An entire system of global trade is at risk: Sir Mervyn King, the Governor of the Bank of England, this week called the current financial crisis “the most serious… since the 1930s, if ever”, in justification for a further £75 billion of “quantitative easing”. Since Sir Mervyn cited the chaos of the inter-war years, it seems appropriate to quote Winston Churchill: “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusions of counsel, until the emergency comes, until self-preservation strikes its jarring gong – these are the features that constitute the endless repetition of history.” Read more>>
Echoes of 2008: Here we go again: The Europeans are pushing the global banking system to the edge. European bankers have been saying things are fine for weeks now, even as their exposure to indebted euro-zone countries strangles their access to funding. Read more>>
Solving the euro-zone crisis: The plan to have a plan: Policymakers are a long way from forming a coherent strategy. Banks’ woes have stolen the headlines this week. But the real reason to worry about Europe is that policymakers are still flailing in their efforts to come up with a big plan, fast, to get to grips with the region’s debt crisis. Read more>>
My thoughts for you....
ReplyDeleteIn 2008 we had the cushion of some of the emerging markets who were still growing exponentially, like Asia (esp) China, and some of the South American economies. There are experts now predicting at least a Chinese slowdown, and possibly others as well. Without the emerging economies and their growing demand to buffer the weakened government and consumer demand in the West, we don't have a lot of room to move.
The most exciting thing scripturally is this.
Europe is in a lose-lose situation. Economically, it makes absolutely no sense to have a monetary but not fiscal union. This creates an automatic imbalance that will always be exposed when there is a slowdown in an economy. Right now Greece would ideally devalue its currency, causing an fast rise in exports due to their lower cost, creating jobs and income. Inflation would rise, but not at the same pace as income. This would lead eventually to full employment and a stablisation of the currency. But it can't do this because of the Euro. So Europe has two choices.
1. Disband the Euro completely. In the long run, a good idea - I think. But in the short term, it would throw the world economy into absolute turmoil, and result in capital flight out of Europe. Basically - short-medium term intense pain.
2. Further political integration. Less economically harmful in the short term, but unpopular with voters. This resistance could disappear though if it is clear it's the only choice.
If this is all correct, we're looking a tighter, more national European government. 2-speed, because those who are not in the Euro (ie the UK) would be on the outside looking on a new, almost Federal entity. I find this quite exciting :-)
Great thoughts Keren, thanks!
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