Tag Archives: Deficit

Why America needs a debt ‘default’

By Anthony Mirhaydari – It’s clear the fiscal fight in Washington isn’t going to end anytime soon.

The causes of this mess are manifold.

At the core, the country abused its privilege as the issuer of the world’s reserve currency. The global demand for dollars enabled our debt dependence. It allowed households to leverage up with cheap mortgages. It allowed banks to play hedge fund and load up on asset-backed bonds sheltered in off-balance-sheet vehicles. And it allowed the government to promise low taxes, ample benefits, and plenty of bailout cash when it all went wrong in 2008. more> http://tinyurl.com/n9jn3nx


The Summers or Geithner nightmare

By James Saft – I can think of no-one, with the possible exceptions of Robert Rubin and Alan Greenspan, who are more closely identified than Summers and Geithner with the errors of financial leadership of the past 15 years. And should either get the top job it would send a clear signal that efforts to properly regulate finance will come to very little, and that the chances of yet another in the long succession of crises are getting larger. more> http://tinyurl.com/lg66jcw

Banks Need ‘Push’ to Avoid Prolonging Crisis, BIS Says

English: A model that describes the competitiv...

English: A model that describes the competitive environment of a company’s business model.
(Photo credit: Wikipedia)

By Boris Groendahl – Lenders, almost four years after the collapse of Lehman Brothers Holdings Inc., still hold overvalued assets and are postponing necessary recapitalizations while relying on official funding, especially in Europe, the BIS said in its annual report released yesterday. Banks are also returning to risks akin to those that led to the crisis.

“Public policy must move banks to adopt business models that are less risky, more sustainable and more clearly in the public interest,” the BIS said in the report. more> http://tinyurl.com/6v8hw7p

Can the Eurozone Survive?

By Mortimer B. Zuckerman – The facts of the eurozone showdown are brutally simple. Growth is stalled, even in the most successful member, Germany, and in many countries it is contracting. Unemployment is high and soaring; today Spain’s unemployment rate is some 24 percent. Banks are collapsing, and over-indebted governments are running out of both money and credit.

Germany wants Greece to stay in the eurozone but it seeks to enforce an internal devaluation through reductions in Greek wages and benefits. But this is difficult for democratically elected leaders. For example, labor costs in Spain are still rising although almost one in four workers do not have jobs. How deep would unemployment have to be for wages to start to fall?

It would amount to a cut in the average Greek family’s standard of living by 20 percent or more. That severe a shock is probably beyond the democratic limits as to how far any individual government can go without a political upheaval of unpredictable consequences. more> http://tinyurl.com/cdsu52k

Europe After the Crisis

Various Euro bills.

Various Euro bills.
(Photo credit: Wikipedia)

By Andrew Moravcsik – From the start, the euro has rested on a gamble. When European leaders opted for monetary union in 1992, they wagered that European economies would converge toward one another: the deficit-prone countries of southern Europe would adopt German economic standards — lower price inflation and wage growth, more saving, and less spending — and Germany would become a little more like them, by accepting more government and private spending and higher wage and price inflation. This did not occur. Now, with the euro in crisis, the true implications of this gamble are becoming clear.

No country has issued a serious challenge to any of the EU’s core activities. Nor has a single prominent European politician advocated withdrawal from the EU, as that would amount to economic suicide. Brussels continues to manage about ten percent of national policies, from business regulation to European migration, under a unified legal system. The union has recently expanded, from 12 members at the time of the Maastricht Treaty to 27 today, leaving lasting movement toward open markets, democracy, and the rule of law in its wake. more> http://tinyurl.com/cm5plsl