Roubini: Euro Zone Endgame Has Begun

[World Traveler]

Posted on Project Syndicate Nov 11 2011
"
That also means that Germany and the ECB have less power than they seem to believe. Unless they abandon asymmetric adjustment (recessionary deflation), which concentrates all of the pain in the periphery, in favor of a more symmetrical approach (austerity and structural reforms on the periphery, combined with eurozone-wide reflation), the monetary union's slow-developing train wreck will accelerate as peripheral countries default and exit.

The recent chaos in Greece and Italy may be the first step in this process. Clearly, the eurozone’s muddle-through approach no longer works. Unless the eurozone moves toward greater economic, fiscal, and political integration (on a path consistent with short-term restoration of growth, competitiveness, and debt sustainability, which are needed to resolve unsustainable debt and reduce chronic fiscal and external deficits), recessionary deflation will certainly lead to a disorderly break-up.

With Italy too big to fail, too big to save, and now at the point of no return, the endgame for the eurozone has begun.

Sequential, coercive restructurings of debt will come first, and then exits from the monetary union that will eventually lead to the eurozone’s disintegration."

http://www.project-syndicate.org/com...bini44/English

[rabot10]

Re: Roubini: Euro Zone Endgame Has Begun

What a joke!!!!! It is socialism, with a fiat currency that the men in power could barrow from the central banks, and they just make the money up and charge interest. And then tell the PEOPLE you will get to retire at 26 with full benefits – let the party begin.

That is until the party is over.

[llanlad2]

Re: Roubini: Euro Zone Endgame Has Begun

[QUOTE=World Traveler;214264]Posted on Project Syndicate Nov 11 2011
"
That also means that Germany and the ECB have less power than they seem to believe. Unless they abandon asymmetric adjustment (recessionary deflation), which concentrates all of the pain in the periphery, in favor of a more symmetrical approach (austerity and structural reforms on the periphery, combined with eurozone-wide reflation), the monetary union's slow-developing train wreck will accelerate as peripheral countries default and exit.

QUOTE]

Personally I think the Germans are playing it perfectly. They aren't going to reflate unless the other countries impose austerity on their own people and control govt budgets. The other countries aren't going to impose austerity unless they are facing a crisis. It's the monetery equivalent of chicken-which the Germans are winning.
Twice they've taken the Euro to the brink and twice countries concerned have installed technocratic governments against their own electorates wishes.
I ultimately believe the Germans (despite any constititional rules) will allow the ECB to reflate and act as lender of last resort. Everyone knows anything less is akin to self-harming and the Germans politicians know it also despite what they may say in public.
Once Merkel and the ECB have de facto control of Europe, monetisation WILL follow in my opinion.

[Starving Steve]

Re: Roubini: Euro Zone Endgame Has Begun

I am in favour of RAISING the value of the Euro by RAISING interest rates and forcing a de-flationary recession. This would make foreign debt easier to retire, and this would force wages and prices in Euroland DOWN, especially in the PIIGS on the periphery of Euroland. This would force competitive efficiency on Euroland, especially in the PIIGS. This would put an end to endless vacations, sleeping 'till noon, dinners that are all-night banquets with fine wine, and the real estate bubbles make this life-style fiscally possible.

What makes Roubini and the other economists object to this de-flationary recession, by doing the exact opposite of what the Arthur Laffer supply-side economists would advocate, is that lean & mean, down-sizing, and rewarding sacrifice, rewarding thrift, rewarding efficiency, rewarding investment, rewarding innovation, rewarding effort, rewarding entrepreneurs, and cutting waste--- all runs counter to everything in Keynesian economics..... But if the world has learned anything from the miserable experience of this Great Recession ( the lost years 2007-2016?) it is that nations can not grow their way out of debt. Nations can not play the game of kick-the-can forever because debt/deficits are real. They drag-down the economy, and they have to be paid-back.

Maybe give my post, not just to Roubini but also to Dr. Arthur Laffer, the genius(es) who prescribed tax cuts and good times, consumption, borrowing, boosterism and bubbles as sound economic policy for the Reagan-Bush years and beyond.

"Deficits won't count when we get government off of our backs, cut taxes, and allow the economy to grow. The deficits caused by government will disappear." (These were the words of Reagan at the 1980 Republican Party convention. And Arthur Laffer would repeat this same message, this gospel, everyday on the Financial News Network on television.)

[Starving Steve]

Re: Roubini: Euro Zone Endgame Has Begun

November 11, 2011: "Chinese Rating Agency Threatens New Down-grade of U.S. Debt". The story is in The Guardian newspaper online.

The threatened down-grade would put the rating of U.S. govn't debt down from A ( as of August 2011 ) to what? A- or BBB+ ?
The coming down-grade would be because the Republicans in Congress are blocking tax increases to pay for spending.

So Dr. Roubini: Not just the Euro-zone end-game has begun, but the America-zone end-game has now begun also.

[oddlots]

Re: Roubini: Euro Zone Endgame Has Begun

A joke indeed.

[jpetr48]

Re: Roubini: Euro Zone Endgame Has Begun

But if the world has learned anything from the miserable experience of this Great Recession ( the lost years 2007-2016?) it is that nations can not grow their way out of debt. Nations can not play the game of kick-the-can forever because debt/deficits are real. They drag-down the economy, and they have to be paid-back.

Who is the world? Is it our elected leaders, the ECB, the Fed? EJ's comments on his meeting with Boston Fed confirm that as long as power remains in the hands of a few, arrogance will rule the day. Here is one thing i know for a fact from a proverb that pride comes before one's fall. This is the sad thing - before this recession started in 2007- i recall a number of people saying Keynesian economics does not work. It's almost like being on an Amtrak train that is moving slowly down the tracks gradually picking up acceleration and ready to collide head on with another Amtrak.

[kriden]

Re: Roubini: Euro Zone Endgame Has Begun

Eddie Hobbs - TV3 - Ireland's Financial Expert Eddie Hobbs advising people to get out of the Euro