Tag Archives: keynesianism

Greek Debt Crisis Reflects Global Problem

1 Mar

The Greek debt crisis represents a threat to the entire Eurozone, and ultimately, the global economy:

Simon Tilford, chief economist at the Center for European Reform in London, says the Greek crisis reflects a larger economic problem in Europe. EU members like the Netherlands and Germany have spent too little and their economies are driven by exports. Meanwhile, southern economies like Greece and Portugal have spent too much and amassed debts as a result.

Now that sounds familiar – “…economies are driven by exports… spent too much and amassed debts as a result”. One could be forgiven for drawing a logical conclusion – that the Australian economy, far from being a shining beacon of fiscal prudence, actually encapsulates the worst of the Eurozone’s economic dilemma.

Greece’s problems are also spilling beyond Europe’s borders. The value of the euro currency has plunged for example, which makes American exports – key to the U.S. economic recovery – less competitive.

Ultimately, Tilford says, the Greek problem reflects a world economic problem.

“The eurozone s really just a microcosm of the global problems we see. So unless we see the big countries in East Asia rebalancing away from exports and toward domestic demand, we are not going to generate a self-sustaining global economic recovery,” he said.

But Tilford does not believe Europe is ready, or willing, yet to undertake fundamental economic reforms he thinks are needed to right these imbalances. The region may rescue Greece, he says, but it will only be putting a bandage on a far bigger problem.

Could it be that, as with every other global trend, Down Under Australia has not “escaped” the GFC at all, but is simply running a few years behind everyone else?

Barnaby is right.

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OECD Economist: Double-Dip Recession Looms

28 Feb

One can only wonder if Treasury Secretary Ken Henry watched the ABC’s “Inside Business” this morning:

One of the OECD’s leading economists says there is a strong chance that the world’s leading economies could quickly slide back into recession.

The deputy director of the OECD’s financial and enterprise affairs, Dr Adrian Blundell-Wignall, has told ABC1’s Inside Business program that the threat of a double dip recession remained because problems in the banking system have not been solved.

“There are many icebergs the ship has to negotiate before we’re out of jail here. This is going to be a 10 year process, not a one year process,” he said.

Dr Blundell-Wignall says many of the banks’ problems have been hidden by changes to accounting rules and their most toxic assets have been shifted to the balance sheets of the big central banks in the US and Europe.

Dr Henry recently stated that the GFC is “over”:

“What people have called the global financial crisis, that has passed“.

Dr Henry went on to predict a “period of unprecedented prosperity” for Australia, one that could “stretch to 2050”.

Dr Henry failed to predict the GFC.

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Rogoff Sees Sovereign Defaults

25 Feb

From Bloomberg –

Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks:

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a history of financial crises published in 2009.

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