A few weeks ago, I began doing something which I hadn’t done since my College days – I did some reading of and about John Maynard Keynes. Among others, I am just finishing the book “The Battle of Bretton Woods” by Benn Steil. And I am amazed! Two principal issues dominated the negotiations lead by Keynes on the UK side and by Harry White on the US side, namely: the flow of trade and the flow of capital as a result of a new monetary system. Continue reading
- “Did anybody ever come back from the dead?”… “Put the guns into our hands and we will use them. Give us the slogans and we will turn them into reality.” Dalton Trumbo, Johnny Got His Gun
- “We think Piraeus and Alpha, two banks we have a position in, are now very well capitalised and poised to recover… They have good management and we think the Greek economy is improving, which should benefit the banking sector.” John Paulson, of Paulson & Co.
When John Paulson moved into Greek banking shares in recent weeks, and came out in public to ‘talk up’ his new investment, Europe’s authorities and the Greek government rejoiced: Greece must, clearly, be on the mend beginning with its recently ‘recapitalised’ banks.
Europe’s World commissioned me to write the article below on where Europe may be in twenty five years from now. Hope that it proves anything other than prophetic… (Click here for Europe’s World site.)
Six years have passed since the Shanghai Crash of 2032, and Europe’s architecture is incapable of responding to its challenges in a way that offers hope of continental consolidation after 30 years of hideous fragmentation.
(This article was commissioned by The New Left Project – click here for the NLP’s site)
A few days before the German federal election, the American commentator Bob Kuttner called upon German Chancellor Angela Merkel to use the election victory that was clearly in the making to change tack regarding the European Periphery. Focusing on Greece, Kuttner added to a chorus of commentators who have called for a Marshall Plan, accompanied by a generous degree of debt forgiveness, as a ‘second phase’ of the program of budget austerity and reform imposed on Greece over the past three years. Kuttner even suggested labeling it The Merkel Plan, so as to afford the Chancellor a timeless legacy for genuine ‘tough love’, as opposed to being permanently remembered, at least in the Mediterranean, for unremitting heartlessness toward citizens of countries bankrupted when the Eurozone’s architecture was found wanting.
The problem with Kuttner’s noble suggestion is that Germany cannot afford such largesse. Continue reading
Last week, Alexis Tsipras (SYRIZA’s chair) gave a talk at the Kreisky Forum, in Vienna. In it he addressed Austrian social democrats, in Bruno Kreisky’s old residence. I post Tsipras’ speech here for two reasons: First, because it sends an interesting message to central European social democrats (Austrian and German in particular). Secondly, because this important speech seems to have gone unnoticed by the mainstream media. Your views on the speech below will, as always, be very welcome. Continue reading
Rather than the claim of German finance minister Wolfgang Schäuble that the rest of Europe needs austerity to be able to compete (The Guardian, July 19th), François Hollande was right to say in an interview with Le Monde (September 3rd) that Europe should stop apologising for the Eurozone crisis and its failure to recover growth and jobs, and act.
To all those who can’t help but feeling that an external surplus recycling mechanism as described in the modest proposal would just be an appeasing technical term for the dreaded transfer-union and that it would condemn the deficit countries into eternal servitude, I would like to point to an example within the mother of all surplus countries which shows that this is does not necessarily have to be the case. Continue reading
Asymmetrical monetary unions, wherever and whenever tried in combination with free trade and deregulated capital movements, ended up in tears and retribution. The Gold Standard, the various pegs between domestic currencies and the US dollar (S.E. Asia, Argentina, Mexico etc.), the ERM (European Exchange Rate Mechanism), the Eurozone that followed the latter’s collapse etc. they all resembled invasions of Russia – that is, a brisk beginning full of enthusiasm and hope, rapid progress that seemed unstoppable, followed by a heart wrenching slowdown as Cruel Winter took its toll, ending up with blood on the snow and infinite retributions thereafter.
This short paper offers a theoretical explanation of asymmetrical monetary unions’ inexorable slide toward crisis and explains:
(a) Why the Eurozone’s current response to its crisis (e.g. the so-called banking union decided upon, the ECB’s OMT, the insistence on austerity with ‘structural reforms) will ultimately fail, and
Is Chancellor Merkel right when she recently said: “Greece should not have been admitted into the euro area”? Continue reading
Just a quick note for regular readers to explain my recent ‘silence’. I am in Mexico City, invited by Adalberto Palma, CEO of UNIFIM (a confederation of Mexican owned financial institutions, and IMEF (the Mexican Institute of Finance Executives), to participate in the current debates on Mexico’s forthcoming financial sector reforms.
A major tussle has been developing between (A) the systemic, foreign owned banks, which dominate Mexico’s financial sector – but who at the same time starve the Mexican economy of credit, and (B) the smaller Mexican financial institutions which, despite their small size are providing disproportionately large quantities of credit to Mexican small and medium sized firms. Meanwhile the government seems determined to introduce regulatory reforms that treat the two groups equally, thus seriously undermining the Mexican financial institutions’ ability to carry on providing much needed credit services to the Mexican economy.
Yesterday, I addressed three different audiences of professionals, regulators, academics and students on the need to restrict the oligopoly power of Mexico’s foreign owned SIFIs (systemically important financial institutions) while nurturing the Mexican-owned smaller institutions. Next Sunday I shall post my keynote speech on this matter (text and audio) – so watch this space. Till then, the silence will continue as I work my way through from one meeting and one interview to another.
The back cover of a portuguese magazine dedicated to politics and critical thinking recently depicted a car mirror in which a Greek flag was clearly visible, complete with the sign: WARNING – OBJECTS IN MIRROR ARE CLOSER THAN THEY APPEAR. With no further comment from me…
Readers of this blog will recall that, years ago, I was predicting that the (mis)handling of the Euro Crisis by Brussels-Berlin-Frankfurt would cause parts of the Eurozone Periphery (Greece in particular) to metamorphosise into versions of Kosovo. This reference of mine has, I must add, upset friends in Kosovo. My message to them is to take my parallelism not as an attempt to put Kosovo down but, rather, as a pragmatic assessment of the convergence of the Eurozone’s Periphery to the current state of Kossovo’s social economy. After all, Kossovo is an EU protectorate, where the major decisions (including privatisation, energy, security) are taken by a Brussels’ functionary, the euro is the country’s currency (without of course any Kosovar official playing any role in monetary policy decisions), the local government is monopolised by a local cleptocracy and, tragically, unemployment is so high that the country’s greatest export is its young people. In other words, Kosovo is the limit toward which other EU countries, like Greece, are now tending. Neither Kosovo nor the Eurozone’s Periphery deserve this fate. Alas, Europe’s compounded political failures have given rise to this hideous, and yet utterly avoidable, catastrophe.
On 8th August 2013 Ambrose Evans-Pritchard, of The Telegraph, took up my analogy in this piece, entitled “Greece becoming new Kosovo as youth jobless hits 65pc“
Klaus Kastner has been in regular correspondence with me and with readers of this blog. A thoughtful commentator, he has held on to the thought that Greece can be revived within the Eurozone under the current mix of ‘fiscal consolidation’ policies. From the outset, he seems to have appreciated some aspects of our Modest Proposal but has maintained the position that countries like Greece can reform from within, independently of what Europe does to re-form the Eurozone. While appreciative of the Eurozone’s architectural faults, and the errors of its response to the crisis, he was never particularly convinced by my emphasis on the Eurozone’s brittle foundations or my arguments that the Eurozone is doomed if it fails to adopt policies like those in the Modest Proposal. Instead he has been consistently choosing to place his emphasis on micro-reforms and on institutional changes that the countries of the Periphery must enact. In a recent post, that breaks with his narrative-so-far, he confesses to have lost faith in the Eurozone project; in the idea that the Euro Area can be maintained in a manner consistent with shared prosperity. He is not the first one. Many of my interlocutors of the past few years, who also thought that the Eurozone was salvageable, have changed their minds, turning to the position that it should be disbanded. For my part, I have not reached that position yet. In my mind, (a) a winding down of the Eurozone can never be smooth or controlled and will, most certainly, lead to another Great Depression for countries like Germany; and (b) the Eurozone can still be saved in the manner that we have been proposing for three years now. Having said that, Europe’s leadership seem determined to disprove me and to confirm the wisdom of Klaus’ recent turn.. For Klaus Kastner’s relevant blogpost click here or read on… Continue reading
What follows is the extended, English language, version of James Galbraith’s recent interview with Roger Strassburg published in NachDenkSeiten. Enjoy: Continue reading
A few months ago, I wrote an article under the title ‘Europe Needs an Hegemonic Germany’. Handelsblatt, the respected German daily, has now picked it up and published it on 24th July 2013. (Many thanks are due to Stephen Richter, of The Globalist, for his copy-editing and support. And for posting a version of this article here.) Click here for a pdf of the relevant Handelsblatt page, or read on for my original English language text… Continue reading
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