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.”


Monday, September 3, 2012

Non-Sense Economics and the Deepening Greek Crisis: Economic Incompetence or a Dangerous Game Played by the German Elite ?


The following video reviews the most recent round of austerity measures planned in Greece and predicts what they will do to the Greek economy and its people.
 
 
See also my review and analysis of the IMF Memorandum of Economic and Financial Policies for Greece:  case study Greece (see August 24 post) and Yanis Varoufakis' comments on a leaked letter from the Troika to the Greek labor ministry. 

Any reasonable economist wonders whether the austerity policies imposed on Greece are merely irrational and/or based on economic incompetence or whether they are instead completely rational as the real objective is to break the back of the unions and dismantle the welfare state.

Gerald Epstein, Professor of economics and Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst argues that it is the latter, suggesting that the German elite is playing a dangerous game. At first, they used the euro zone to export their goods, recklessly lending to the Southern periphery so their people could buy German products. Now, they are using the crisis in Greece and other highly-indebted Southern European countries to destroy the European welfare state, liberalize the labor market, and organize the privatization of state-owned assets at fire sale prices.
 
He argues that this strategy endangers the peace in Europe and – just like in the 1930s - leads to violent clashes and a revival of radical parties (which we have already seen). What makes the situation especially dangerous, not only for Europe but the global economy, is the fact that – just as pre-Lehman – we don’t know who is holding the bets against European sovereigns and who has to pay for them if the euro zone collapses.

My view: Although the origins of the strategy lie outside of Germany (see my posts of August 20 and 24), I’m afraid that Epstein may be right about the consequences. It could very well be that Greece is just the starting point on the path toward a market-fundamentalist re-making of Europe, serving as a blueprint for similar programs in other eurozone countries. These programs are already being prepared, e.g. for Germany: "Agenda 2020")
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