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Economy
In reply to the discussion: STOCK MARKET WATCH -- Thursday, 19 January 2012 [View all]Demeter
(85,373 posts)47. Münchau: We are fighting the wrong crisis
http://www.creditwritedowns.com/2012/01/mnchau-we-are-fighting-the-wrong-crisis.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+creditwritedowns+%28Credit+Writedowns%29&utm_content=Google+Reader
...Münchau says that Standard and Poors was right not necessarily about the ratings downgrades, but rather that Europe was fixated on the wrong problem, budget deficits. in his view and mine- this is only going to make things worse. Austerity has already led to a worsening outlook for Europe with even Germany now expecting 0.7% growth for all of 2012.
In Münchaus view, the reason for the downgrades was that Europe is fighting the wrong battle. S&P even said in their message on the downgrades that an austerity-centered approach would make matters worse. Wolfgang noticed that German Chancellor Merkel and her Finance Minister Schäuble responded to this message by exhorting Europe to push through their austerity packages more quickly. Clearly they dont get it.
Wolfgang goes on to say that the problem is not in the public sector but in the private sector, where high debt, deleveraging and then recession caused a gaping hole to open up in the public sectors balance sheets. Moreover, in what Münchau calls the single currency "strait jacket", the economies of Euroland have diverged rather than converged and that has meant current account imbalances and private debt accumulation in the periphery.
To me this situation looks pretty hopeless frankly. Policy makers in Europe just dont get it. The best we are going to get is austerity and partial monetisation by the ECB until the union breaks or sovereign debtors default and banks are recapped. The question is why are they leading us down the abyss. Wolfgang says its because the government deficit story is an easier narrative to tell and simpler to attack within the existing institutional limitations of Euroland. That makes some sense politically, but it tells me that this crisis will continue to get worse.
...Münchau says that Standard and Poors was right not necessarily about the ratings downgrades, but rather that Europe was fixated on the wrong problem, budget deficits. in his view and mine- this is only going to make things worse. Austerity has already led to a worsening outlook for Europe with even Germany now expecting 0.7% growth for all of 2012.
In Münchaus view, the reason for the downgrades was that Europe is fighting the wrong battle. S&P even said in their message on the downgrades that an austerity-centered approach would make matters worse. Wolfgang noticed that German Chancellor Merkel and her Finance Minister Schäuble responded to this message by exhorting Europe to push through their austerity packages more quickly. Clearly they dont get it.
Wolfgang goes on to say that the problem is not in the public sector but in the private sector, where high debt, deleveraging and then recession caused a gaping hole to open up in the public sectors balance sheets. Moreover, in what Münchau calls the single currency "strait jacket", the economies of Euroland have diverged rather than converged and that has meant current account imbalances and private debt accumulation in the periphery.
To me this situation looks pretty hopeless frankly. Policy makers in Europe just dont get it. The best we are going to get is austerity and partial monetisation by the ECB until the union breaks or sovereign debtors default and banks are recapped. The question is why are they leading us down the abyss. Wolfgang says its because the government deficit story is an easier narrative to tell and simpler to attack within the existing institutional limitations of Euroland. That makes some sense politically, but it tells me that this crisis will continue to get worse.
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$10 TRILLION Liquidity Injection Coming? Credit Suisse Hunkers Down Ahead Of The European Endgame
Demeter
Jan 2012
#7
Speaking of the skunk, I just meandered over to Automatic Earth and found this.
Fuddnik
Jan 2012
#18
Yeah. What would be the corresponding statistics for the States? The Skunk, you see,
Ghost Dog
Jan 2012
#19
Well, ZH has a tendency to go way over the top, on occasion. The 'soundbite' is based on
Ghost Dog
Jan 2012
#20
I don't really "understand" any of it, Tansy - but I don't think it matters
bread_and_roses
Jan 2012
#62
Not as far back as our reptile brains. Just a hundred and fifty years of Western social progress,
Ghost Dog
Jan 2012
#65
The A-List: Jeffrey Sachs - Self-interest, without morals, leads to capitalism’s self-destruction
Demeter
Jan 2012
#37
Obama's "tax-policy", the new puppet-in-waiting and the collapsed UBS business model.
Ghost Dog
Jan 2012
#87