fair, and sustainable economic future for the €uro area.

On the origins of the 2008 Great Financial Crisis:
“90+% of traders are men, and they bet all of our bank deposits on liar loans which froze credit leading to 40% average losses passed on to ordinary taxpayers; then begged for trillion-dollar bailouts upon which they paid themselves 50% higher boni.”


Thursday, August 9, 2012

Austerity causes capital flight and discourages investors

As if to underline the arguments in my previous post of August 4, two days later Shell's CFO Henry Simon announced that the Shell Group would withdraw €15 bln in cash from Europe and deposit the funds in non-European assets "to avoid the growing macroeconomic risk" in the euro zone. On August 7, Bloomberg reported that Italy's biggest manufacturer Fiat SpA intends to suspend investments in Italy due to the slump in demand. Today, the head of European foreign exchange at PIMCO, Allianz's asset management arm, wrote that the "crisis of confidence in the euro zone" had reached "a new dimension", with investors not only withdrawing funds from the European periphery but out of the euro zone altogether (Bloomberg report, Aug.9, 2012).

All this is no surprise to non-mainstream economists who have warned about the negative economic effects of austerity until they became fuzzy-mouthed (den Mund fusselig geredet). The flight of capital and investments may still get much worse as more corporations reassess the macroeconomic risks and prospects in the €uro currency area.

.....unless Germany's Schwabian housewife decides to put an end to the moronic austerity strategy she is insisting on and instead starts to focus on a €uro area-wide strategy for economic growth and job creation, coordinated with our European partners and financed by taxes on rich banksters and their speculative activities.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)