February 22, 2012 by galudwig
First of all, even though I kind of came down from my Crusader Kings II high (still spending huge amounts of time on it though), I’ll be drastically slowing down the pace of my posting to two or three per week. The reason is that I’m spending so much time working on a number of projects which involve me writing so much that I hardly feel like blogging anymore..
Now, on to today’s topic! I was asked to translate some articles on the Eurozone today which really rubbed me the wrong way. There really does seem no end in sight to the madness (from an Austrian perspective) of some/most economists. Here are two influential American opinion makers who both point to the United States’ economic policy as a model to be followed for recovery of the Eurozone:
Modern Monetary Theorist Cullen Rouche from Pragmatic Capitalism writes in Business Insider writes that not only is the US well on the road to recovery, but the reason for the upturn are the country’s huge deficits in the last few years. Referring to cutting spending as a strategy which would “torpedo” the economy, Rouche claims that the failure of EU countries to run high enough (10%+) deficits is destroying their economic growth.
At the same time, CNN’s Fareed Zakaria made the argument on his CNN blog that the Eurozone is not slumping at all! No, in fact, it has been saved by Mario Draghi, the recently appointed head of the European Central Bank. The recipe for this success? Creating 500 billion euros out of thin air and lending them out to troubled banks at well-below-market interest rates. In fact, it’s been deemed so successful that rumors are floating about that another trillion euros will be “injected” into the economy in a second round of “quantitative easing” over the coming month! Rather hilariously, Zakaria writes that, because of this expansion of credit, a new “Lehman-like crisis” will be impossible. Also, in case you are a reactionary non-believer, this won’t lead to any inflation, because “unemployment levels are at record highs — how can wages go up in that circumstance?”
So, there you have it, today’s solutions to the sovereign debt crisis according to two respected American writers on economics are to be found in deficit spending and credit expansion.
And we, the common European citizens, who will be forced to foot the bill when debt payments spiral even more out of control, using fiat money which is losing its value at a rapid rate, we fall for it all hook, line and sinker.